The Bank of England's just released 2014 Annual Report discloses that it was holding 5,485 tonnes of gold as a custodian, down 755 tonnes to around the level it was in 2011 and 2012. Below is a chart of the data against the average gold price over the Bank's financial year ending February, which shows that the amount of gold has basically followed the gold price, very much like the behaviour of the gold ETFs.
The table below details the figures and calculations back to 2005, when the Bank first started reporting its custodial activities.
| As at Date | Allocated Gold (GBP billions) | London PM Fix (GBP) | Allocated Gold (tonnes) | Year on Year Change (tonnes) |
| 28/02/2005 | 29 | 226.514 | 3,982 | |
| 28/02/2006 | 36 | 318.078 | 3,520 | -462 |
| 28/02/2007 | 43 | 338.964 | 3,946 | +425 |
| 28/02/2008 | 72 | 488.854 | 4,581 | +635 |
| 28/02/2009 | 102 | 669.809 | 4,737 | +155 |
| 28/02/2010 | 125 | 746.149 | 5,211 | +474 |
| 28/02/2011 | 156 | 868.682 | 5,586 | +375 |
| 28/02/2012 | 197 | 1110.484 | 5,518 | -68 |
| 28/02/2013 | 210 | 1046.719 | 6,240 | +722 |
| 28/02/2014 | 140 | 793.931 | 5,485 | -755 |
In this June 2014 Quarterly Bulletin, the Bank reports on page 134 that 72 central banks hold gold with them (which is 65% of the 113 central banks that the World Gold Council records as having gold reserves). It also noted that the
"Bank also acts as a bank to certain other financial institutions. One example is central counterparties". Included in that the latter group would be the six London bullion market clearing banks. As it is unlikely that the Bank runs allocated gold accounts for banks that are not central to the gold market, it would be fair to conclude that the majority of the allocated gold it holds is for central banks.
Given there was nowhere near 755 tonnes of central bank selling in the year ending February 2014 it would therefore be fair to conclude that this gold outflow was from the allocated accounts that bullion banks had with the Bank of England. This is not surprising considering that the major gold ETFs lost in excess of 600 tonnes over that same period.
Just one final observation from World Gold Council central bank holdings data: it wasn't until the year ending Q1 2010 that central banks were net buyers. Prior to that they were net sellers (1,011t for 4 years to March 2009), yet the table above shows customers of the Bank of England adding to their holdings (753t for 4 years to February 2009). Now if we remove central banks that most likely don't store with the Bank, this 1,011t net sell figure may change, but I doubt enough to turn it around to anywhere near 753t of net buying. Tentative conclusion is that bullion banks were accumulating a lot of allocated gold with the Bank of England.
Combining the above figures with detailed LBMA turnover figures, UK gold import/exports, London ETF flows, and central bank activity is more work than I have time for at the moment, but it certainly would give us a better picture of the London gold market.
