I just came across a rather interesting interview with Andrew Maguire and another gentleman named Robert Kientz.
Andrew is a serious precious metals trader out of London who has been around for a long time.
Robert Kientz has many years of experience as an auditor.
In the interview Robert explains that he has done an investigation into the accounts of the Perth Mint in Western Australia.
The Perth Mint is wholly owned by the WA Government and is therefore obliged to publish accounts, something that many gold dealers or refiners do not do.
Robert claims that by ‘reverse engineering’ the accounts of the Perth Mint, he has discovered some rather astounding anomalies.
He insists that the Perth Mint’s ‘Unallocated Accounts’ do not have the metal in them that they are supposed to have.
An unallocated gold or silver account is one where customers purchase a certificate which gives them ownership of an amount of precious metal.
Unlike in an ‘allocated account,’ the certificate holder does not own a specified gold or silver bar.
This means that storage fees for unallocated accounts are lower, or even non-existent.
In theory then, these accounts make a lot of sense for an investor wanting to hold gold – providing you trust the institution.
In this case, it is owned by WA’s Government so it should be OK – right?
Well, having done an investigation, Robert claims that at one point, the Mint was short almost a billion dollars of Gold from certain unallocated accounts.
He further claimed that the Mint had sold off one Exchange Traded Fund to Goldman (presumably ‘Sachs’) and Goldman had immediately barred any holders of gold certificates from redeeming the metal.
How does that work? You ask.
Well, imagine the Perth Mint starts a new unallocated account with a million dollars’ worth of gold in it.
They then sell certificates for that gold and take in one million dollars. They now hold a million dollars worth of gold in the vault and a million dollars worth of cash in the bank.
On the other side of the ledger are the owners of a million dollars’ worth of certificates.
The owners of the certificates can cash in the certificates and take either the cash, or the gold. Invariably, they take the cash because they have total confidence that the Perth Mint holds the gold.
But suppose the mint didn’t have the gold?
In theory, it doesn’t matter because most people just collect the cash.
If the mint then sells the unallocated account to a third party then in theory they would be sending them the gold.
If they don’t have the gold, then they would be sending them cash instead. The new owner of the account can then refuse to redeem the certificates in precious metals and just redeem them with cash.
Most people would be non the wiser and most wouldn’t care. It’s the perfect crime. There isn’t even a victim.
But there is a problem. What if the price of gold rose?
Well, if it was only a small rise, the mint could probably hide that in its accounts somewhere, and if the price fell, well, they would be in front right?
But what if the price rose suddenly, as it did in 2019; when it powered from AU$1600 to around AU$2800?
That would leave the mint in a precarious situation and with a vested interest in trying to reduce the gold price.
This is the danger of short selling. When prices rise, you are forced to buy back. Since there is no limit to how high prices can rise, there is theoretically no limit to your losses.
If you are a taxpayer in Western Australia, this should concern you.
I have written a letter to The Perth Mint asking questions and requesting clarification on this issue. I will keep you informed on their response.
The questions are as follows:
1. Do the Perth Mint unallocated gold and silver accounts have enough precious metals to cover 100% of customers’ accounts?
2. If not, are customers made aware of this fact before purchasing certificates for unallocated precious metals?
3. Would Perth Mint consider it acceptable to transfer ownership of precious metals from unallocated accounts to a third party, even for a limited time period, without informing the owners of the unallocated precious metals?
4. If yes, then would there be a limit on what percentage of an unallocated fund could be transferred to a third party and what would that limit be?
5. Are the Perth Mint’s holdings of unallocated gold and silver audited and if so, how often? Further to that, is it possible to receive a copy of the audit or failing that, a summary attesting that all of the precious metals the mint claims to have are actually held without any third party claims to them.
6. If the Perth Mint were to transfer precious metals to a third party and that third party failed to return the metals, would the Western Australian taxpayers be obliged to purchase metals on the open market to repay any certificate holders who wished to redeem their metals?
7. Has the Perth Mint sold any unallocated funds or ETFs to third parties in the last decade who have then refused to redeem physical metal to customers?
8. Does the Perth Mint ever try to discourage holders of unallocated precious metals accounts from taking delivery of actual metals, other than with previously agreed upon fees to cover the service?
In the meantime, I just want to let you all know that I have no intention of committing suicide, especially by shooting myself three times in the back of the head with a rifle (or a homemade shotgun).
