Export of 'Gold Compounds' a Booming Business

by: Economic Disconnect

This story was from back in late May, and I cannot recall seeing it at that time. Monday the blog Market Skeptics takes another look at the massive exporting of "Gold Compounds" over the past year and a half (original article at Goldseek can be found here.)

Key question:

I took special note of how 2,920 metric tonnes of “Gold Compounds” had been exported from the U.S. in 2008. This number seemed BIGGER than BIG – because the U.S is only alleged to have stockpiles of sovereign gold of 8,100 metric tonnes while annual U.S. mine production of gold is roughly 228 metric tonnes. This figure of 2,920 metric tonnes is equal to 36 % of all alleged sovereign U.S. gold stocks or more than 14 times annual U.S. gold mine production. So, I was left wondering, “just what is/are ‘gold compounds’?

I contacted the USGS and queried a qualified individual [who had working knowledge of this data stream] about the definition of “Gold Compounds”. I was told that, according to the U.S. Census Bureau – who supplies not only the definition but the actual reported numbers, gold compounds were typified by industrial type products containing low percentages/amounts of actual gold content – like gold paint.

I then reasoned with the USGS person, if such were the case, why would U.S. exports have increased in 2008 to nearly 3,000 metric tonnes [when the Global Economy was slowing and the U.S. Dollar was strong] from 2007, when U.S. exports totaled approximately 2,000 metric tonnes [when the U.S. Dollar was weaker and the Global Economy was booming]? I noted that this was counter-intuitive and made no fundamental economic sense...

When confronted with reason, the individual for the USGS agreed that the data, as published, did not make logical sense and explained that the U.S. Census Bureau was questioned as to the veracity of this particular line item in their data.

I asked the USGS employee if the gross weight or the gross value [not shown in the table but known to the USGS] of the “Gold Compounds” was queried.

The individual confirmed that their query to the U.S. Census Bureau dealt with the gross value being assigned to these exported goods.

I responded rhetorically, “being an issue of gross value – then let me guess that the U.S. Census Bureau is assigning an astronomically high value to these goods. Such a high value would be COMPLETELY INCONSISTENT with what the U.S. Census Bureau claims these items are- namely, industrial goods. The values being reported would be more in line with these goods being gold bullion or equivalents”.

The individual from the USGS confirmed my reasoning when he responded, “that would be CORRECT”.

At a minimum, this is a very peculiar event. Does the US sell that much gold paint, or those little gold flakes for alcohol shots? Does the US export enough "industrial use" gold to significantly affect US trade numbers? Market Skeptics offers his own idea:

Until someone explains to me what these “gold compounds” were, I am going to assume that they were half the US gold reserves leaving the country.

I am not ready to jump on that ship, but either this is a way to quietly move gold bullion on a large scale back to foreign central banks, or the numbers themselves are fictitious and constitute a blatant data manipulation on trade numbers. In any case, this is an important story.