Serpo
7th December 2011, 06:28 PM
overnments, central banks, bullion banks, and commercial banks to suppress the gold price during a crisis
"'It's hard to understand,' said one New York-based bullion banker." No, it's not hard at all to understand in the context of the need of governments, central banks, bullion banks, and commercial banks to suppress the gold price during a crisis.
* * *
By Jack Farchy
Financial Times, London
Wednesday, December 7, 2011
http://www.ft.com/intl/cms/s/0/93885646-20fd-11e1-8a43-00144feabdc0.html
A dash for cash by European banks in a little-watched corner of the gold market has accelerated this week, highlighting the continued scarcity of dollar funding even after a co-ordinated intervention in the market by the world's largest central banks.
Gold dealers said that banks -- primarily based in France and Italy -- had been actively lending gold in the market in exchange for dollars in the past week.
The rush has pushed gold leasing rates -- the implied interest rate for lending gold in the market in exchange for dollars -- to record lows, according to Thomson Reuters data. The one-month gold leasing rate fell to a low of -0.57 per cent on Tuesday, suggesting that a bank lending gold for one month would have to pay to do so, at an annualised rate of 0.57 per cent.
... Dispatch continues below ...
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"People are lending gold out to raise dollars," said one senior metals banker. Edel Tully, precious metals analyst at UBS, said banks were "looking to offload metal either for balance-sheet reasons or funding, or both."
Large bullion-dealing banks take gold on deposit from a range of customers such as investors, central banks, and other commercial banks.
Although they often lend out some of that gold around the end of quarterly reporting periods to reduce their liabilities, the moves have been unusually dramatic in recent months as the eurozone debt crisis has caused growing strains in the dollar funding market.
Banks do not, however, lend all their gold and some of it is held in accounts that preclude them from using it for trading.
The rush to exchange gold for cash began in September, when one-month leasing rates fell as low as -0.48 per cent.
Traders cautioned that few if any banks were likely to receive the published rates since they have been skewed in recent months by a widespread reluctance among bullion banks to take gold for dollars.
Bankers said they were surprised to see such heavy lending just after the Federal Reserve and other central banks announced measures to ease dollar liquidity to the financial system.
"It's hard to understand," said one New York-based bullion banker. "This wasn't supposed to happen with the dollar swap lines in place."
The gold leasing rate eased slightly in the wake of Tuesday’s European Central Bank annoucement that 34 banks obtained $50.7 billion in three-month dollar funding. One-month rates were at -0.52 per cent, as borrowing interest returned, according to Ms. Tully.
[url]http://www.gata.org/node/10746 (http://www.prophecycoal.com/news_2011_nov21_prophecy_granted_landmark_chandgan a_power_plant_license.php)
"'It's hard to understand,' said one New York-based bullion banker." No, it's not hard at all to understand in the context of the need of governments, central banks, bullion banks, and commercial banks to suppress the gold price during a crisis.
* * *
By Jack Farchy
Financial Times, London
Wednesday, December 7, 2011
http://www.ft.com/intl/cms/s/0/93885646-20fd-11e1-8a43-00144feabdc0.html
A dash for cash by European banks in a little-watched corner of the gold market has accelerated this week, highlighting the continued scarcity of dollar funding even after a co-ordinated intervention in the market by the world's largest central banks.
Gold dealers said that banks -- primarily based in France and Italy -- had been actively lending gold in the market in exchange for dollars in the past week.
The rush has pushed gold leasing rates -- the implied interest rate for lending gold in the market in exchange for dollars -- to record lows, according to Thomson Reuters data. The one-month gold leasing rate fell to a low of -0.57 per cent on Tuesday, suggesting that a bank lending gold for one month would have to pay to do so, at an annualised rate of 0.57 per cent.
... Dispatch continues below ...
[/URL]
"People are lending gold out to raise dollars," said one senior metals banker. Edel Tully, precious metals analyst at UBS, said banks were "looking to offload metal either for balance-sheet reasons or funding, or both."
Large bullion-dealing banks take gold on deposit from a range of customers such as investors, central banks, and other commercial banks.
Although they often lend out some of that gold around the end of quarterly reporting periods to reduce their liabilities, the moves have been unusually dramatic in recent months as the eurozone debt crisis has caused growing strains in the dollar funding market.
Banks do not, however, lend all their gold and some of it is held in accounts that preclude them from using it for trading.
The rush to exchange gold for cash began in September, when one-month leasing rates fell as low as -0.48 per cent.
Traders cautioned that few if any banks were likely to receive the published rates since they have been skewed in recent months by a widespread reluctance among bullion banks to take gold for dollars.
Bankers said they were surprised to see such heavy lending just after the Federal Reserve and other central banks announced measures to ease dollar liquidity to the financial system.
"It's hard to understand," said one New York-based bullion banker. "This wasn't supposed to happen with the dollar swap lines in place."
The gold leasing rate eased slightly in the wake of Tuesday’s European Central Bank annoucement that 34 banks obtained $50.7 billion in three-month dollar funding. One-month rates were at -0.52 per cent, as borrowing interest returned, according to Ms. Tully.
[url]http://www.gata.org/node/10746 (http://www.prophecycoal.com/news_2011_nov21_prophecy_granted_landmark_chandgan a_power_plant_license.php)