Export of 'Gold Compounds' a Booming Business

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.

Comments

[Roger Knights:]

Maybe some madcap in the Census Bureau decided to amuse himself by stirring up the gold bugs?

(The only pedestrian reason I can think of for this jump is that some product formerly not in this category was added to it. That could happen if a paint mfgr. suddenly realized, or was told, that his gold paints needed to be reported in a special way. E.g., he may have noticed for the first time the line on the form for gold paint.)

Sep 01 04:58 AM

[manya05:]

Well, your story does not say how much higher the 2008 exports of gold compounds were with respect to 2007. +10%? +50%? +100%?

The story does not say (and I am sure the Census Buereau does not know), what is the average gold content of the compounds being exported. A minimal amount fo gold may be being exported.

And finally, if tehse are industrial compounds, I would fully expect them to be exported. To extract the gold probably involves chemicals that are banned in the US, and processes that shorten workers' lives by years for each week of work...probably also banned in the US. The reprocessing is taking place in some poor country, the gold may come back to the US for all we know.

Sounds like a fishing expedition to the desert.

Sep 01 06:56 AM

[Economic Di...:]

Roger,
I too think there may be an innocent reason here, but that much paint or other material?

Manya,
from the source article the increase is 30% from 2007 to 2008.

Sep 01 07:16 AM

[manya05:]

OK, thanks, 30% increase does not sound like much, if gold prices went up, you are now scraping the bottom of the barrel a little bit harder and shipping off compounds for reprocessing that you were previously dumping. As I said, not much to see here...move on..move on ;-) (good luck convincing gold bugs to move on...)

Sep 01 07:46 AM

[PMMaven:]

Keep in mind, there are many gold compounds used by industrial companies. The actual gold portion of the product weight can vary greatly to as low as a few % up to 80-90%. If the value (selling price) includes fabrication costs the actual gold value of the sale could be very low. For instance, gold paint's (poor example) gold value is probably less than 10% of selling price.

Sep 01 10:33 AM

[dragonpaw:]

Let' see.. at an increase of 1000 metric tonnes over the previous year, we're "exporting" about 3 metric tonnes daily (about 7000lbs.) from Fort Knox? Logisticly this wouldn't be all that tough. But don't you think someone in the chain of command/delivery might let a conspiracy theory like this leak to say Glenn Beck, Rush Limbaugh, or their missives?

Sep 01 11:55 AM

[Economic Di...:]

All,
after rechecking the article and checking some other yearly data, this does not seem extraordiinary, but still I found it interesting.

Sep 01 12:06 PM

[bindlepete:]

Curious and curioser.

I sure do not trust government statistics but there are the occasional attempt at being honest if even in a supposedly unnoticable way. One thing I am sure is that Treasury, if they wished to be transparent, could explain what was going on.

Try an FOI and I suspect it will be lost in process. Ask Barney Frank and he will babble.

LOL

Sep 01 01:48 PM

[bindlepete:]

Curious and curioser.

I sure do not trust government statistics but there are the occasional attempt at being honest if even in a supposedly unnoticable way. One thing I am sure is that Treasury, if they wished to be transparent, could explain what was going on.

Try an FOI and I suspect it will be lost in process. Ask Barney Frank and he will babble.

LOL

Sep 01 01:48 PM

[daveddawg:]

I don't see any gross value in the table, only gross weight. This would have more credibility if the gross value was included

Could there have been a miscommunication between the original author and the USGS person and then between USGS and Census?

Sep 01 05:53 PM