The Mexican Standoff: Gold, the Bank of Mexico and the Bank of England Jan Skoyles - Market Oracle
go to original March 7, 2013

Late last month it was reported that Mexico is going to organize an audit of their gold stored at the Bank of England.

Financial journalist Guillermo Barba, writes that that the Mexican Superior Audit of the Federation (“ASF” in Spanish) has made an official ‘recommendation’ that the Bank of Mexico “should “make a physical inspection with the counterparty that has the gold under its custody, in order to be able to verify and validate its physical wholeness and the compliance with the terms and conditions of dealing with this Asset…” It was verified by the ASF that this has never been done by Banxico.”

It turns out Banxico, isn’t really even that sure how many gold bars they own.

Barba’s concern, along with many other individuals and countries, is that the gold may not even be there. In documents received by Barba, from Banxico, reference is made to the London Bullion Market Association which he finds ‘disquieting.’ This is of course down to the fractional reserve system which large bullion banks operate on. This can, of course, only survive if the countries don’t come running for their gold at the same time.

The gold stored at the Bank of England came under (weak) media scrutiny at the beginning of the year when Germany announced that it would be bringing back some of its gold, not from the Bank of England, but from Banque de France and the Federal Reserve.

At the time many speculated that the gold held at the Bank of England was not being returned to Germany as storage was not being charged for and it ‘made economic sense’. In case anyone was in any doubt as to the existence of the gold the Queen of England was rolled out for a photo-op, just to reassure any doubters around the world.

It’s clear that Queen Elizabeth II’s visit did not do enough to put the Mexicans’ minds at rest.

Read the whole story at Market Oracle

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