In the central vault of Banxico there is almost no gold. A bad news because it means that the financial shield of Mexico is still in the possession of a foreign central bank.
In the first quarter of 2011, Banco de México (Banxico) jumped to the international scene with a purchase of 100 tons (t) of gold that was world news. That year he refused to reveal to this journalist the location of their protection, which led us to assume that they were not in the country. As if that were not enough, he worried that he would tell us: “Due to the variability in the gold content of the ingots, the exact number of bullions purchased can not be specified with certainty.”
It was clear that he had acquired imaginary gold in an ” unallocated account” , which gives the right to withdraw the metal if it is required … and if there is one at the time of the request. A central bank can not afford these luxuries due to the high risk of default that it means, especially if the purchase was made to minimize the risk of dollar reserves.
A year later, the central institute added 20 more tons to its balance sheet. We went back to questioning where such a valuable treasure was located, and in the face of the refusal, we had to resort to the Transparency Law, a review resource and a long process that culminated favorably. Thanks to this, we brought him exclusively the story that almost all of Banxico’s golden reserves were housed in a London vault of the Bank of England.
In this regard, today I update you with two news: one good and one bad.
The bad news is that of the total gold reserves at December 31, 2015 -3 million 905 thousand troy ounces (just over 121.4 tons equivalent to 4.139 million dollars) -, 98.3% continues to be protected in the United Kingdom. The rest is divided between Mexico and the United States. In the central vault of Banxico there is almost no gold.
The above information was revealed to us by the institution that governs Agustín Carstens through the office OFI006-14945.
It is bad news because it means that the financial shield of Mexico is still in the possession of a foreign central bank.
The last time we asked Banxico about where they were and how many gold bars they owned, it was in May 2014. At that time, there was no great news: the locations were the same and there was only one “unassigned” account. Banxico reiterated: “it is not possible to specify the exact number of ingots that made up the Reserve as of May 31, 2014.”
At the time, we criticized this situation a lot and stressed the need to bring gold to the country or, in the worst case, change the status of the account to “assigned” ( allocated account ).
That brings us to the good news: Banxico has already changed most of its account to the “assigned” status. He has told us that he has the serial number and characteristics of 7.265 ingots that correspond to him. A small advance, but advance at the end.
Through the Transparency Law we will proceed to require the list with serial numbers to compare them with other published lists. It is not going to be that more than one has assigned the same ingot.
The “Good Delivery” bars that central banks usually accumulate are the 400 troy ounces, with a minimum purity of 995 parts per thousand. This allows us to estimate that some 2.9 million ounces – almost three quarters of the total reserve – would already be “assigned” .
Of course, for the total-assigned or not-is paid. “The cost of custody of gold reserves abroad amounts to 112,135.22 pounds sterling from December 1, 2014 to December 1, 2015,” the central institute concluded. At yesterday’s exchange rate, that equates to just over 3 million 100 thousand (devalued) pesos.
Here we celebrate that Banxico has attended at least our request to demand the allocation of its gold, but it is not enough.
Whats Next? We insist that the central bank must increase its golden holdings to at least 10% of its total reserves -now they represent little more than 2 %-, which would imply having five times more than today. The goal would be 600 tons.
Half of that gold should be brought to the central vault of Banco de México, and the rest should be left where it is in the event that, due to a financial emergency, it is required to place it under guarantee. In matters of precious metals you can not trust anyone.
With the peso as weakened as it is and the dollar reserves shrinking, gold would be an important support that could help mitigate investor distrust in our economy. Hopefully Agustín Carstens will also take us into account this time.
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