Nazi gold, Central Bank intrigue, Chinese plots — how many gold conspiracy theories do you want?
If gold is on the way out, how come it generates so many conspiracy theories? But here’s the point: each one of them is plausible. Each one of them would or could be the makings of a best-seller in the hands of one of the masters of the best-seller fiction plots.
No, the fact that gold generates so much heat, so much discussion, so much division between the gold bugs and the gold haters — well, what that tells you is that gold is maintaining its allure, its mystery, its value. In fact, it is a stronger argument that gold is still vital to the world monetary system than all the figures on central bank holdings, or statistics about investment bar demand.
Here’s a sampling of some of the theories that have gained a life of their own.
Example # 1: Nazi gold just waiting to be found.
An author of a book about Nazi gold once quipped that the ultimate tabloid newspaper headline would be “Nazi Gold Found In Pharaoh’s Tomb”. This “missing” Nazi gold line popped up again just last month.
Mind you, it is quite a story. No one knows how much gold the Nazis stole and appropriated but in 1946 several countries (including Albania, Austria, Belgium, Czechoslovakia, Greece, Italy, Luxembourg, Netherlands, Poland and Yugoslavia) made claims to have their reserves returned. Much of is said to have gone into the Swiss National Bank and never recovered.
Get our daily investorintel update
But then the great conspiracy gets a real workout when you get on to the subject of that gold being buried somewhere. In late September British newspapers were thrilled with the claim by a Dutch archaeologist, Leon Giesen, that he had cracked the code as to when Hitler had ordered the gold hidden. The code was in a piece of music written during the war by Gottfried Federlein. It was not the original score but one copy that had been annotated with various letters. Giesen said the annotator was none other than Martin Bormann, Hitler’s right-hand man. Those letters spelled out part of the word Mittenwald in the Bavarian Alps.
The German magazine Der Spiegel noted that “the whole idea of Nazi gold has long held a grip on the public imagination, and as a former Nazi stronghold, Bavaria provides fertile soil for many an aspiring Indiana Jones … In April 1945, the Wehrmacht armed forces and officials of the Reichsbank approved a plan to store at least part of the reserves of the German Reichsbank at Einsiedl, a small town on the southwest shore of Lake Walchen. Much of these assets were handed over to the Allies, but around 100 gold bars, sacks of dollars and Swiss francs and possibly even more hoards went missing.”
No doubt they will keep looking.
Example #2: The Central Banks actually don’t have all the gold they claim to possess.
Now, this is an oldie but a goodie. It submerges then re-emerges on a regular basis, but was given a dust-off and new lease of life earlier this year when the news broke that Germany — which had parked most of its gold in Paris, London and New York in the Cold War days lest the Soviet hordes decide to take over Western Europe, which seemed a real possibility back then — now wanted its gold back, but the Federal Reserve, which was holding 300 tonnes of Germany’s reserves, would need seven years to complete the repatriation.
Seven years? As someone pointed out at the time, how hard would it be to charter three Boeing 747-400 freighters (which between them could move the 300 tonnes), load them up at JFK and fly non-stop to Frankfurt? Unless, of course, the Fed didn’t have the gold, had loaned it out and might have trouble getting it back.
There has long been a feeling that the figures of gold holdings at central banks bear no relation to what is actually in the vaults. It could be a case of “Hey, Dude, where’s my gold?”
Theory # 3: The central bankers want to destroy gold.
This one got a great work-out in April — and with good reason. When New York gold trading opened on April 12, 3.4 million ounces (or 110 tonnes) of June futures contracts were dumped on the market, sending the gold price plummeting. Two hours later, another 10 million ounces (300 tonnes) hit the trading screens. One of Australia’s most astute analysts, Warwick Grigor of Canaccord Genuity, commented at the time: “This had all the hallmarks of a concerted short sale designed to break the back of the gold market. When a party dumps 15% of annual world mine supply it can only be for one purpose. The Fed’s quantitative easing debased the value of the U.S. dollar. This made gold the stabilising currency. But this was not what the Federal Reserve wanted. So bullion has been attacked with full force by U.S. monetary authorities working with the investment banks. And it has achieved its aim.”
Just look at the state of the gold mining industry as a result. Miners are under pressure to write down assets, projects are being delayed, closures loom. For those wanting to undermine gold as the ultimate store of value, nothing could be sweeter.
And a former assistant U.S. treasury secretary (in the Reagan administration), Paul Craig Roberts, told one news agency this after the April run on gold: “Brokerage houses told their individual clients the word was out that hedge funds and institutional investors were going to be dumping gold and that they should get out in advance. Then, a couple of days ago, Goldman Sachs announced there would be further departures from gold. So what they are trying to do is scare the individual investor out of bullion. Clearly there is something desperate going on.”
Les Davis, of Australian gold producer Silver Lake Resources, also smelled a rat. He told a reporter from the Australian Broadcasting Corporation (the government-owned national broadcaster) that the industry remained concerned that the millions of ounces of gold that were dumped on the market and caused the drop was so-called “paper gold“. A lot more gold was being traded on paper but without full information on how much had physical backing. “There seems to be a lot of smoke and mirrors on how much gold is actually out in the big wide world. And where it is. And who’s got it,” he said.
Theory # 4: China is buying all the gold it can to back the yuan as world currency.
So far as I can see, that’s not a theory. More like a probability.
InvestorIntel is a trusted source of reliable information at the forefront of emerging markets that brings investment opportunities to discerning investors.