To begin with, is it remotely plausible that, if in fact there was no gold in the Scotia vault, that Scotia would take someone inside to show them an empty vault?  Scotia has extensive procedures in place including criminal background checks before anyone is allowed inside the vault and the whole process is documented. Even our auditors have to comply with these procedures.

I have personally been in the vault at least a dozen times both with clients, advisors and auditors and not only is the $300 million that BMG holds on behalf of clients but at least 4 times that amount is held for other clients as well as Scotia’s inventory. Scotia has had to expand the vault because if anything they may run into capacity constraints and they are considering expanding the vault again.

Scotia’s 2009 financial statements show $5.580 billion in precious metals assets (about 1% of their total assets) and $3.856  billion in precious metals liabilities.  The liabilities represent the certificates and unallocated accounts.  Bullion that is held for clients in allocated accounts does not appear on Scotia’s Financial statements as it belongs to their clients.

In the case of BMG, we have unallocated accounts for each metal that are used to facilitate the purchase and sale of bullion to meet purchase and redemption requests.  These accounts vary between $500,000 and about $1 million each.  When the unallocated accounts reach about $1 million we have Scotia debit the unallocated accounts and deliver bullion to the allocated account.  Scotia then issues an updated report showing the holdings in the allocated account.  These reports identify each bar held by refiner, exact weight and purity and serial number. At the end of each year KPMG as the Fund’s auditor as well as BMG’s auditor verifies the holdings and reports accordingly in the Annual Report.  This is set out on page 43 of the 2009 Annual Report.