London Gold Market Secrecy: $52 Trillion And Counting

An insightful, thought-provoking infographic, put out by this week visually illustrates the enormous amount of gold traded on an annual basis on the London Gold Market.

In 2015, 88.03% of all gold traded globally (1,355,400 tonnes) was traded on the London gold market.

That is both a staggering and unbelievable amount of gold, especially when you consider the daily trading volume in London is 5500 tonnes of gold – and globally only 9 tonnes gold are mined daily. And historically – all the gold ever mined totals approximately 187,000 tonnes. Yet London traded 1,355,400 tonnes of gold in 2015.

Sounds like a pretty good magic trick. So how did they do it? The gold they traded was fractional reserve paper traded gold. In other words, the gold had no legal title, it was “unallocated” and part of a massive paper gold system. In other words, a closed loop, ponzi scheme with a limited number of major players and no real market-based price discovery mechanism.

The one metric that was not included on the infographic was the value of the gold traded in 2015 on the London gold market. When you run the calculation it will ALARM you.

  • There are 32,150 troy ounces of gold in one metric tonne of gold. 
  • When you multiply 32,150 X 1,355,400 tonnes you get a staggering 43,576,110,000 ounces of gold.
  • When you multiply 43,576,110,000 ounces of gold X $1200/ounce you get a value of in excess of $52,291,332,000,000 (trillion) dollars worth of gold that was traded on the London Market in 2015. 
  • That’s pretty amazing because the Global GDP in 2014 was just over $78 trillion in nominal terms. 

And this supposedly, tiny, inconsequential market, that according to Ben Bernanke is participated in by the Fed supposedly out of “tradition”, isn’t supposed to have any real relevance in today’s economy – yet in 2015 over $52 trillion worth of gold – albeit, paper gold – was traded on the London market.

When $52 trillion worth of anything is traded anywhere, for any reason, it matters. Who’s trading it, for whose accounts, why, and for how much? Transparency should not be difficult to achieve. But it has been, is, and will continue to be.

Cries for transparency are one of the repetitive sounds from election cycle to election cycle. People forget they demanded transparency last time. And then forget that they forgot. But if something becomes important enough (again) it may crop up on the radar screen – only to compete and find it’s priority with the current ensemble of unmet election year needs.

And as interesting and important as the machinations of trading $52 trillion worth of gold is to the world economy – because so few own gold – and even fewer understand the gold market – it probably won’t rank that high on anyone’s list – until the day it appears on the horizon like a black swan – and by that time, it will most likely – already – be too late.

By | 2017-04-26T07:06:00+00:00 May 27th, 2016|Categories: Gold|

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