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Old 12-15-2011, 07:33 AM   #1
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Exclamation Negative lease rates for gold (and silver)

Quote :
... There was a report last Friday from a European media source that the Bank of England and the ECB were selling gold. They retracted that report yesterday but it turns out that is it half-true. It turns out that these two Central Banks were likely "leasing" gold out to member banks in order to enable these banks to raise much-need liquidity without having dump crap assets that have little or no bid. How do we know that the CB's were leasing gold? Take a look at the lease rates for gold, which can be found here: www.kitco.com You'll see that there are two distance downward spikes into negative territory. This indicates that Central Banks are making a large supply of gold available for lease to member banks. Imagine that, borrowing gold AND getting paid a small rate of interest to borrow that gold so you can sell it into the market place and use that money to pay your bills...
http://truthingold.blogspot.com/2011...er-review.html

Quote :
Today the lease rate for one month lease on gold went to negative 1/2%. In other words, the central bank pays the bullion bank to borrow gold. With cheap gold and silver (also negative lease rate) the bankers raided gold and silver. Most financial commentaries believe this action was to make the world seem to be in better shape if gold/silver was down as Europe is in a mess. I do not believe that this was the reason for today's raid. The real reason was the fact that Europe again after just two weeks of huge dollar swaps, have run out of dollars again. Collateral at the European banks are few and it seems the only "good" asset that they have is the gold that they have not already leased out. All other European gold that have been leased out has not been returned and thus remains as a short to the banks. The subsequent sale of the leased gold/silver raises the needed USA dollars.
...
More: http://harveyorgan.blogspot.com/2011...egold-and.html

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Old 12-15-2011, 07:53 AM   #2
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Interesting bit of tin foil hat speculation:
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...
Having supplied several powerful reasons as to why the bullion banks love to “lease” their gold (i.e. sell it to multiple buyers) begs the question: why aren’t the bankers always “leasing” vast amounts of gold to suppress the price? Hopefully that answer is obvious to regular readers. If you want to loan ton after ton of gold onto the market, you must have some original bullion to lend into the market in the first place.

Here is where we come upon a seeming paradox with respect to the recent explosion of gold leasing. We know that the banksters have virtually run out of their own bullion, as the evidence is absolutely conclusive. The same Western central banks which were openly selling 500 tons of gold per year onto the market every year have now all totally ceased their gold sales. They have no more gold…or at least they had no more gold.

Yet here we have the same bankers directly implying that suddenly they have lots of gold. It makes no sense to announce “the greatest sale on gold in history” – only to run out of inventory after the few first customers have bought their fill. Clearly the bankers have some new gold. This begs an even more obvious question: where did they get it?
...
More: http://www.bullionbullscanada.com/in...ary&Itemid=131

Jeff Nielson speculates the gold was stolen from Greece and Libya.
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Old 12-15-2011, 08:04 AM   #3
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Ok, one thing is clear: somebody is willing to pay someone else for lending his gold.
It´s either central banks or it´s the general public.
The central bank story is beeing analyzed here in detail:
http://www.metalaugmentor.com/analys...ase-rates.html
The general public scheme could be this: The LBMA offers unsegregated gold accounts where customers can buy gold on quite a big bid/ask spread. The bullion banks can do whatever they want with the gold in these accounts. Here is what they could do:
We all know they make money on the spread. But they can also lease the gold held in these accounts into the market where it is beeing sold immediately and purchased back through a forward contract. As the spread on the accounts give them gold at a discount to spot, they can use this price difference reduce it somewhat and offer gold at negative lease rates to other market participants.
Gold lease rates calculate like this: Libor MINUS gold forward rate. I.E. if the gold forward rate is higher than the libor, a gold carry trade doesn´t make sense, because your return on the libor investment is lower than the cost of carry. This changes, however, if you´re able to pass your cost onto another counterparty. In this case, the third person is f.cked. It could be unsegregated LBMA gold accounts.
This is described here in detail:
http://www.pollitt.com/upfile/pdf/Oct_2011_Wrap.pdf
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Old 12-15-2011, 08:26 AM   #4
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I would like to borrow gold at negative interest rates. And I bet my credit score is higher then France. Where can I apply for credit?
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Old 12-15-2011, 10:02 AM   #5
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PMBUG was faster than zerohedge today.
Great work
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Old 12-15-2011, 01:39 PM   #6
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What do you guys think of this? I'm not sure I understand the picture well enough to comment, just that it seems pretty relevant, and someone here thinks they know what's going on.

http://www.minyanville.com/businessm.../2011/id/38404
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Old 12-15-2011, 02:39 PM   #7
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I didn't understand everything in that article - I will need to read it again later when I can do so without distractions, but it looked interesting and thought provoking and touched on several issues that have been highlighted here in the forum.
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Old 12-15-2011, 05:12 PM   #8
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There is a significant correlation between 1 year EUR basis swap rates http://www.bloomberg.com/quote/EUBS1:IND/chart (as an indicator for money market conditions) and gold lease rates. The thesis that this negative lease rates phenomenon is caused by a dollar shortage could be on to something.
Money markets are in post-lehman mode. Translating this to gold would mean that gold forward rates could turn negative soon, meaning gold going into backwardation due to the reverse transaction of the leases which will take all the artificial supply off the market. That would be ultra bullish. All the gold that has been dumped into the market would suddenly dissapear. It would also mean that lease rates would skyrocket, because lease rates = Libor minus GOFO. If GOFO < 0 and Libor > 0 then lease rates > libor > 0. That happened in 2008:

GOFO rates are already falling:
http://www.lbma.org.uk/pages/index.c...ards&show=2011

So are lease rates:
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Old 12-15-2011, 05:51 PM   #9
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Originally Posted by DCFusor View Post:
What do you guys think of this? I'm not sure I understand the picture well enough to comment, just that it seems pretty relevant, and someone here thinks they know what's going on.

http://www.minyanville.com/businessm.../2011/id/38404
I think it´s a great article.
In addition to the points already made in this thread, I think the following issues are important:
- The fact that supply and demand don´t seem to influence CRIMEX prices could indicate an imminent disconnect between paper and physical prices.
- This information would soon spread arround the globe and trigger a huge wave a actual physical deliveries out of the CRIMEX warehouses. Due to the fractional reserve structure of the CRIMEX, the exchange could default.
- The weird CRIMEX warehouse data is very suspicious. I have no idea how they´re accounting.
- The only explanation of these illogical warehouse data with regards to all the gold leasing activity would be that these transactions are done over the counter (otc), i.e. not using the CRIMEX and therefore not affecting the warehouse data.
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Old 12-16-2011, 06:06 AM   #10
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Rickards on KWN sees the same things we see:
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... One thing that is going on is there is a massive run on the banks globally. It is primarily centered in Europe, but also around the world. There is a huge demand for dollars. There’s a liquidity shortage and people just need dollars.

So let’s just say, hypothetically, I have gold and I like gold for the long-run and think it’s a good investment. I’m a bank let’s say and they (depositors) are withdrawing money and I need dollars. Well, I will sell the gold to get the dollars, even though I like my gold position and I think it’s going higher. I may have to sell it to get cash to meet these other obligations in a liquidity crisis and we are seeing a liquidity crisis.

So the action this week is technically driven, but the fundamentals are still intact. The fundamentals have everything to do with the excess of paper money relative to gold and the potential loss of confidence in paper money that’s coming from over-printing.

The ECB will print when they see some deflation....

The Fed will print if the dollar gets stronger because the Fed needs the dollar to be weaker. With all of this printing coming on stream, you can rest assured the price of gold is going to go a lot higher.”
...
http://kingworldnews.com/kingworldne...he_Dollar.html

Same thing we were discussing re: the dollar gaining strength and deflation.
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Old 12-16-2011, 06:42 AM   #11
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Mish relates several news reports on Euro banks indicating severe stress and follows up with:
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...
The story of Credit Agricole is symbolic of the banking sector everywhere. Banks are shedding assets, not because they want to, but rather because they have to. The reason they have to is they are over-leveraged or need to raise capital for numerous reasons including new Basel requirements.
...
http://globaleconomicanalysis.blogsp...recession.html
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Old 12-16-2011, 08:24 AM   #12
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New article on zerohedge supporting the USD shortage thesis:
http://www.zerohedge.com/news/gold-r...-snapback-here
Quote :
The movements in the bases confirm that the recent downward move in gold against Dollars was as a result of Dollar funding pressures. Gold was lent on the swap against United States Dollars. This swap must be unwound and where a bid for gold was sought to raise Dollar liquidity, an offer of gold will be sought to unwind the swaps. The co-bases for Feb-12 and Apr-12 gold contracts are starting to advance – an exceptionally bullish signal following the selloff and a sign that physical buying is being prompted by these lower prices. It would be very prudent to accumulate gold against United States Dollars aggressively over the next fortnight."
Watch this video to understand why we could be up to a massive lease covering rally, including gold futures going into backwardation:
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Old 12-16-2011, 09:00 AM   #13
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Old 12-19-2011, 08:12 AM   #14
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Lease rates are now higher than they were before the recent gold correction

Silver rates haven´t changed a lot:
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Old 12-20-2011, 10:18 AM   #15
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Gold lease rates are on the rise again today.

For a long term perspective: One can easily see the chaos in the heavily manpulated gold market of the 1990s here. On the surface (spot price) it looked calm all the way. But look at the lease rates:
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Old 12-29-2011, 09:23 AM   #16
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Rates went up a little bit today:
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Old 12-29-2011, 09:44 AM   #17
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By the way:
All silver rates (1,2,3,6 month + 1 year) now are positive
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Old 01-04-2012, 12:43 PM   #18
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Gold rates are falling slightly today:

Silver rates are not:
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Old 01-06-2012, 09:44 AM   #19
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6 and 12 month rates for both gold and silver are crashing again.
Short term rates for silver are going UP
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Old 01-06-2012, 10:18 AM   #20
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Interesting. Possible indications of a physical shortage?
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