Mexico’s federal audit demands physical inspection of sovereign gold holdings

stockjockee

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MEXICO’S FEDERAL AUDIT DEMANDS PHYSICAL INSPECTION OF SOVEREIGN GOLD HOLDINGS

Today we have an exclusive note on this blog, but hopefully this can be known through the “mainstream media” too: the Mexican Superior Audit of the Federation (“ASF” in Spanish), in its “Report of Supreme Audit Results of the 2011 Public Account” delivered last week to the Chamber of Deputies, gave a stern “recommendation” to the Bank of Mexico (Banxico).

The reason is one of the most important issues we have addressed here: the gold reserves of our country.

As you may recall, last year we informed that after four months of legal wrangling with Banxico, it was forced to give us the information we wanted (that of course they did not want to disclose), about the supposed physical location of Mexico’s sovereign gold holdings.

Thanks to that, we found out that 95 percent of the Mexican gold reserves (about 125 tonnes) were abroad, and almost all (99%), in London, England.

Well, the ASF documented the purchase of 100 tonnes of gold that was made in 2011, for a total of 4,543 million dollars.

In its report, the ASF says that a confirmation of the operation was made with the counterparty, but also "found that Banxico has not conducted physical inspections to gold to verify compliance with the terms of acquisition and the conditions regarding its storage, in order to be certain of the physical custody of this asset." Our emphasis.

Moreover, the central bank only has documents which establish the terms and conditions, the dates of the transactions and payment vouchers. That's all.

In other words, Banxico invested 4.5 billion dollars and released the money without making any confirmation of the existence of the gold purchased, or of the location of the vaults where the gold bars were supposed to be held. Mere “paper gold”.

The ASF states that the Central Bank gave them some arguments on why they did not consider any verification as necessary, and assured them that the gold reserves were under the custody of "a prestigious financial institution". It seems that Banxico has a “blind faith” regarding such an institution.

According to the report, the Bank of Mexico said that the metal seller “only” offers services to other central banks and monetary authorities, and "places gold in custody in a bank of the United Kingdom" who "sets strict standards for weight and purity which gold bars must meet, in order to be received under custody." Almost a religious act for Banxico.

In this blog it’s been documented that this custodian is none other than the famous Bank of England, which is supposed to provide its services on an "allocated basis". That is, that customers have, or should have, a list of every ingot owned with serial number and stamped certifications of purity.

Banxico has none of these lists. Last year it could not answer a single question made by this journalist, through a legal “Request for Information”, about the number of bars that make up the Mexican gold reserves. The central bank only said that “due to the variability of the content of gold in the bars, it is not possible to specify with certainty the exact number of bars purchased." Oops!
...
More: http://inteligenciafinancieraglobal.blogspot.mx/2013/02/mexicos-federal-audit-demands-physical.html
 
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pmbug

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Interesting. I wonder if the ASF has the stroke to compel Banxico to account for the gold (much less repatriate it).
 

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Update on story

Mexico may repatriate some Gold from Bank of England - possibly prompting other countries to follow suit

bullionstreet.com
MARCH 05, 2013

The Government Audit Office has concluded that 95% of the gold reserves of the Bank of Mexico are stored abroad and 99% of this gold is stored with the Bank of England.

Following some nations in repatriating gold reserves stored abroad, Mexico is likely to bring back some of it's gold reserves from the Bank of England, analysts said.

They said the Mexican government is under tremendous pressure from opposition and also from ruling partners to repatriate gold after the Audit Office issued an official statement, criticizing the Bank of Mexico for not auditing the gold it has supposedly bought and stored at the Bank of England.

The auditors ask the Central Bank of Mexico to 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 compliance with the terms and conditions of dealing with this asset.

According to Global Financial Intelligence and the Gold Anti-Trust Action Committee report, the actions of the Mexican Government Audit Office are the result of a long campaign lead by Guillermo Barba, a Mexican civil activist and investigative journalist.

The Government Audit Office has concluded that 95% of the gold reserves of the Bank of Mexico are stored abroad and 99% of this gold is stored with the Bank of England.

However, the Mexican central bank has never inspected the gold it bought, has not performed purity tests on it and doesn’t even have a list of all the gold bars stored in London.

In their current state, Mexico’s gold reserves are no more than paper gold in the meaning that the Bank of Mexico doesn’t have any physical gold, but mere claims on a certain amount of gold supposedly held by the Bank of England.

The pending audit of the Mexican gold reserves is not a singular case of actions that show a high level of mutual distrust among central banks.

The latest move of the Bundesbank, which demanded the repatriation of its gold holding from Bank of New York, Bank of England and Banque de France, is another sign of distrust in the world’s financial system.

It is quite probable that after the audit, Mexico will decide to repatriate its gold holdings, possibly prompting other countries to follow suit

http://goldsilver.com/news/mexico-m...bly-prompting-other-countries-to-follow-suit/ :wave:
 

pmbug

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Well, one would hope anyway. One assumes that the folks in charge actually care about Mexico's best interests first though.

Kudos to Mr. Barba. Sounds like he's the Mexican equivalence of Mr. Lars Schall.
 
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