Steal
6th July 2010, 05:26 PM
I have a bit of knowledge on leasing but as for swaps, am in the dark. Jim Sinclairs view of what happened today with gold...
Reports about a large gold swap done by the IMF are being colored by a glib analysis of what a swap is as compared to a lease.
If the IMF was legally able to and leased this gold, I would agree with the fear of market sales as a means of bailing out euro banks or other entities.
Gold swaps are done with monetary authorities. Gold leases are done with "for profit entities" such as gold banks.
Gold Swaps are usually undertaken by monetary authorities. The gold is exchanged for foreign exchange deposits with an agreement that the transaction be unwound at a future time at an agreed upon price. The IMF will pay interest on the foreign exchange received. Historically swaps occur when entities like the IMF have a need for foreign exchange, but do not wish to sell the gold. In this case gold is a leveraging device for needed currency to meet requirements.
Conclusion:
The many reports today that characterize the large IMF gold swap as a sale of gold into the markets do not understand the difference between a swap and a lease as defined by with whom it is done and why.
All that scary crap written today is just that, crap.
The IMF swap so talked about today is not a threat to the gold price. In retrospect neither was the gold leasing as it was happening $1000 points lower. Certainly the swap is not and the various commentators today are not familiar with the differences.
Reports about a large gold swap done by the IMF are being colored by a glib analysis of what a swap is as compared to a lease.
If the IMF was legally able to and leased this gold, I would agree with the fear of market sales as a means of bailing out euro banks or other entities.
Gold swaps are done with monetary authorities. Gold leases are done with "for profit entities" such as gold banks.
Gold Swaps are usually undertaken by monetary authorities. The gold is exchanged for foreign exchange deposits with an agreement that the transaction be unwound at a future time at an agreed upon price. The IMF will pay interest on the foreign exchange received. Historically swaps occur when entities like the IMF have a need for foreign exchange, but do not wish to sell the gold. In this case gold is a leveraging device for needed currency to meet requirements.
Conclusion:
The many reports today that characterize the large IMF gold swap as a sale of gold into the markets do not understand the difference between a swap and a lease as defined by with whom it is done and why.
All that scary crap written today is just that, crap.
The IMF swap so talked about today is not a threat to the gold price. In retrospect neither was the gold leasing as it was happening $1000 points lower. Certainly the swap is not and the various commentators today are not familiar with the differences.