The 1981 and 86' HMS Edinburgh salvage - the numbers don't seem to add up, what do you think?

[Ex Nafragiis Venit Aurum]

For those that don't know - the HMS Edinburgh was sank in 1942 by the Germans. 58 British lives were lost, and also 465 bars of Russian gold. Reports on the weight of each bar have differed, some indicating 7 pounds, some say 13 pounds, but most sources agree that each bar was 23 pounds. That's 368 ounces of gold per bar, and 171,120 ounces of gold in total.

In 1942 the price of gold was $33.85 per ounce. That’s $541.60 a pound. Remember that.

In 1942 the RMS Edinburgh, along with 60 British lives, was sunk by a German U-BOAT. This ship had been carrying a secret war payment of 465 gold bars of Russian origin with an intended destination for the US.

Each gold bar, it’s reported, weighed 23 pounds. Reports differ on the total weight of the gold. Some indicate it was 4.5 tonnes, while others indicate it was 5.5 tonnes. When calculated, the total supposed tonnage is 4.851 metric tons

According to historical records the total value of these 465 golden bars was £1,500,000. In 1942 each £1 was equal to $4.03. This means that in USD, the 1942 cache of gold was valued at $6,045,000.

But this math doesn’t make sense under the historical price of gold in 1942. If we consider the recorded value of gold, $33.85, then 465 gold bars at 23 pounds each should be valued at only $5,792,412. That’s $252,588 (£62,676.92) less than the reported value.

In the grand scheme of things this isn't a large discrepancy, but fast forward just 40 years and it gets much worse:

The gold was partially salvaged in 1981, where the value of gold was recorded to be *$460 an ounce, or $7,360 a pound.

The team recovered 431 gold bars, (that's 9,913 pounds) reportedly £45,000,000 in value. In 1981 the exchange rate was £1 to $1.26. At this exchange rate, the reported value of the 431 gold bars was $56,700,000.

This is problematic because the *recorded cost of gold puts the 431 gold bars at a value of $72,959,680, or £57,904,507.93, meaning the gold was undervalued at more than £12,000,000 according to all historical sources that put it at £45M if my math is correct.

Is my math correct? If it is- what is the cause of this discrepancy? Could the reported weight of each gold bar be wrong? For 431 bars to be worth £45M, each bar would have to be valued at £104,408.353 or $131,554.524.

This figure, divided by the recorded price of gold per pound in 1981 ($7,360) comes out to 17.87 pounds per gold bar. it seems unlikely that anyone wouldn't make bars of gold.

Did the historical records of gold prices forget to mention they used troy ounces rather than normal ounces?

It's 16 normal ounces to a pound, but only 14.5833 troy ounces to a pound. Let's try plugging that into the 1981 equation instead?

14.5833 x $460 = $6,708.318 per pound of gold, multiplied by 23 pounds is $154,291.314 per gold bar. That's $66,499,556.30 total value for the 431 gold bars in 1981. Divided by the $1.25 exchange rate gives us £52,777,425.70.

It's closer- but no cigar. We still face a discrepancy of more than £7,000,000.

What am I missing>?

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[Mackaydon]

For those who do know, the name of the vessel was the HMS Edinburgh, not the RMS Edinburgh. Did you pose the question looking solely for a math answer or did you post the question as part of research directed towards salvaging the balance of the gold--or both?
Don in SoCal

 

[Red-Coat]

As @Mackaydon says, Edinburgh was a Royal Navy Town-class light cruiser (HMS), not a Royal Mail Ship (RMS). A couple of other corrections. Her destination when she left Murmansk in Russia was Britain, where the gold was to be unloaded for onward shipment to America. Although crippled by the German attacks she was actually scuttled to prevent the gold falling into German hands and sunk by two of Convoy QP 11’s escort ships: HMS Harrier and HMS Foresight. The official record for the number of crew lost was 58 (2 officers and 56 ratings).

Regarding the weight and value of the consignment, various figures are mentioned with values which differ according to when and where the story was published (and this is often the case for these kinds of stories). The total weight for the 465 bars is reliably recorded as 4.5 long tons (4,570 kg). The value was put at approximately £1.5 million sterling in 1942 (adjusted for inflation to £45 million in 1981; £140 million in 2014; £220 million in 2024). Many variations are reported on these figures since the story has resurfaced several times with different adjustments for inflation, using different exchange rates against the dollar (when reported in America) and using gold bullion prices from different dates (all but 5 of the bars were recovered in two operations in 1981 and 1986.)

Sometimes, the picture is further confused by the gold having different (realised) values in different countries as a result of taxation. Most reports say that 431 bars were recovered in the first operation but British records indicate the Russian share as 158 bars and the British share as 272 bars (ie 430 bars). The British share was divided as 111 going to the Department of Trade and 161 to the recovery consortium.

On arrival at the Bank of England’s vault, the condition of the bars was inspected and they were weighed. Questions had already been raised over the ‘good delivery’ status of the bars, since they had been produced at various Moscow state refineries between 1937 and 1942 and had no assay certificates. In order to sell them on the London gold market, an assay charge of 60 pence per ounce was quoted, so it was suggested that the consortium’s share be exchanged for ‘good delivery’ bars (to which they agreed, keeping a few of the original bars as souvenirs). Two of the bars were purchased on behalf of the EEA, forming part of the reserves, and have been on display at the Bank of England from time to time. The remaining bars were sent in batches to the Royal Mint, where they were melted down to produce gold sovereigns.

What the consortium didn’t realise at the time is that the gold would be liable to 15% Value Added Tax as soon as it landed in the UK (but they were able to take advantage of ‘postponed accounting’.) The original contract specified that the bulk of the consortium’s share was to be paid in sterling but the Russians were so short of hard currency that the consortium was forced to take its share in gold. Had they realised this earlier, they would have sold their share of the gold abroad, avoiding the VAT. The consortium was also due an outstanding interest payment, but it was withheld by the Department of Trade and ultimately forfeited because the consortium signed away its rights to the balance when it was awarded a new contract for the second recovery operation, which retrieved a further 29 bars. Depending on date and nature of publication, some stories refer to the value of the gold recovered in the first operation; some refer to the total from both operations; and some refer to the total consignment value including the 5 unrecovered bars.

The son of a lady I used to work with was one of the expert divers used for recovery of the gold: a guy called “Banjo” West. She had a photograph of him on her desk, on the dive-vessel Stephaniturm with one of the gold bars nestled in his lap. She told me that some of the divers amused themselves during a lull in the proceedings by tossing explosive charges overboard to make huge splashes. The two Russian observers on board came rushing to the deck in a panic, urging them to stop. Apparently, they were above a Russian submarine lane.

 

[Ex Nafragiis Venit Aurum]

For those who do know, the name of the vessel was the HMS Edinburgh, not the RMS Edinburgh. Did you pose the question looking solely for a math answer or did you post the question as part of research directed towards salvaging the balance of the gold--or both?
Don in SoCal

LOL thanks for the save - I was staring at the numbers too long and didn't realize my error.

2 - this is for a script I'm writing - has nothing to do with the TV show. Planning to launch social media channels before the show that cultivate an audience that loves content about treasure, adventure, military history etc. The HMS Edinburgh was 1 such ship I was considering to discuss in a video - but I don't like being a factory that mindlessly copy pastes wikipedia articles. There are FAR FAR too many pseudo "history" channels doing that already. I believe in being accurate - which is why I examined the numbers this closely

 

[Ex Nafragiis Venit Aurum]

Edinburgh was a Royal Navy Town-class light cruiser (HMS), not a Royal Mail Ship (RMS). A couple of other corrections. Her destination when she left Murmansk in Russia was Britain, where the gold was to be unloaded for onward shipment to America. Although crippled by the German attacks she was actually scuttled to prevent the gold falling into German hands and sunk by two of Convoy QP 11’s escort ships: HMS Harrier and HMS Foresight. The official record for the number of crew lost was 58 (2 officers and 56 ratings).

1. Yes I knew that I made a mistake in typing this up - not been getting enough sleep haha, thankyou for the correction
2. I should have realized that - was oversimplifying the story in my head, thanks
3. Yeah I knew this - just wanted to keep the post simple without getting into specifics historically speaking. Not complaining you brought it up - history is ofcourse fascinating - just don't want you or anyone else thinking I'm an idiot that doesn't read lol

The value was put at approximately £1.5 million sterling in 1942 (adjusted for inflation to £45 million in 1981; £140 million in 2014; £220 million in 2024).

My research indicates that the £45,000,000 was only the price of the recovered 431 gold bars in 1981, not the entire hoard of 465 bars, adjusted for inflation. There was no mention of inflation contributing to this price in my research, beyond the fact that in 1979 the price of oil doubled worldwide due to the Iranian Revolution and their sudden strike on oil production, which resulted in a decrease of nearly 5M barrels a day - which in turn contributed to widespread speculative hoarding, raising the consumer price index in the States by 14%. The price of gold more than doubled in 1980 to $615 and then fell to $460 the following year in 81'.

Most reports say that 431 bars were recovered in the first operation but British records indicate the Russian share as 158 bars and the British share as 272 bars (ie 430 bars). The British share was divided as 111 going to the Department of Trade and 161 to the recovery consortium.

It was my understanding that the Rothschild's managed to snag 1 bar for the Bank of England, which is there to this day supposedly - here is an excerpt from a paper written about the process by Michele Bragg, judging from the rest of your reply I'm guessing we read the same paper :

"A retired bullion dealer who had acted on behalf of the consortium first mentioned the salvage operation of HMS Edinburgh to me. Following this interview I learnt that Rothschild had purchased the first salvaged bar, KP0620, which remains in the bank’s possession." source: http://public.bacs.daisy.websds.net/PDFFiles/Articles/108001.pdf
Perhaps this helps account for the missing bar?

The son of a lady I used to work with was one of the expert divers used for recovery of the gold: a guy called “Banjo” West. She had a photograph of him on her desk, on the dive-vessel Stephaniturm with one of the gold bars nestled in his lap. She told me that some of the divers amused themselves during a lull in the proceedings by tossing explosive charges overboard to make huge splashes. The two Russian observers on board came rushing to the deck in a panic, urging them to stop. Apparently, they were above a Russian submarine lane.

This is a fascinating story. I have read through 5 full stories on this ship already, and just purchased Ric Whartan's book on the salvage as well- but you just can't beat good stories like this. Thankyou for sharing