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Gold Bars at NY Fed "Need Recasting", Says Bundesbank

Gold bars owned by Germany's central bank fail London Good Delivery standards...
GERMANY's central bank, the Bundesbank, is having gold bars it holds at the New York Federal Reserve melted and re-cast in Europe to meet market standards before taking them into storage in Frankfurt, a spokesperson has told German media.
The second-largest national gold owner with 3,387 tonnes, the central bank announced in January 2013 that it would withdraw 30% of the gold bars Germany held in foreign central banks over the next 7 years, and hold them at home instead.
But in December, the Bundesbank "let slip" that it had so far received only 32 tonnes of gold bars from the Banque de France in Paris, according to the Bild tabloid, and only 5 tonnes from the United States' New York Fed.
At that rate, it would take until 2024 to remove all of the German gold now allocated in Paris, rather than 2020 as announced. Withdrawing 20% of Germany's New York-held bars as planned would take 60 years.
Now wanting "to counter speculation" about these delays and the recasting process, according to Welt am Sonntag, the Bundesbank says this program only began in the autumn. Because "contracts had to be arranged" with shipping companies and refiners – arrangements apparently helped by the Swiss-based Bank of International Settlements.
"Employees of the Bundesbank supervised the bars' removal from the New York Fed," the newspaper reports, "crossing those bar numbers off the vault's inventory lists."
The gold bars so far delivered from Paris, Die Welt's Sunday edition goes on, already met the London Good Delivery standards required by the professional wholesale market worldwide. But the 5 tonnes of New York Fed material sent in 2013 conformed only to "previous" standards, and so had to be re-cast to gain that "ultimate authority" which London Good Delivery bars carry.
Converting non-LGD bars into market-acceptable form – an aim set when the Bundesbank announced the re-allocation program in January 2013 – was done in Europe, according to yesterday's newspaper report, answering a point raised in December by German bloggers including the head of Gold-Action, a lobby group calling for external audits and the repatriation of all central-bank gold worldwide.
So far, says Welt am Sonntag, the process has given the Bundesbank – which publicly asserted the validity and independence of its gold reserves management amid growing calls for more transparency in October 2012, three months before announcing the relocation plans – "no reason for complaint" against the New York Fed.
"The weight and fineness of the gold bars agreed with the books."
The Bundesbank now expects to receive between 30 and 50 tonnes of gold bars from the New York Fed's care in 2014, the newspaper's report concludes.
Begun in the mid-18th century by the Bank of England, the Good Delivery list of refineries approved for making large wholesale gold bars acceptable to the London market has been managed since 1987 by the London Bullion Market Association. It removed large gold bars stamped as being manufactured by the US Assay Offices & Mint from the "current list" in 1997. Gold bars produced by the US Mint between 1934 and 1997 remain on the "former list" however, meaning they would be acceptable.
Updating its website in January 2013, just as it announced Germany's 2020 relocation plan, the Bundesbank detailed how in the late 1960s it agreed to accept non-LGD gold bars into its New York Fed account, because the run on America's gold which eventually led to the collapse of the post-war Bretton Woods system had depleted the Federal Reserve's stockpile of Good Delivery metal.
On having the bars then recast into acceptable form, the German central bank says, "the Fed compensated the Bundesbank for both the costs incurred from the melting process...and the discrepancy in the weight of the bars."

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