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... 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...
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.
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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?
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I think it´s a great article.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/business...tes-precious-metals-price/12/15/2011/id/38404
... 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.”
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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.
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Watch this video to understand why we could be up to a massive lease covering rally, including gold futures going into backwardation: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."
The short term silver rates - yes, possibly.Interesting. Possible indications of a physical shortage?
The short term silver rates - yes, possibly. ...
Central banks increased the amount of gold they lent for the first time in a decade in 2011, as they used their bullion reserves to help commercial banks raise US dollars.
Although central banks hold one-sixth of all the gold ever mined in their reserves, their activities in the bullion market are opaque, with not a single institution revealing its day-to-day operations. In addition to holding gold for their reserves, some central banks also trade the metal, lending it on the open market in order to obtain a yield.
As the squeeze in the dollar funding markets intensified, short-term interest rates for lending gold fell to record lows in late 2011. The rate for lending gold for one month fell to -0.57% in early December, implying that a bank would have to pay to swap it for dollars.
Interesting developments in silver lease rates: they're indicating the the long end of the futures curve (i.e. also the longer dated forward prices) is moving towards deeper backwardation:
This move is only happening in silver. gold rates are staying basicly flat.
Backwardation means that the future price of a commodity is below the spot price. You basicly pay a premium for instant delivery. This indicates a phyiscal shortage and is very bullish.Care to elaborate?
Backwardation means that the future price of a commodity is below the spot price. You basicly pay a premium for instant delivery. This indicates a phyiscal shortage and is very bullish.
As of yesterday, the silver futures curve looks like this:
Interesting developments in silver lease rates: they're indicating the the long end of the futures curve (i.e. also the longer dated forward prices) is moving towards deeper backwardation: ...
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