Treasure Ship Found With $130 Billion In Gold Is Likely Fake News

On July 18th, a South Korean company claimed to have found the wreck of a Russian warship holding $130 billion in gold. Shinil Marine said it had discovered the wreck of the Dmitrii Donskoi, a Russian armored cruiser sunk in 1905 after fighting Japanese warships off South Korea’s Ulleung Island. It was reported that a staggering 200 tons of gold, worth $130 billion, was on board!

gold treasure russian ship

 

The ship, discovered 434 meters beneath the surface of the sea, was a 6,200-ton first-class armored cruiser from the Russian Baltic Fleet. It had left the Baltic Sea in 1885 and sailed the oceans until its doom in 1905 when the Battle of Tsushima began, wherein  38 Baltic ships including Dmitrii Donskoi, and 89 Japanese ship  went to war. The ship was sunk, leaving many searching for her for years.

 

When I first heard this news, the size of the discovery made me question the authenticity. The Bank of Korea holds only 104 tons of gold in reserve. Furthermore, 200 tonnes of gold is worth around $8 billion at the current spot price, not $130 billion. (1 tonne = 2,000 pounds, there are 16 ounces in pound or 32,000 ounces in a tonne, x 200 tonnes = 6.4m ounces of gold x $1,225 = $7.84 billion).

So, it is unclear why a value of $130 billion was reported in the first place. One report claims the ship was carrying 200 tonnes of gold coins AND 5,500 boxes of gold bars. Maybe the gold bars make up the missing $122.16 billion in the calculation, but it seems unlikely. For reference, the image below is a pallet of around 10 tonnes of gold. The ship would need to be carrying 20 of these pallets to equate to the 200 tonnes or 325 of them to equate to $130 billion worth of gold.

10 tonnes gold

 

If a newfound supply of $130 billion came into the market, it could soak up demand and force prices lower. Even the discovery of $8 billion would be meaningful in the short term, so I initially viewed the discovery as bearish for prices. The gold price shed $20 in a six-hour time period leading up to the public announcement of this gold discovery. Gold hit a new 2018 low around $1,211 per ounce the day after the news was released. Of course, correlation does not imply causation, but here is the chart for your amusement…

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