By Patrick A. Heller, Market Update
August 10, 2009
On March 17, 2008, the day that Bear Stearns failed, international journalist Max Keiser interviewed officials at the Bundesbank, the German central bank. Keiser's report, released just a few days ago, contains a stunning admission. Toward the end of his report
Keiser stated, "The most fascinating thing I've learned is that all the gold in Germany is in New York."
In the past, the Bundesbank has denied that German gold reserves were in the custody of the United States. To now reveal the truth may well cause a great controversy in German political circles.
A few years ago, Bundesbank officials admitted that it had engaged in gold swaps on behalf of another central bank, but did not identify the other party. At the time, several analysts figured that meant the Bundesbank had cooperated with the U.S. government in gold price suppression activities.
The Germans could have liquidated physical gold stored in Germany on behalf of the U.S. government and replaced it by taking title to gold stored in U.S. government vaults. It was around this time that the U.S. government completely changed its report on U.S. gold holdings from referring to them as "reserves" to calling them "Custodial gold and silver reserves."
As I write this, it isn't possible to predict the extent of the fallout of this revelation. At a minimum, I would expect a public outcry in Germany calling for gold reserves to be shipped back home.
Such a request could put the U.S. government on the spot, as there is some concern that the German gold reserves are no longer intact. Some or all of it may have been distributed to the public as part of gold price suppression schemes. If so, any request by the German government to return gold could cause a severe supply squeeze. To prevent a surge in gold demand sparked by this revelation, there could be significant price suppression efforts early this week.