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RBA Gold Leasing Raises Questions about ‘Synthetic Gold’

The commercial practice of gold leasing by the Reserve Bank of Australia (RBA) requires further investigation and scrutiny to assess its full ramifications for both the RBA and the gold market more generally.

In 2018, Martin North and I kicked off a firestorm on YouTube across a range of videos when we raised questions about the:

  • location of the RBA’s gold holdings;

  • status of 11 tonnes of gold which was recorded in the 2017 RBA Annual Report as being ‘leased’[1]; and

  • the frequency and quality of gold audits conducted by the RBA[2].

These videos, in part, raised questions as to whether gold held at the Bank of England (BoE) that was leased to ‘Bullion Banks’ was secretly being shipped to Switzerland for melting and recasting before being on sold to gold customers in Asia, in particular China and India.

Such was the interest in the gold holdings of the Australian Government that questions were raised with the:

  • RBA through formal correspondence; and

  • RBA Governor at the CEDA annual dinner which was held in November 2018.

The RBA Claims that its Leased Gold Does Not Move

Interestingly, the public interest raised from the Adams and North YouTube discussions of the RBA’s gold holdings resulted in questions being raised in Federal Parliament via the House of Representatives Standing Committee on Economics at its public hearing on Friday, 22 February 2019 by Chairman Tim Wilson MP.

The exchange between Chairman Wilson, other committee members and the RBA about gold leasing brought forward the peculiar and perhaps unfathomable claim by the RBA Deputy Governor Dr Guy Debelle that physical gold leased by the RBA does not physically move from the BoE vault where the RBA’s gold holdings are held.

This claim, when made by Dr Debelle at the hearing in February 2019, was startling to interested observers as it raised the following questions:

1. How could the RBA know the physical status of its gold holdings (i.e. whether its gold holdings physically moved or not) given that the RBA had up until this point only conducted a partial gold audit at BoE in 2013?[3]

2. If gold leasing does not require the RBA’s gold to physically move, why is the RBA so insistent that its 80 tonnes holding be vaulted at the BoE as opposed to being securely vaulted in Australia – especially given that the RBA has not bought or sold any physical gold since July 1997[4]?

3. Which counterparty would be interested in leasing physical gold from the RBA that does not physically move and for what purpose?

The 22 February 2019 interchange between the House of Representatives Standing Committee on Economics and the RBA is displayed at Exhibit 1[5].

Exhibit 1: RBA Testimony to the HoR Economics Committee - Friday, 22 February 2019

Revealing the Mystery Major Gold Lessee

Importantly, given the above interchange, it remains a point of interest as to the identity of the RBA’s gold leasing counterparties especially given that the RBA was still leasing 11.1 tonnes out of its 80 tonnes of gold held at the BoE as of 30 June 2019[6].

According to the RBA’s website about its gold holdings[7], the RBA generated $AUD 0.88 million in leasing income during the 2018-19 financial year from its leasing arrangements[8].

Interestingly, according to the RBA’s webpage of its gold holdings, the identity of its leasing counterparties is confidential as noted by the following quote:

“The commercial relationships the Reserve Bank has with participants in the gold market are confidential; the same is true of the commercial relationships used in managing other official reserve assets”.[9]

However, such counterparties are carefully selected according to a strict criterion:

“Any gold lending by the Reserve Bank is fully collateralised by cash (either foreign currency or Australian dollars) or has the benefit of a government guarantee of the borrower's payment obligations to the RBA.”[10]

Amazingly, given the RBA’s commitment to commercial confidentiality, the RBA inadvertently revealed the identity of its major gold leasing counterparty through a release of documents on 2 September 2019 in response to a Freedom of Information request[11].

According to the documents released, one internal e-mail sent on 5 April 2019 between RBA officials reveals that 0.357 million troy ounces[12] or 11.1 tonnes of the RBA’s gold is on loan to Gold Corporation (i.e. the Perth Mint) which is wholly owned by the Western Australian Government and governed by Western Australian statute Gold Corporation Act 1987[13].

This revelation is displayed in Exhibit 2 as shown below.

Exhibit 2: RBA Internal E-mail - 5 April 2019

It is important to note that even though the e-mail correspondence as displayed in Exhibit 2 refers to ‘ounces’, it is most likely the case that RBA officials were in fact referring to ‘troy ounces’ given that this is the standard unit of measurement for physical gold bullion[14].

Why Lease Physical Gold that Does Not Move?

Considering the above revelation in the context of the 22 February 2019 testimony of RBA Deputy Governor Dr Debelle to the House of Representatives Standing Committee on Economics, the following question needs to be asked:

Why would Gold Corporation (i.e. the Perth Mint) lease 11.1 tonnes of physical gold from the RBA that does not physically move – especially given that the primary activities of Gold Corporation are the manufacturing (i.e. casting & refining) and retailing of gold bullion products?

Assuming that the testimony from Dr Debelle to the Federal Parliament is true and accurate, the only logical answer to such leasing arrangements is that Gold Corporation requires such leased physical gold in order to satisfy its ‘physical gold accounting requirements’ that it must meet under the multitude of non-physical (or what I have previously described as ‘synthetic’) gold products.

In an article published on 10 June 2020 entitled Beware of Synthetic Gold and Silver Products[15], I outlined several risks which gold and silver investors need to be aware of when considering a range of synthetic gold and silver products such as:

  • unallocated gold and silver accounts;

  • pool allocated gold and silver;

  • gold and silver Exchange Traded Funds (or ETFs);

  • gold and silver futures contracts (e.g. as traded on the COMEX); and

  • gold and silver backed crypto currencies.

Gold Corporation via the Perth Mint offers a range of these products to both institutional and retail Australian and foreign investors and claims that these products are backed with requisite physical gold and silver holdings – although the location and status of these physical holdings are not fully transparent and verifiable.

As outlined in the 10 June 2020 article, the risks associated with synthetic gold and silver products include:

  • over issuance risk - the involved counterparty (bullion dealer, bullion bank, ETFs) does not, either deliberately or by accident, have the requisite gold or silver consistent with the funds invested in the synthetic product;

  • convertibility risk - the involved counterparty is not able or is unwilling to convert the synthetic product into physical gold and silver upon request (where convertibility is a feature of the synthetic product);

  • rehypothecation risk - meaning that multiple synthetic gold and silver products are sold to multiple individuals which are tied to the same underlying physical gold or silver bar or coin;

  • counterfeit risk - the involved counterparty uses ‘salted’ gold and silver (i.e. bars and coins which actually are counterfeit gold and silver) or gold and silver which is not up to the requisite purity.

Given these risks, it would appear (unless another plausible explanation can be offered) that Gold Corporation’s synthetic gold products may carry elevated over-issuance risk given that a portion of its gold portfolio is located in the BoE vaults which the RBA has testified to Federal Parliament cannot and does not move.

Thus, if a sizeable number of Gold Corporation clients who hold the Perth Mint’s synthetic gold products were to stand for physical delivery via convertible redemptions, it remains an open serious question as to how much actual physical gold is available to satisfy such redemptions.

If the current global economic stagflation environment were to worsen leading to a greater demand for physical gold and silver bullion, Gold Corporation and other Australian and international issuers of synthetic gold and silver products may find themselves short of physical bullion which may in turn result in investors experiencing financial loss if:

  • requested redemptions are settled in government issued fiat currency (e.g. Australian dollars) as opposed to physical bullion; and

  • a sizeable spread exists between the spot price determined in the London OTC Market and the price of gold and silver in the physical market

as cash settlements are typically set with reference to the spot prices of gold and silver.

Other Significant Questions Remains

Beyond the discussion above, other significant questions which are both relevant for the RBA and more importantly for Gold Corporation remain. These questions include:

1. If Gold Corporation has leased 11.1 tonnes of physical gold from the RBA, are there any other physical gold quantities from its gold portfolio that have been leased from other counterparties?

If so, how much gold has been leased and from whom? Where is the physical location of that gold and what is its legal status?

2. What leasing arrangements has Gold Corporation undertaken in relation to its silver portfolio and what risks, if any, does this pose to the Perth Mint’s synthetic silver products?

3. Given that the RBA was not given unfettered access to its gold holdings by the BoE in both its 2013 and 2019 gold audits and given that the 2013 and 2019 audit reports have not been publicly released, with what confidence can Gold Corporation claim that the gold that they have leased actually exists and has not been leased or sold by the BoE to another counterparty?[16] (i.e. can Gold Corporation be confident that the BoE has not rehypothecated their 11.1 tonnes to another counterparty?)[17]

Gold Corporation’s Annual Report

A limited amount of information to the questions raised above can be found in the Gold Corporation Annual Report 2018-19[18]. On page 100 of its Annual Report, Gold Corporation has disclosed that as of 30 June 2019 its ‘precious metal borrowings – interest bearing’ (i.e. current liabilities which is one year or less) stood at $AUD 1.226 Billion up from $AUD 950.3 million on 30 June 2018.

On page 114, these borrowings were defined as follows:

“In the case of Precious metal borrowings - interest bearing, the consolidated entity's contractual obligation is to return precious metal ounces (which are fungible) to the counterparty. The "lease rate" for borrowing those ounces is payable at maturity in cash.”

From page 57 of the RBA’s 2019 Annual Report[19], we are able to ascertain that the RBA as of 30 June 2019 issued gold loans (via its gold leasing operations) in the amount of $AUD 718 million (i.e. this is the market value of the leased 11.1 tonnes as measured by the 30 June 2019 spot price).

Thus, we can conclude that Gold Corporation as of 30 June 2019 had borrowed $AUD 508 million in gold and silver leasing arrangements beyond the physical gold leased from the RBA.


As I have noted in previous articles, the opaque nature of the gold and silver markets have raised significant questions regarding both the price of gold and silver and whether these prices are manipulated as well as the legal status of various holdings.

In this article, we have revealed through the use of FOI documents the fact that 11.1 tonnes of leased physical gold from the RBA holdings at the BoE has been leased to Gold Corporation – a wholly owned company of the Western Australian Government.

We have also raised the important question as to what would motivate Gold Corporation to enter into such a lease arrangement given that the RBA has testified to Federal Parliament that its leased gold physical cannot and does not physically move.

Assuming the RBA’s testimony to Federal Parliament is both true and accurate, the only plausible motivation for Gold Corporation to lease 11.1 tonnes of immovable physical gold is to satisfy its ‘physical gold holding accounting requirements’ that it is obliged to meet as part of its various synthetic gold product offerings.

Such arrangements raise serious questions as to:

  • how much physical gold does Gold Corporation have under direct ownership available for immediate redemptions were its clients to stand for physical delivery of gold; and

  • the degree of over issuance risk Gold Corporation’s synthetic gold products exposed to.

In a current global economic environment of stagflation which is expected to intensify during the rest of 2020 and into 2021, the demand of physical gold bullion is expected to increase. In such an environment, synthetic gold and silver products may come under increasing pressure if issuers of these products struggle to meet redemption and delivery requirements.

If redemptions are unable to be met when requested and are instead settled in government issued fiat currency, significant financial loss may be incurred by investors who still require physical gold and silver bullion for their portfolios.

Given these risks, investors and consumers of physical gold and silver would be best placed to obtain direct legal ownership of physical gold and silver bullion where legal title can be clearly established.

John Adams is an independent political and economic analyst and commentator


[1] See the YouTube video broadcasted on 14 October 2018: Adams/North – Help John Adams Find Australia’s Missing 11 Tonnes of Gold [2] See the YouTube Video broadcasted on 16 October 2018: Adams/North: A New Gold Scandal – England Denies Australia Access to its Gold [3] According to documents released under Freedom of Information and revealed in the YouTube video - Adams/North: A New Gold Scandal – England Denies Australia Access to its Gold, an RBA official on 12 August 2013 e-mailed the BoE stating that its upcoming 2013 gold audit was “a first time review of the Bank’s gold holdings.” [4] The last purchase or sale gold transaction conducted by the RBA was in July 1997 when the RBA sold 167 tonnes (from 247 tonnes to 80 tonnes) as outlined in the following RBA press release: [5] The original testimony can be found at the following link:;page=0;query=Gold%20RBA%20Decade%3A%222010s%22%20Year%3A%222019%22%20Month%3A%2202%22;rec=0;resCount=Default [6] See page 111 of the 2019 RBA Annual Report: [7] [8] Note that the RBA’s website has not been updated for the 2019-20 financial year nor has the RBA’s 2019-20 Annual Report been published meaning that its gold leasing activities beyond 30 June 2019 has not been revealed. [9] See question 5 from RBA’s webpage of its gold holdings (link provided at footnote 6). [10] See question 4 from RBA’s webpage of its gold holdings (link provided at footnote 6). [11] [12] It is important to note that there is an important physical distinction between ounces and troy ounces. One troy ounce is equivalent to 1.09714286 ounces. [13] [14] For more information about the unit of measurement for physical gold, please refer to the following Perth Mint webpage: [15] [16] Note that Ronan Manly from BullionStar has recently revealed that the exchange-traded fund (ETF) GLD has sourced physical gold through lease agreements from the BoE. Manly’s analysis can be found at the following link: [17] Note as discussed in the YouTube Video: Adams/North – Help John Adams Find Australia’s Missing 11 Tonnes of Gold (see footnote 1), Eric Sprott and Frank Veneroso claimed that the BoE via the bullion banks were on selling client physical gold holdings in order to meet the international demand for physical gold bullion and thus suppress the international gold price. [18] [19]

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