Executive Summary

• The amount of gold in London's vaults dropped by 1/3 in the past year(!)
• Activity at the COMEX is flashing warning signs
• When to worry about physical defaults
• Simple math will win out: the West is fast running out of its bullion

If you have not yet read Part 1: Buy Gold While You Still Can! available free to all readers, please click here to read it first.

An interesting piece of detective work was done by Ronan Manly at Bullionstar.com where he noted that the LBMA reported pronounced drops in the amount of gold stored in London vaults, which includes both gold held at the Bank of England as well as non-official vaults within the LBMA system.

To summarize his report, here’s the amount of gold reportedly held in London:

• April 2014 – 9,000 tonnes
• Early 2015 – 7,500 tonnes
• June 2015 – 6,250 tonnes

That means that 2,750 tonnes left London over the past 1+ year.

Does such a large number even make sense?

Well, sure, if we consider that just these four countries cumulatively imported (or increased reserves) by ~4,500 tonnes since the beginning of 2014.

(Source)

Confirming this is this handy chart of UK gold flows as compared to Shanghai Gold Exchange (SGE) withdrawals:

(Source)

Quite interestingly, the highest flows out of the UK were during the months of the price bloodbath in early 2013…but the flows had picked up in earnest in the months prior.  Without the ‘liberation’ of gold from GLD, it’s quite possible that physical shortages would have appeared much earlier.  Again, the price smash of gold seems to have been a stroke of good luck for the central planners in the west, both for the psychological impact but also for liberating so much physical gold from weak hands in the west.

What we can also see is that generally speaking the UK has been steadily losing gold month in and month out for the past 2.5 years.  Also interestingly, the gold that the UK does import has mainly come, of late, from the US and Canada. 

The only question is, how much longer can this continue?