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Gold Holdings vs. Loans and Swaps

Central banks have their purchases and sales of gold tallied by the IMF International Reserves and Foreign Currency Liquidity Statistics Department and updated roughly every three months by the World Gold Council (WGC).* According to the WGC, some central banks report with a lag of 3-9 months, making statistics in these reports stale. There are also numerous market analysts who believe that some governments obscure their gold purchases in the market and use various entities to dodge reporting the increase of official gold reserves. We could not officially confirm or deny this activity in the market.

“Net official sector sales over the first six months of 2006 are estimated to have reached 167 tonnes, down by 60% or 245 tonnes year-on-year. Our estimates are based on official IMF statistics, publicly available data released by individual central banks, as well as information on unpublished sales GFMS collect through field research. Due to the lag that often exists between official sector activity taking place and its identification, future revisions to our estimates are possible.”

- GFMS Gold Survey 2006 Update 1

While central banks report sales and purchases to the IMF, they do not report their levels of holdings out on loan. There are some exceptions, most notably the Bank of Portugal and the Swiss National Bank, who update loaned gold levels once a year in annual reports, but not on a monthly or quarterly basis.

Gold Fields Minerals Service (GFMS), estimates loaned gold levels in their annual gold survey, but no official statistics exist on how much loaned central bank gold is actually in the marketplace. GFMS bases their figures on informal surveys of 30 central banks (over 115 central banks hold gold in reserves). The banks surveyed are not identified and numbers used in GFMS estimates are not audited numbers. GFMS stands by their loan estimate figures, despite the inability to back them up with any hard, audited data. This data is also a once annual “snapshot” of loans from their surveys. Gold is loaned in and out of the London market on a daily basis. GFMS does not include loaned gold data in their official supply/demand summary of the gold market (See Appendix II).

“The quantity of gold lent to the market by the official sector fell last year for the first time since 1993. Although we are certain there was a substantial fall, establishing the exact scale of the decline has proved to be a difficult task. As even the most casual observer of the gold market will know, only a handful of central banks have ever published gold lending statistics. Nevertheless, over the years, GFMS have built up what we believe is a fairly robust picture of central bank lending.”

- GFMS Gold Survey 2002

Blanchard asks; how can we rely on a set of data with no underlying backup material supporting that data?

* - http://www.imf.org/external/np/sta/ir/colist.htm
http://www.gold.org/value/stats/statistics/archive/index.php

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