Thursday, August 13, 2009

Gold: South Africa's wealth, shipped to the UK. Why?

Cape Town Waterfront Harbour. In the back you ...Image via Wikipedia



Gold: South Africa's wealth, shipped to the UK. Why?


South Africa's biggest bank, ABSA, manages an ETF called Newgold. In February of this year ABSA moved the gold they claimed to have (28 tons) to support the ETF from the storage facilities of Rand refinery , world biggest gold refinery in Johannesburg, to vaults in the UK and Wales, owned by Brinks, a NYS listed company, headquartered in Virginia, USA. "Because the core business of Rand refinery is not storage", we read in the press release.

Hmm, I am sure a few security companies in South Africa are looking at this deal with suspicion. Why are they being cold shouldered? Why not store the gold in South Africa? South Africa needs the jobs, has the expertise and I am sure South African security companies would do a great job looking after the gold professionally. Bet they would even build a vault. I mean, you will have a hard job trying to find people in the world with more expertise on crime than the South African security people.

So what can be the reason to fly bloody 28,000 kilos of gold to the UK and Wales? Besides the fact that the operation must have cost an arm and a leg it is also a security risk. Suppose something happens? Explosion in the air, sink to the bottom of the sea, high jack?

And why is ABSA, owned by Barclays bank (UK) shifting custody from our backyard of something so important (real money to the value of almost 1,1 Billion US$) to a NYS listed American company, to a vault in the UK, by airplane taking all the risks, circumventing South African security companies with apparent approval of the South African Reserve bank????

Yes, South Africa has exchange rate control, also called capital control. The rules and regulations are not so strict anymore compared to 20 years ago, but still, if you want to emigrate you are limited to a certain amount to take with you. Want to buy something overseas? You will be checked by grey people wearing grey shoes and grey suits. So on one hand the South African government wants to show overseas investors that they are very confident; internally they are scared as hell and do not show confidence at all with these regulations from the middle ages.

So, goodbye gold? Red lights flashing?

Strange story as it just does not make sense. Let's read Absa's Media release (bold = mine; Troy)
Media Release: Absa Capital
17 February 2009
New Custodian Appointed for NewGold ETF
Absa Capital, the investment banking division of Absa Bank Ltd, announced today
that the issuer of the NewGold Exchange Traded Fund (ETF), NewGold Issuer
Limited, has appointed Brink’s Limited (Brink’s) as the safe custody custodian of
NewGold’s gold bullion holdings.
The reason for the change was the limitation in the safe custody capacity of the
previous custodian, in light of significant increase in NewGold’s holdings of gold and the predicted continued growth of such holdings.
NewGold is the largest ETF in South Africa with R8.7 billion under management.
NewGold’s gold bullion has been transported to the safe vault premises of Brink’s inEngland where they have assumed physical control of the gold bullion with effect from 16 February 2009.
Brink’s is a global leader in business and security services serving banks, retailers,
governments, mines, refiners, metal traders, diamantaires and jewellers through morevthan 800 facilities in 50 countries on 6 continents.
Ends…

About Absa Capital
Absa Capital, a division of Absa Bank Limited (Absa) and affiliated to Barclays
Capital, is a leading South African investment bank with global reach, offering clients financing, risk management and advisory solutions in a wide range of currencies and structures across the globe.

About Absa Capital ETFs and Index Products
Absa Capital is a leading originator of exchange traded funds (ETFs) in the South
African market. The investment bank listed and operates NewRand, the first ETF in South Africa based on a proprietary investible index (the NewRand Index, comprising rand hedge stocks with the highest correlation with the Rand/USD exchange rate), as well as NewGold, the first and only gold ETF in South Africa as well as the largest ETF in the SA market with R8.7 billion in assets under management.
Absa Capital ETFs are listed on the JSE Ltd and can be traded at any time throughout the course of the day. Typically, ETFs try to replicate a stock market index such as the FTSE/JSE Top 40 Index, a market sector such as resources or financials, or a commodity such as gold.
www.absacapitaletfs.com

About Brink’s
Brink's, Incorporated, a subsidiary of The Brink's Company, is a global leader in business and security services serving banks, retailers, governments, mines, refiners, metal traders, diamantaires and jewellers through more than 800 facilities in 50 countries on 6 continents - an unrivalled global footprint that delivers incomparable security, efficiency and visibility across the logistics lifecycle.
Founded in 1859, Brink's has evolved from a leading armoured transportation service carrier to a premier provider of secure transportation and logistics solutions around the world. Brink's global leadership is founded on a heritage of trust and has earned a reputation as the most reliable name in secure logistics. Today, thousands of companies across the globe entrust Brink's with the secure armoured transportationand management of their most precious assets.
Brink's is an authorized depository for Nymex/Comex and an official vault operator in the Dubai Gold & Commodities Exchange and Mumbai NCDEX. Brink's is an approved weigher of the London Bullion Market Association and its vaults are utilised by clearing members of the London Bullion Market. Through its professional vault officers, Brink's is a recognised authority on the acceptable standards for gold bars. Brink's forms part of the LBMA committee that adjudicates on the criteria for the London Good Delivery Bar.
Issued by: etc.
Is this a clue? On the 16th of february 2009, 28 tons of physical gold has been deposited in the warehouses of Brink. Will Brink immediately register this gold to be deposited also at Comex? If, positive, this should wack the gold price downwards, wouldn't it? But the price in that period after 15th of February 2009 went up only to go in a downward spiral in the last week of Feb/first week of March.

No transparency; many questions. Anyone?

3 comments:

  1. 28 tons would not have any effect on the market, it represents 0.1% of all privately held gold, see http://seekingalpha.com/article/155072-reviewing-the-new-kid-on-the-gold-block for the stats.

    It probably also has something to do with liquidity as London is where the depth of market is.

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  2. Bron, what would your comment be if Perth Mint decides to transport all their gold holdings to the UK? Is the whole point of investing in precious metals not "physical possession"? An ETF breaks that rule, but even so, to ship it to the other side of the world is pushing it.

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  3. Certainly not happy at all. My comments were not meant as agreeance. It appears that the ABSA product is part of the World Gold Council "family" http://exchangetradedgold.com/ hence I am not surprised that it has moved to London, where the rest of the WGC metal is.

    In fact, that is the little dirty secret of the ETFs and GoldMoney and BullionVault - all of that metal is in London or Zurich, so much for geographical diversification. One terrorist nuke in London and there goes all the gold.

    Being involved in the running of our own ASX listed gold product, plus our Depository, I am fully aware of the difficulties running loco Perth gold when the gold market's liquidity is in London. We could solve that problem by holding our gold in London, but we realise that this eliminates one of our main competitive advantages, something ABSA obviously doesn't get.

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