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ETF And Central Bank Gold Lent To Banks Being Relent Into Market?

Tyler Durden's picture





 

From GoldCore

ETF And Central Bank Gold Lent To Banks Being Relent Into Market?

Gold is trading at USD 1,680.90, EUR 1,267.70, GBP 1,075.30, CHF 1,564.40, JPY 130,750 and AUD 1,659.0 per ounce.

Gold’s London AM fix this morning was USD 1,680.00, GBP 1,077.06, and EUR 1,266.49 per ounce.

Friday's AM fix was USD 1,712.00, GBP 1,094.49, and EUR 1,281.34 per ounce.


Gold in USD – 2 Yrs (100, 144, 200 DMA)

Gold was steady in trade in Asia until 0322 GMT when sharp selling saw gold fall 1.3% from $1,708/oz to $1,684.75/oz in minutes. The fall may have been technical in nature after last week’s 2% fall in US dollar terms. The selling had the hallmarks of a large sell order or liquidation and Reuters reports that “the approaching year-end and funding difficulties caused by financial market turmoil have reduced liquidity in the gold market.”

Market reaction to the failed EU Summit was that gold, the euro, European equities and ‘PIGS’ debt all came under selling pressure this morning.

Gold is again testing support at the 144 day moving average at $1,674/oz. Below that is the major support of $1,617.25/oz (see chart above).


Gold Spot $/oz (30 days)

With concerns about liquidity and solvency in the European banking system, there is lending and possibly even selling of gold by banks to raise much needed cash. This may be creating short term weakness in gold bit is bullish for gold in the long term.

The FT reported last week that “gold dealers” said that banks – “primarily based in France and Italy – had been actively lending gold in the market in exchange for dollars.”

The key question is who is lending and is their lending simply liquidity driven - to raise dollars or euros?

John Dizard, who frequently comments on gold in the Financial Times wrote on Saturday that,

“Gold market people say European commercial banks are being driven to lend gold for dollars at negative interest rates just to raise some extra cash for a few weeks. 

There’s not a lot of transparency about where the banks are getting the gold they are lending out, but it could be lent to them by either their national central banks, or by gold exchange traded funds.”


Cross Currency Table 

If this is the case it will raise further concerns about the possibility of double accounting of gold and concerns that much of the gold investments in the market are in fact ‘paper gold’ and not backed by physical as is believed by investors.

It will add to deepening concerns about the emerging scandal of rehypothecation where some banks, brokerages and dealers have been reusing the collateral pledged by its clients as collateral for their own borrowing.

Owners of gold exchange traded funds (ETFs) would be surprised and worried to discover that certain banks might be lending out gold that they have bought and believe that they own.

The leading gold ETF, GLD has been criticized by many analysts for its extremely complex structure and prospectus. Critics have also pointed out the possible conflict of interest in its relationships with HSBC and JPMorgan Chase which are believed to have large short positions in gold and overall lack of transparency. 

If as has been suggested, European banks are lending gold into the market that has come from exchange traded funds then this would validate the many concerns raised about the gold ETF market. Questions would again be asked as to whether many of the ETFs are fully backed by the gold that they claim to own in trust on behalf of clients. 

Already some hedge funds managers and investors have liquidated their ETF positions in favour of allocated physical bullion and we would expect that trend to accelerate as prudent investors rightly seek to avoid counter party and systemic risk.

OTHER NEWS

? The flow of gold from Hong Kong to mainland China rose 51 pct in October to a record 85.7T, bringing the total amount of gold shipped for the year to October to 286.6T. (Reuters)  

? Economist Dennis Gartman said he’s “being taken out of the remainder” of his gold position and investors should not own the metal priced in euros. Gartman had previously owned bullion priced in euros “Those not already out of the gold side of this trade should be out immediately,” he said today in his daily Gartman Letter. (Bloomberg)

? Gold could hit $2,500 if Euro fails in what would be a ‘horror story’ said Citigroup in a note. The Euro failing is a “low probability” event. Citigroup emphasizes it’s not forecasting $2,500/oz, though it says this could occur were the Euro to collapse. (Bloomberg) 

? Gold’s premium to platinum may widen in months ahead, UBS Says. Gold’s premium to platinum “has room for further widening over the next few months,” Edel Tully, an analyst at UBS AG, wrote today in a report. The premium was at 12.4 percent today, Bloomberg data show. (Bloomberg)

For breaking news and commentary on financial markets and gold, follow us on Twitter.

SILVER 
Silver is trading at $31.13/oz, €23.51/oz and £19.93/oz 

PLATINUM GROUP METALS 
Platinum is trading at $1,483.75/oz, palladium at $662.75/oz and rhodium at $1,450/oz.

NEWS
(Reuters)
Gold falls 1% on technicals, Europe worry lingers

(MarketWatch)
Gold prices ease amid firmer U.S. dollar

(Bloomberg)
HSBC Sues MF Global Over $850,000 of Gold

(Bloomberg)
HSBC-MF Global, AT&T, Sabre, Apple, AMR Corp. in Court News

(Google News)
'Cash for Gold' buyers tempt Greeks to sell family gold facing hard times

COMMENTARY
(ZeroHedge)
Gold "Rehypothecation" Unwind Begins: HSBC Sues MF Global Over Disputed Ownership Of Physical Gold

(Money Morning)
Why You Shouldn’t Trust Your Gold to a Banker

(The Independent)
Robert Fisk: Bankers are the Dictators of the West

(The Telegraph)
Eurozone leaders deluded if they think this 'sticking plaster' treaty can solve the debt crisis

(ZeroHedge)
Is A Physical Silver Shortage Spike Imminent?

(Thomson Reuters)
MF Global and the Great Wall St Re Hypothecation Scandal

 


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Mon, 12/12/2011 - 09:38 | Link to Comment cossack55
cossack55's picture

I am ready to receive any amount they wish to lend.  I will even polish it before I don't give it back.

Mon, 12/12/2011 - 09:44 | Link to Comment LawsofPhysics
LawsofPhysics's picture

I will be a much better candidate for them to lend the gold to as I will take out an insurance policy on that gold with AIG in the event that the gold should be "damaged, lost, or stolen".  Isn't this the new American business model?  Fleece your customers while you make money betting that you will fleece your customers so that the taxpayer (your customers) can bail you out.

Mon, 12/12/2011 - 09:51 | Link to Comment trav7777
trav7777's picture

I guess that "silver-gold parity" is going to have to wait until next week?

Mon, 12/12/2011 - 10:05 | Link to Comment tmosley
tmosley's picture

Guess the old lies were getting stale.

Mon, 12/12/2011 - 10:16 | Link to Comment Badabing
Badabing's picture

“If this is the case it will raise further concerns about the possibility of double accounting of gold and concerns that much of the gold investments in the market are in fact ‘paper gold’ and not backed by physical as is believed by investors.

It will add to deepening concerns about the emerging scandal of rehypothecation where some banks, brokerages and dealers have been reusing the collateral pledged by its clients as collateral for their own borrowing.”

Silver – gold parity ? Watch out what you wish for!

It looks like the beginning of a mass exodus out of the paper P/M market, it is possible for the paper P/M market to crash to zero ergo silver – gold parity

Mon, 12/12/2011 - 10:30 | Link to Comment tmosley
tmosley's picture

Yes, I predicted that on numerous occasions starting in February.

Physical gold and silver, however, will not be zero.  They will be much, much higher.

Physical gold and silver parity will come on an industrial panic stemming from the failure of the COMEX to deliver physical silver to industrial users who use the exchange to lock in prices.

Mon, 12/12/2011 - 10:48 | Link to Comment Badabing
Badabing's picture

I agree 100% But first a flash crash and all trading stopped to regroup. 

Mon, 12/12/2011 - 11:49 | Link to Comment trav7777
trav7777's picture

how many fucking times do you have to be told this...industrial users buy from PRODUCERS, not from the FUCKING COMEX.  Comex is an exchange...NOT A PRODUCER OR BUYER.

They simply make a market around the margins and provide cash-settlement.

Mon, 12/12/2011 - 12:35 | Link to Comment Attitude_Check
Attitude_Check's picture

You realize you just made Mosely's point that the paper/physical price will diverge, and the underlying supply/demand factors that will enable it.

Mon, 12/12/2011 - 12:41 | Link to Comment tmosley
tmosley's picture

You can "tell" me an infinite number of times, Trav.  You only have to prove it once.

But you can't, because that's not the way the markets work.

Christ, the COMEX is an exchange, and an exchange is where BUYERS MEET SELLERS.  Just because most of the activity is from speculators doesn't mean that there are no acutal producers or users there.  Without them, the whole thing would fall apart.  Gold rush towns become ghost towns by the same methods.

Mon, 12/12/2011 - 13:21 | Link to Comment Haddock
Haddock's picture

How about the BHP Billiton (World's largest silver miner) annual report (page 56):

BHP Billiton’s Marketing network manages the Group’s revenue line and is responsible for...

selling the Group's products....

acheiving Market clearing prices for the Group's products....

Our marketing activities are centralised in Singapore, The Hague and Antwerp.

These three marketing offices incorporate all the functions required to manage product marketing and distribution – from the point of production to final customer delivery.

In addition, we have marketers located in 15 regional offices around the world

?http://www.bhpbilliton.com/home/investors/reports/Documents/bhpBillitonAnnualReport2010.pdf

?

 

 

 

Mon, 12/12/2011 - 13:44 | Link to Comment tmosley
tmosley's picture

So one company makes direct sales, therefore no-one else uses futures markets for their intended purpose?  

No, to prove that miners and industrial users don't use the COMEX to guarantee prices, you are going to have to get data from the COMEX, namely data showing that the COMEX makes no deliveries of actual physical silver whatsoever.  Thing is, it does.  Every month.  The deliveries are posted every work day, with a couple of days lag.

But Trav doesn't like evidence that doesn't support whatever stupid idea pops into his head, so he ignores such things.

Mon, 12/12/2011 - 14:57 | Link to Comment Haddock
Haddock's picture

Top 20 silver producers extracted around 300 million ounces in 2010.  Globally 735 million ounces mined.

http://www.silverinstitute.org/production.php

How does that compare to COMEX deliveries?  I have looked on the site, but struggle to find the correct data...

EDIT: not sure if I looking in the right place, but if the totals per page 25 of this = physical delivery of 5000 oz silver contracts, total = 48 million oz

http://www.cmegroup.com/delivery_reports/MetalsIssuesAndStopsYTDReport.pdf

I am genuinely interested in understanding this as I think it is a key factor in any silver speculation we may get involved in....

Mon, 12/12/2011 - 10:21 | Link to Comment Temporalist
Temporalist's picture

They don't lie, they re-hypothesize after re-hypothecating.

Mon, 12/12/2011 - 09:52 | Link to Comment Sabibaby
Sabibaby's picture

I care not for who gets the gold but I will store all of it for all of you.

 

Just making sure I do my part, that’s all….

Then I’ll use it as collateral multiple times…

Mon, 12/12/2011 - 10:01 | Link to Comment unununium
unununium's picture

> Fleece your customers while you make money betting that you will fleece your customers so that the taxpayer (your customers) can bail you out.

Step 3. Laugh soullessly at anyone stupid enough not to be a criminal.

Mon, 12/12/2011 - 09:44 | Link to Comment Pladizow
Pladizow's picture

No physical involved - paper lent for paper.

2fer - Bank gets liquidity and drives down gold price!

Mon, 12/12/2011 - 10:38 | Link to Comment MarcusLCrassus
MarcusLCrassus's picture

That's always been the whole point.  Take money out of actual PMs while at the same time getting their hands on that money and being able to gamble with it. 

Mon, 12/12/2011 - 11:33 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

goldCore missed one of the best articles of the weekend:

Market News International retracts report about central bank gold sales

the last few times i've come across worldGoldcouncil "data" it has just seemed like bankster press released too, plus mining "news"

theCore admits it doesn't know what's going down, tho, w/ the banksters, commercial, bullion and central~~all 3 types of the pathology, but quotes the FT guy diZard: "...European commercial banks are being driven to lend gold for dollars at negative interest rates just to raise some extra cash for a few weeks."

so gold is being hocked, but will it be redeemed?  is the "repo" guaranteed by The Men's WearHouse or something? 

does it seem like too much of a stretch to picture multiple trips to the 'pawnbrokers' (ultimately, banksters who can print~~CBs), who keep offering you less and less for the gold you're bringing in? 

it does seem like a stretch to imagine anything more re-hypothecatednnn than gold

fractional X fractional X fractional = the soup of the soup of the soup

Mon, 12/12/2011 - 09:57 | Link to Comment Clam McCain
Clam McCain's picture

gold longs getting torched

Mon, 12/12/2011 - 10:17 | Link to Comment GMadScientist
GMadScientist's picture

Oh noes...now I'm only seeing a 400% appreciation since I bought it. Whatever will I do?

Mon, 12/12/2011 - 10:19 | Link to Comment economics1996
economics1996's picture

Does anyone know about silver production?

According to the price run up based on the printing of the Fed gold will drop 12.4%.  A drop of 12.4% would realign gold with paper, over the last 40 years.

I wish I new more about silver production, is it elastic ort inelastic.  Silver is undervalued verses paper but that means nothing because I do not have a clue about the elasticity of supply for silver. 

Mon, 12/12/2011 - 12:05 | Link to Comment Libertarian777
Libertarian777's picture

Afaik silver supply is inelastic since there are few primary silver producers, it is largely a byproduct of lead or other metal mining. If silver spikes but lead doesn't miners don't produce more lead, their profitability will naturally go up though since the silver will cover more of the lead mining costs.

Mon, 12/12/2011 - 09:40 | Link to Comment Spigot
Spigot's picture

Its all paper. And its all burning. Rehypothecation is just another word for fraud. The whole world is going down in flames.

Mon, 12/12/2011 - 09:47 | Link to Comment FEDbuster
FEDbuster's picture

Run, don't walk towards the exit. 

Buy food and lots of it.  The FEMA food lines will be long (think Black Friday everyday).

Mon, 12/12/2011 - 09:54 | Link to Comment bernorange
bernorange's picture

Last one out of the rehypothecated paper claim Ponzi collapse is a rotten egg.

www.pmbug.com

Mon, 12/12/2011 - 11:52 | Link to Comment trav7777
trav7777's picture

rehypothecation is just another word for bankers gambling with YOUR CHIPS.

They gamble with the stock you own outright and they even pledge the shit you bought on margin.

They will gamble with ANY chip you put in their possession, and are authorized to by law.  In the UK, there are virtually no limits whatsoever on this practice.

Mon, 12/12/2011 - 09:40 | Link to Comment chinaboy
chinaboy's picture

Once they find that feasible, they will do it again and again.

Mon, 12/12/2011 - 09:41 | Link to Comment RobotTrader
RobotTrader's picture

Gold and silver about to go negative on the year

 

Retail stocks still pinned at 52-week highs

One asset group is Fed-sponsored and TPTB supported.

The other is not.

Can't fight City Hall.

Always gotta trade where the wind is at your back.

Mon, 12/12/2011 - 09:45 | Link to Comment Pladizow
Pladizow's picture

Idiot!

Mon, 12/12/2011 - 09:54 | Link to Comment kito
kito's picture

no way pladizow, robo is pure hindsight genius.........

Mon, 12/12/2011 - 10:34 | Link to Comment Badabing
Badabing's picture

"Gold and silver about to go negative on the year"

 

Robo you tool TPTB bitch,

YTD gold was at $1400

you dick.

Mon, 12/12/2011 - 11:28 | Link to Comment thunderchief
thunderchief's picture

This is a buying opportunity, and a physcial buying opportunity at that. 

It's good sport buying silver at these prices. 

Mon, 12/12/2011 - 11:57 | Link to Comment SHEEPFUKKER
SHEEPFUKKER's picture

To be fair, silver is about to go negative, but gold obviously is not. It's a strange world isn't it.

Mon, 12/12/2011 - 10:37 | Link to Comment Bendromeda Strain
Bendromeda Strain's picture

RoboTarder selling his birthright for a bowl of pottage...

Mon, 12/12/2011 - 09:46 | Link to Comment LawsofPhysics
LawsofPhysics's picture

"One asset group is Fed-sponsored and TPTB hoarded"

Fixed it for you robo.  Whether you like it or not, everything is about to get physical.

Mon, 12/12/2011 - 09:51 | Link to Comment SheepDog-One
SheepDog-One's picture

AH yes your much adored equities may indeed be at 52 weeks highs, unfortunately also at 25 year avg. So sad.

Oh and BTW Robo, tick-tock on that much ballyhooed Santa rally too, whats wrong? Shaping up to repeat your disastrous 'debt ceiling rally' looks like to me.

Mon, 12/12/2011 - 10:03 | Link to Comment kito
kito's picture

sheepie i cant wait tll those headlines read, "consumer tapped out after black friday, credit card default payments rise"............. as per robo, and i quote him "THE CONSUMER IS STRONGER THAN EVER"  THE LEAST INTELLIGENT REMARK MADE BY ANY POSTER ON ZH THIS YEAR>

Mon, 12/12/2011 - 09:50 | Link to Comment beaker
beaker's picture

It may be safer to buy gold at $1800 than to try and catch a falling knife.

Mon, 12/12/2011 - 10:00 | Link to Comment Al Huxley
Al Huxley's picture

No, in the case of gold, that's not true,and it's what kills the speculators who leverage themselves on the paper contracts and then get their asses handed to them by the bullion banks. It's a small specialty market with its own rules, and the best bet is to buy physical gold whenever it goes on sale (which it does regularly). Anything else and you might as well just hand your cash over to the commercials on the other side of the trade.

Mon, 12/12/2011 - 10:56 | Link to Comment Badabing
Badabing's picture

Last month I went to my guy, the price was 1680, all he had was pesos.

Mon, 12/12/2011 - 09:55 | Link to Comment Sabibaby
Sabibaby's picture

Always gotta trade where the wind is at your back.

Yeah, so the piss goes farther.... The problem is everyone else is above you so it really doesn't matter which way the wind is blowing because you're still getting dribbled on.... Best not to play at all!

Mon, 12/12/2011 - 10:37 | Link to Comment GMadScientist
GMadScientist's picture

Funny. You see, the thing is, City Hall can't afford to fight me.

I'm betting that the fat fuckers with the pepperspray will have a change of heart when it's made clear that their pensions are vapor.

Mon, 12/12/2011 - 11:20 | Link to Comment oddjob
oddjob's picture

You nailed it.

Mon, 12/12/2011 - 11:55 | Link to Comment realitybiter
realitybiter's picture

That's funny.

 

Those fat "dono" cops, bullying folks with their pepper spray are going to die paupers after their pensions get "paper-sprayed".  Payback's a bitch.

 

Wake up, public workers.  Your boss is a fraud and you are a sucker.  Do the math and ask the tough questions.

 

Read history.  In 1921 WW1, decorated German Generals were reduced to panhandling because their pensions got "paper-sprayed."

Paper-sprayed.  good one.

Mon, 12/12/2011 - 12:02 | Link to Comment trav7777
trav7777's picture

HAHAHAHAHAHAHA...you've never seen a 2nd or 3rd world country, have you?

the police work for bribes and they jack people. The regulatory framework ALREADY exists for the police to legally steal from you.  They can drop a joint in your lap and take your fucking car and everything in it.

If their pensions vaporize, they will use their badges and guns and go take their pensions from the public.

In places like brazil, people with automatic weapons lighting up police cars serve as a rough check and balance on this type of police aggression.  In East Germany, the police power was mostly uninhibited.

We have the nice terrorism/patriotism nexus to steer us more toward the latter than the former.  Mow the cops, they find a rat/informer/friend of the State to rat you out

Mon, 12/12/2011 - 15:20 | Link to Comment New World Chaos
New World Chaos's picture

Word.  When TSHTF, the cops will be the worst gangs around.  They have the best infrastructure, the best organization, people are already conditioned to fear/worship them, and they have been carefully pre-selected for sociopathy.  Only the vets will stop them.

Mon, 12/12/2011 - 09:43 | Link to Comment fonzanoon
fonzanoon's picture

Gold is about to drop 20%?

Mon, 12/12/2011 - 09:47 | Link to Comment LawsofPhysics
LawsofPhysics's picture

On paper, how is that spot price again?  Go see a coin dealer and let me know how much they want after paper drops 20%

Mon, 12/12/2011 - 10:17 | Link to Comment economics1996
economics1996's picture

According to the price run up based on the printing of the Fed gold will drop 12.4%.  A drop of 12.4% would realign gold with paper, over the last 40 years.

I wish I new more about silver production, is it elastic ort inelastic.  Silver is undervalued verses paper but that means nothing because I do not have a clue about the elasticity of supply for silver. 

Mon, 12/12/2011 - 09:43 | Link to Comment topcallingtroll
topcallingtroll's picture

Lending gold at negative interest rates for dollars?

A less strained way to say that is that gold is being used as collateral for a dollar loan.

Goes to show which one is real money and which one isnt.

Mon, 12/12/2011 - 10:20 | Link to Comment topcallingtroll
topcallingtroll's picture

Uhh.

You were supposed to give me a red.
My comment officially disses gold.

Mon, 12/12/2011 - 09:46 | Link to Comment Darth Silver
Darth Silver's picture

its like the classic line from 48 hours where Reggie Hammond say "lets see who i can fuck with next"

 

its criminal activity in plain site.  Fed and other central banks pay (yes pay, as in negative lease rates) dealers to lease gold from them.  dealers in turn flood the market with the leased gold driving price down.  turn around and cover.  get paid on the short by the sheep and the gold lease by the central governments.  pure desperation that continues to work.

 i like to think its analogous to collecting pennies off a train track.  but so far no sign of the train. 

 

Mon, 12/12/2011 - 09:44 | Link to Comment Quinvarius
Quinvarius's picture

The gold carry trade became unprofitable for the first time in ten years.  You bet central banks are panicing and pushing gold into the system.  The shithawks are coming on the winds of shit.

Mon, 12/12/2011 - 09:50 | Link to Comment FEDbuster
FEDbuster's picture

A shit blizzard approaches from behind while we stare into the shit abyss.

Mon, 12/12/2011 - 09:53 | Link to Comment SheepDog-One
SheepDog-One's picture

You can feel the way the shit clings to the air.

Mon, 12/12/2011 - 09:57 | Link to Comment Quinvarius
Quinvarius's picture

Nice shit analogy!

 

Throw a bar of gold into the shit abyss.  You will never hear it hit the bottom.  The shithawks swoop in and take it.  Then they shit on you.

Mon, 12/12/2011 - 10:50 | Link to Comment FEDbuster
FEDbuster's picture

Yep, the shit winds are a coming.  The shit pressure is rising.  The whispering winds of shit.

 

 

 

Mon, 12/12/2011 - 11:13 | Link to Comment MsCreant
MsCreant's picture

By Fed Fling Poo.

Mon, 12/12/2011 - 15:36 | Link to Comment FEDbuster
FEDbuster's picture

The FED is planting shit seeds.  Do you know what shit seeds grow into?  Shit trees (like Goldman Sachs) with shit apples, and the rotten shit apples don't fall far from the shit tree.  The shit apple harvest is coming.  Soon we will all be drinking shit cider.

Mon, 12/12/2011 - 10:54 | Link to Comment I Got Worms
I Got Worms's picture

That's deep shit.

Mon, 12/12/2011 - 11:02 | Link to Comment Badabing
Badabing's picture

that's the shitbomb

Mon, 12/12/2011 - 12:03 | Link to Comment KrugerrandFan
KrugerrandFan's picture

There's a shitacain coming!

Mon, 12/12/2011 - 09:47 | Link to Comment machineh
machineh's picture

'Gold could hit $2,500 if Euro fails in what would be a ‘horror story’ said Citigroup in a note.'

That's one possibility -- if euro holders panic into gold as a safe haven. (Arguably, they already have.)

The opposite outcome would look like this morning: euro holders panicking into dollars, which drives down the dollar price of gold.

Citicorp's 'horror story' is interactive fiction, where you get to vote for one of two nightmarish, but quite different, finales.

Mon, 12/12/2011 - 09:52 | Link to Comment Quinvarius
Quinvarius's picture

Then why does it now cost more to borrow gold than it costs to borrow dollars?

This intervention in gold you are seeing is about as a big of a buy signal you are ever going to get.  It could be painful for a little while, but it is just a rescue operation.  You need to not look at the five minute prices the banks need for the overnight operations.  You need to watch the big picture. 

The gold carry trade just went sour.  That says more than gold getting pounded for an hour.

Mon, 12/12/2011 - 10:17 | Link to Comment topcallingtroll
topcallingtroll's picture

It costs more to borrow dollars than gold.

Unless my morning roach is fuzzing up my brain lending gold at negative interest rates means that it is the dollar that costs more to borrow.

This goes to show that dollars are wanted and desired by the currency markets not gold. This is a bearish for gold. I have never understood how gold phreaks can think of this as a bullish sign.

Mon, 12/12/2011 - 10:40 | Link to Comment Quinvarius
Quinvarius's picture

It costs more to borrow gold than dollars.  The GOFO rate is .5% higher than LIBOR.   

The "lease rate" as reported on various websites is not the rate at which gold is lent.  It is the profitability of the gold carry trade.  It is LIBOR minus GOFO.  GOFO being the rate at which gold is lent.  So when the lease rate rises, gold is pushed into the system via the carry trade.  Now the lease rate is negative.  The carry trade in gold is broken.  GOFO is higher than LIBOR.

So knowing the gold market, central bankers are dumping huge loads in their pants trying to extricate their buddies from the gold carry trade.

Mon, 12/12/2011 - 10:53 | Link to Comment Bendromeda Strain
Bendromeda Strain's picture

Someone does not understand the difference between "wanted and desired" and "demanded and required". You should change your name to Prison Romance.

Mon, 12/12/2011 - 09:58 | Link to Comment kito
kito's picture

all things are done, the deflation storm approachith, and the ecb wont print. get into cash, physical cash. germany would rather go back to the mark than see the ecb erode their currency into weimar paper...........

Mon, 12/12/2011 - 10:07 | Link to Comment unununium
unununium's picture

So you'll change your outlook when the ECB does print? We've been through this all before only 2 years ago.

Mon, 12/12/2011 - 10:25 | Link to Comment kito
kito's picture

no only robo changes his "outlook" after the fact..........

Mon, 12/12/2011 - 12:21 | Link to Comment trav7777
trav7777's picture

expect worthlessness of all paper assets then, because they are all debt claims

Mon, 12/12/2011 - 09:47 | Link to Comment PulauHantu29
PulauHantu29's picture

Makes sense. When people 9or bansk) get desperate they will sell at  adiscount to raise cash especially those banks who cannot print their own currency. I suspect the enitre market will experience a sell off today as people try to raise cash to pay debts, payrolls, etc...

Mon, 12/12/2011 - 09:48 | Link to Comment Peterpaul
Peterpaul's picture

It's a shit hurricane! Mr. Lahey...

How is this any different than re-hypothecation - as in the same asset gets lent out for borrowed cash, thereby pumping the system with "liquidity" and "leverage" while adding another layer of claims or ownership on to the same underlying asset.

When this ends it will be the mother of all scrums for real assets.

Mon, 12/12/2011 - 09:59 | Link to Comment vegas
vegas's picture

I looked re-hypothecation in the dictionary and it said: "what could possibly go wrong?"

 

http://vegasxau.blogspot.com

Mon, 12/12/2011 - 09:59 | Link to Comment ExpendableOne
ExpendableOne's picture

With the wind at your back, watch out for the boom swiinging around from behind.  You knew it was there all along right?

Mon, 12/12/2011 - 12:22 | Link to Comment trav7777
trav7777's picture

jibe ho

Mon, 12/12/2011 - 10:00 | Link to Comment FoieGras
FoieGras's picture

Where are the guys who were preaching gold was "at the top of the money pyramid"?

Mon, 12/12/2011 - 10:23 | Link to Comment Doubleguns
Doubleguns's picture

We are still here. Most likely many are out like me busy buying more gold and silver. Please dont tell me you do not see the shit storm coming. Looks a lot like a sand storm out Arizona way. Problem is we are standing at the grand canyon rim this time watching the sand build up approaching 20K feet in height.

 

Buying fiat with borrowed gold to solve a liquidity crisis in a vain attempt to solve a solvency crisis....are you kidding me. Talk about a circle jerk....

Mon, 12/12/2011 - 10:23 | Link to Comment FEDbuster
FEDbuster's picture

more like a cluster fuck.

Mon, 12/12/2011 - 10:28 | Link to Comment topcallingtroll
topcallingtroll's picture

Buying or borrowing fiat with gold with gold at a discount (negative lease rates).
Looks mighty deflationary to me.

Mon, 12/12/2011 - 12:53 | Link to Comment jimmyjames
jimmyjames's picture

Looks mighty deflationary to me.

*********

Yes it is deflationary-which is why you want to be in gold-

You simply do not understand deflation and the fact that "everything" price wise has been deflating against gold since 01-

You are another one who doesn't understand how to interpret prices vs gold-just another clueless idiot who focuses on the gold price alone-

Mon, 12/12/2011 - 10:41 | Link to Comment GMadScientist
GMadScientist's picture

It's a ha-poop.

Mon, 12/12/2011 - 10:24 | Link to Comment topcallingtroll
topcallingtroll's picture

Hehe.

Negative lease rates means the dollar is at the top. Oh gold bugs. Where are you? Come out and play.

Mon, 12/12/2011 - 11:05 | Link to Comment Doubleguns
Doubleguns's picture

pfftt.

Mon, 12/12/2011 - 12:59 | Link to Comment jimmyjames
jimmyjames's picture

Where are you? Come out and play.

**********

I brought my toys-what shall we play?

Mon, 12/12/2011 - 10:03 | Link to Comment PaperBear
PaperBear's picture

“There’s not a lot of transparency about where the banks are getting the gold they are lending out” ?

I think the guy on the street tried to opaque with similar dealings, they wouldn't be able to but if they were able to do it and were discovered then they would be going to prison for a long time.

Mon, 12/12/2011 - 10:25 | Link to Comment Quinvarius
Quinvarius's picture

Also, lets debunk the idea that anyone lends gold a negative interest rate to raise cash.  That is nonsense.  You might lend gold to someone else at a negative interest rate so they can raise money.  But there is no way to make money paying someone else to take your stuff.

The fact is the interest rate on gold is rising, it is not negative. It is higher than LIBOR for the first time in ten years.  So these banks are borrowing gold at a large interest rate to sell and raise cash.  And they would be better off just borrowing cash because it is cheaper.

Therefore...I suggest...central banks are dumping gold into the hands of dealers below GOFO at this very minute to shore up a physical gold liquidity problem as they pound paper gold prices to try and fight gold specs.

Mon, 12/12/2011 - 10:30 | Link to Comment topcallingtroll
topcallingtroll's picture

Ok.

A very good defense of the gold bug position. I gotta think on that one.

A greenie for ya.

Mon, 12/12/2011 - 10:23 | Link to Comment Kina
Kina's picture

China and Co laughing all the way from the bank, carrying all their gold. Thanks for all the fish.

Real wealth transferring West to East thanks to bucket loads of corrupt banks.

Mon, 12/12/2011 - 10:23 | Link to Comment junkmail
junkmail's picture

The europeans are stupid.. how can you sell your gold just to pay off some debt.. Default on the fucking debt and let the americans have the show... Its assinine to have to sell your gold to the americans for paper toilet money... fuck

Mon, 12/12/2011 - 10:30 | Link to Comment Quinvarius
Quinvarius's picture

And they don't even have any gold to sell.  So they have to borrow it at interest, then sell it.  A money raising plan with zero history of success.  But that makes perfect sense as an action the bankers would take, because it is stupid.

Mon, 12/12/2011 - 10:42 | Link to Comment fuu
fuu's picture

I expect the hydra to be all over the boards today.

Mon, 12/12/2011 - 10:55 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

golds sudden drop may have been "technical"...

I don't know who from GoldCore is writing this BULLSHIT,but it is obvious they are petrified of the Powers that be.

Cut the fucking bullshit.

"Golds sudden drop was from Central Bank,and Goverment PPT manipulation".facts are facts jack...

Thats what a REAL man would say,when he knows it is the truth.

Get off your knees GoldCore

Mon, 12/12/2011 - 11:03 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

"Market reaction to the failed EU Summit was that gold, the euro, European equities and ‘PIGS’ debt all came under selling pressure this morning"

So lets get this straight. A failed summit that was supposed to get the EU's shit together is a flop,and that causes gold to sell off.

 

I call BULL FUCKING SHIT......again.....

Mon, 12/12/2011 - 11:37 | Link to Comment Matt1973
Matt1973's picture

Question to you all (I am taking a poll)...Is CEF real Gold/Sliver or paper?

Mon, 12/12/2011 - 11:45 | Link to Comment Doubleguns
Doubleguns's picture

Its real when its in your hand. Everything else is suspect and some is flat out guilty of being paper.

Mon, 12/12/2011 - 12:14 | Link to Comment Libertarian777
Libertarian777's picture

Dumb question, CEF, GLD, PHYS, SLV are ALL paper. Sure one might be more 'sound' more 'trustworthy than another, but possession is 9/10ths of the law. If its not in your hand, it ain't physical.

In order of preference...for gold bugs
Physical bar / coin in your hand
Allocated account
Perth mint
CEF / PHYS

But in the truest sense if you can't hold it it ain't real. Shit u can't even hold paper certificates anymore it's all electronic bookkeeping.

Mon, 12/12/2011 - 11:43 | Link to Comment Bastiat009
Bastiat009's picture

If real gold price is much higher than paper gold price, why is this a real gold buying opportunity?

If the price of gold depends so much on the value of the US$ against the euro, what will happen to gold when the euro is gone?

I know there is no way I can track the answers to these questions on this site (technical glitch??) and I will probably not get straight answers but I am asking anyway.

Mon, 12/12/2011 - 11:48 | Link to Comment Doubleguns
Doubleguns's picture

The euro would simply be the first dominoe in the fiat currency fiasco. Dont count on the dollar its in the line up with the other dominoes.

Mon, 12/12/2011 - 12:08 | Link to Comment gnomon
gnomon's picture

One should always keep in the back of one's mind the fact that even the CBO with its optimistic projections has the U.S. larding on 1.5 trillion of additional debt each year to the national debt for years to come.  And never forget the fact that the Fed can NEVER let interest rates go up and have the system survive, (without outright default).  Is any of that realistic?  Of course not.

Bulk up with PHYSICAL, or prepare to die with the illusion.

Mon, 12/12/2011 - 13:08 | Link to Comment jimmyjames
jimmyjames's picture

If the price of gold depends so much on the value of the US$ against the euro, what will happen to gold when the euro is gone?

**********

The first major currency to collapse (if one does) will be the kiss of death for all of them-

There is only one way to save a currency on its way to collapse and that is to weight it to gold and the first country that does it-will guarantee that all others must follow-

Mon, 12/12/2011 - 13:10 | Link to Comment CitizenPete
CitizenPete's picture

http://www.apmex.com/Category/1151/Pamp_Suisse_Gold_Bars__Pendants.aspx

 

Spot + (increasing) Premium still over 1700USD at 12noon - ZH has always been "spot on"

 

Wrote song about it: -- Zerhedhdge said physicals' the place to be:  "So they loaded up the truck and thye moved to Chil-i-e, ...hills that is, ...soverign man, no taxes, freedom"

... he he

Mon, 12/12/2011 - 13:17 | Link to Comment AldoHux_IV
AldoHux_IV's picture

Sounds like the vultures and jackals are turning against themselves in the race to offload off-balance sheet liabilities.

In fact if the gold etf story is true then I would bet that paper price would see a flush and then pretty steep rise after the fact that the market realizes supplies are even tighter.

Tue, 12/13/2011 - 05:38 | Link to Comment boogey_bank
boogey_bank's picture

@jimmyjames

pls develop further your argument about € and $ falling together

couldn't be the $ the last currency standing, given that it's rotten, but afterall a rotten reserve currency?

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