Two stories emerged last week, which will create additional interest in the precious metals market.

Two stories emerged last week, which will  create additional interest in the precious metals market.

1)     Elke Koenig, the president of Germany's top financial regulator, Bafin, which apparently is not as corrupt, complicit and clueless as its US equivalent, and who said that in addition to currency rates, manipulation of precious metals "is worse than the Libor-rigging scandal."     http://www.gold-eagle.com/article/bafin-enquiry-deutsche-bank

2)     Deutsche Bank, one of the 5 banks involved in setting the daily AM and PM London fix gold prices has announced today it will quit participating in precious metals price setting due to the ongoing investigation by German authorities into alleged precious metals manipulation. It appears that the daily price fixes may be in jeopardy particularly in silver, as the bank’s exit would leave only HSBC and the Bank of Nova Scotia as the remaining banks involved in the daily silver fix, and reports indicate others may follow Deutsche’s lead

3)     The leverage of 112 times in Comex has reached unprecedented levels and is facing massive delivery problems.  Serious investors are moving from the western future exchanges and ETF’s into the physical market, making the exchanges obsolete

4)     The FED has no gold. Interestingly, this theory is simply getting stronger and stronger. The "theory" is that the NY Fed has rehypothecated out more gold contracts that it actually has physical gold in the vault. Over a year ago, the Bundesbank announced that it had decided to repatriate the 674 tons of gold that the FED held on its behalf, however, one year on, the FED has actually only managed to physically deliver into the Bundesbank, a grand total of 37 tonnes with 32 tonnes delivered by the Bank of France and 5 tonnes by the NY FED announcement according to Zerohedge.  See larger article below.

Germany Has Recovered A Paltry 5 Tons Of Gold From The NY Fed After One Year

Submitted by Tyler Durden on 01/19/2014 13:35 -0500

 On December 24, we posted an update on Germany's gold repatriation process: a year after the Bundesbank announced its stunning decision, driven by Zero Hedge revelations, to repatriate 674 tons of gold from the New York Fed and the French Central Bank, it had managed to transfer a paltry 37 tons. This amount represents just 5% of the stated target, and was well below the 84 tons that the Bundesbank would need to transport each year to collect the 674 tons ratably over the 8 year interval between 2013 and 2020. The release of these numbers promptly angered Germans, and led to the rise of numerous allegations that the reason why the transfer is taking so long is that the gold simply is not in the possession of the offshore custodians, having been leased, or worse, sold without any formal or informal announcement. However, what will certainly not help mute "conspiracy theorists" is today's update from today's edition of Die Welt, in which we learn that only a tiny 5 tons of gold were sent from the NY Fed. The rest came from Paris.

As Welt states, "Konnten die Amerikaner nicht mehr liefern, weil sie die bei der Federal Reserve of New York eingelagerten gut 1500 Tonnen längst verscherbelt haben?" Or, in English, did the US sell Germany's gold? Maybe. The official explanation was as follows: "The Bundesbank explained [the low amount of US gold] by saying that the transports from Paris are simpler and therefore were able to start quickly." Additionally, the Bundesbank had the "support" of the BIS "which has organized more gold shifts already for other central banks and has appropriate experience - only after months of preparation and safety could transports start with truck and plane." That would be the same BIS that in 2011 lent out a record 632 tons of gold...

Going back to the main explanation, we wonder: how exactly is a gold transport "simpler" because it originates in Paris and not in New York? Or does the NY Fed gold travel by car along the bottom of the Atlantic, and is French gold transported by a Vespa scooter out of the country?

Supposedly, there was another reason: "The bullion stored in Paris already has the elongated shape with beveled edges of the "London Good Delivery" standard. The bars in the basement of the Fed on the other hand have a previously common form. They will need to be remelted [to LGD standard]. And the capacity of smelters are just limited."

So... New York Fed-held gold is not London Good Delivery, and there is a bottleneck in remelting capacity? You don't say...

Furthermore, Welt goes on to "debunk" various "conspiracy websites" that the reason why the gold is being melted is not to cover up some shortage (and to scrap serial numbers), but that the gold is exactly the same gold as before. Finally, to silences all skeptics, the Bundesbank says that "there is no reason for complaint - the weight and purity of the gold bars were consistent with the books match." In conclusion, Welt reports that in 2014 "larger transport volumes" can be expected from New York: between 30 and 50 tons.

Here we would be remiss to not point out that the reason why the German people and the Bundesbank have every reason to be skeptical is that as Zero Hedge reported exclusively in November 2012, before the Buba's shocking repatriation announcement and was the reason for the escalation in lack of faith between central banks, it was the Fed and the Bank of England who in 1968 knowingly sent Germany "bad delivery" gold.  Which is why we have a feeling that the pace of gold transportation will certainly not accelerate until such time as the German people much more vocally demand an immediate transit of all their gold held at the New York Fed: after all, it's there right - surely the Bundesbank can be trusted to melt the gold (if any exists of course) into London Good Delivery or whatever format it wants.

Unless of course, the gold isn't there...