Analyst Paul Mylchreest speculates on what happened to Asian gold stolen by the Japanese during World War II and secreted in the Philippines. Could it have been laundered through the London gold exchange in the 1990s? And is that what accounts for the sudden ‘take-downs’ in the gold price?

“In the light of the story of Yamashita’s Gold have another look at the chart of Gibson’s Paradox. There are actually two periods when the relationship breaks down in a major way and the gold price falls sharply when the correlation suggests that it should have risen:
BB The obvious one is in the mid/late 1990s which coincided with massive volume reported by the LBMA, the likes of which have never been seen since, even though we’ve been in a gold bull market for the last eight years and gold, as an asset, has become “investible” again in western financial markets.
BB The slightly less obvious one, but have a closer look, is 1986-1990. Now we don’t have any LBMA volume data for those years, but remember the story of Yamashita’s Gold – Ferdinand Marcos, who eyewitnesses testified had recovered enormous amounts of gold which he was holding in Manila, was DEPOSED in 1986.
If Alternative 2 is correct, and there is far more gold in existence than is generally understood, a strong
case can be made that the unusual behaviour of the gold price and the huge volumes of gold traded
through the LBMA in a major bear market for gold suggests that looted gold was being laundered through the London market – during these periods in particular and most likely others given the frequent counterintuitive movements in the gold price for more than a decade. The question for my friends at the Gold Anti-Trust Action Committee is whether the gold price suppression has been the result of covert sales of central bank gold or from the Yamashita hoard?

Finally, if Alternative 2 is correct, what are the implications from an investment standpoint? If it is true
then the periodic laundering of clandestine or “black” gold into the London market has been a feature of the gold market since the end of the Second World War so going forward what’s chagned? One of the key themes of Thunder Road has been the inevitable approach of a dollar crisis (and a Sterling crisis) hence the need to own gold and silver. Alternative 2 doesn’t change the technical insolvency of the US. At the same time, nations like China and Russia are buyers of gold. My lateral thought on China is that much of the gold allegedly stolen by the Japanese is believed to come from the Middle Kingdom. Not only has China announced that it has doubled its official gold reserves, but it has started to promote the ownership of gold and silver to its people. Is China actively trying to reverse events which began more than a century ago and reclaim its gold?

From a tactical perspective, if there are still quantities of clandestine gold which can be dumped into the market periodically, short-term pull backs in the price will remain a feature in the gold market but, once again, that’s no different from what we’ve been experiencing anyway. Let’s not forget, the gold price on 15 January 2009 was US$810/oz compared with US$995/oz on the day before Bear Stearns collapsed in March 2008. In the intervening 10 months, the world economy had been decimated and governments around the world, especially in the US, had spent or pledged many trillions of US dollars created out of thin air.

Counter-intuitive anybody?

A final thought is: why did the LBMA suddenly surprise everybody by starting to publish data on the volume of gold trade going through London in January 1997? If Alternative 2 is correct, was somebody high up in the LBMA suspicious about the heavy selling of bullion which was pushing the gold price down? Was it their way of letting us know? Here is an posting on the internet from 31 January 1997 from “CMAX”. The only changes I have made are to improve the English without restraining some of his (slight?) hyperbole!

“HOW HOW HOW…in this enlightened age of information, did something exist so large as loco London??
It has been hidden all this time not by government mandate…but by private enterprise. The discovery
of loco London is akin to discovery of the New World by Columbus…these are the numbers of a GOLDEN
ALTERNATIVE CURRENCY, here and NOW.”