Poland’s Gold and the Conspiracy Theorists

The price of gold was up enough to buy a bottle of Two Buck Chuck wine, and the price of silver was up enough to buy a wooden nickel (well, not enough to buy a real nickel nickel).


Poland’s gold bars are packaged by employees of G4S International Logistics to be transported from London to Poland. Poland’s gold was originally transferred to London at the beginning of WW II, when Stalin and Hitler invaded and partitioned the country in the late 1930s. For some reason Poland’s post-war communist government left it there – presumably because it was easier to sell in London. [PT]

Photo credit: G4SI


Having just seen (OK participated in) a bit of a Twitter storm about the gold price suppression conspiracy theory, we wanted to add a bit more to all the things we have already said (e.g. my Thoughtful Disagreement with Ted Butler).

We observed a series of arguments made, in which each was quickly abandoned for the next. We think of it as pivoting. The arguer seems not to care which argument is believed, or even if one argument he makes contradicts one he previously made. He’s just looking for whatever works, and will abandon whatever isn’t working at the drop of a tweet.

A prominent gold bug posted a link to the article about Poland asking for 100 tons of its gold to be shipped from London to Warsaw. The article says:


“…central banks usually seek to diversify the places where their gold resources are stored, also in order to limit geopolitical risk, the consequence of which could be, for example, loss of access or limitation of free disposal of gold resources kept abroad.

Due to the significant increase in our gold resources and taking into account the practice of other central banks, the Management Board of the NBP decided to transfer half of the current gold resources (about 100 tonnes) to the treasury of the NBP.”


Despite this statement, the gold bug of course spun it as a “worldwide run on gold vaults.” So I retweeted with the added comment:


“A transfer of gold from one storage vault to another is not a ‘run’.”


The airplane used for transporting Poland’s gold [PT]

Photo credit: G4SI


A run on the bank is when depositors are demanding to withdraw their money. But the bank has only got a limited amount of cash. The rest of its assets are long term, such as bonds. If enough depositors demand withdrawals, the bank will fail to pay and be taken down into receivership and liquidation. If this is happening to multiple banks, then the price of bonds crashes, as they are all desperate to sell bonds to raise cash to meet redemptions.

A warehouse is not a bank. The concept of a run is inapplicable to a gold vaults. Well, let’s just say that saying this sparked a firestorm!

The first argument thrown back was: the gold in the vaults in London is “leveraged”. This appears to mean the Bank of England either lent out Poland’s gold in breach of its contract, and/or that it conducts a fractional reserve banking operation with gold it holds in storage. Other folks helpfully clarified that the gold in London has been fraudulently sold 100 times over, which they can get away with because few people demand to take delivery.

We see here two problems. One, the term leveraged has a very approximate, fuzzy meaning. That is a feature, not a bug. We will get back to that. The other is that these folks casually assert without evidence that there is a simple, obvious, and flagrant fraud occurring. In order for this to be true, thousands of employees, auditors, and regulators would have had to be complicit over decades. And stay silent. We suggest that financial fraud is not like Fight Club.

While we are sure that there are cases of simple fraud, we do not believe that it is endemic in the Western World.

Others attempted to prove that gold is suppressed by posting links to articles about bank traders being caught spoofing. Spoofing is like a kid sneaking a Snickers Bar into his jacket, compared to suppressing the price of gold from its supposed real value of $50,000 to $1,500 for decades being more like a mobster gunning down people eating at Umberto’s. We assume that at the murder trial, the judge would not allow evidence presented that someone stole $0.10 worth of candy.

This is also a case of the Motte and Bailey Fallacy.

Next the argument for naked-shorting on COMEX came out. Answered with the Ted Butler article.

Next someone asserted that the COMEX gold contract is “cash settled.” And therefore, just like GLD, it “absorbs demand” for gold that would otherwise go to gold itself. Aside from being yet another allegation of outright fraud, it is a frivolous argument. Many buyers cannot buy physical gold for one reason or another. Indeed, we seriously doubt that anyone who wants gold for reasons of either total distrust of the banking system and/or prepping for the end of the world owns GLD in lieu of gold.

In any case, the holder of a COMEX gold future has the right, but not the obligation, to stand for delivery of 100oz gold. But there’s a catch. He needs to have $150,000 in cash in the account. So most do not stand for delivery. But this is no argument for price suppression. And not even a case that the contract is inherently “cash settled.”

Finally, someone argued that suppressing the price of gold props up the dollar. Without debunking this here (we debunked it here), we want to make an observation. Conspiracy theorists always use fuzzy language. They traffic in vague claims. If they clearly denoted a specific allegation, then it would be easy to debunk. So they resort to an obscuring fog.

And that is also why they pivot from one argument to the next. Thus the gold bug tweeted about Poland’s repatriation—as if this would cause the price to rise. They just want arguments for why the price would rise.


Moving gold from A to B certainly won’t cause gold prices to rise. Of greater interest in this context may be the fact that Poland’s central bank has been a big buyer of gold this year, enlarging the country’s gold reserves considerably. It started buying gold in 2018 and has upped the pace of its purchases since then. By the middle of 2019 its reserves had grown by more than 125 tons. [PT]


One person skipped over the ideas and jumped straight into feelings. “You are a mole”, he blurted, upset because I seemed to be saying that the Polish gold move would not affect the price.

Folks, beware sloppy use of words and concepts, arguments that evolve from one idea to another, and goal-seeking for reasons that the gold price will go up. It’s hazardous to your wealth.


Fundamental Developments

Let’s look at the only true picture of the supply and demand fundamentals of gold and silver. But, first, here is the chart of the prices of gold and silver.


Gold and silver priced in USD


Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio (see here for an explanation of bid and offer prices for the ratio). The ratio went sideways.


Gold-silver ratio, bid and offer


Here is the gold graph showing gold basis, co-basis and the price of the dollar in terms of gold price.


Gold basis, co-basis and the USD priced in milligrams of gold


Scarcity (i.e., the co-basis) rose slightly, while price rose as well. The Monetary Metals Gold Fundamental Price, was down another $3 this week, to $1, 454.

Now let us look at silver.


Silver basis, co-basis and the USD priced in grams of silver


In silver, scarcity rose much more sharply than in gold.

So it’s no surprise that the Monetary Metals Silver Fundamental Price shot up 58 cents, to $16.71.


© 2019 Monetary Metals


Charts by Monetary Metals


Chart and image captions by PT


Dr. Keith Weiner is the president of the Gold Standard Institute USA, and CEO of Monetary Metals. Keith is a leading authority in the areas of gold, money, and credit and has made important contributions to the development of trading techniques founded upon the analysis of bid-ask spreads. Keith is a sought after speaker and regularly writes on economics. He is an Objectivist, and has his PhD from the New Austrian School of Economics. He lives with his wife near Phoenix, Arizona.




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