posted on Apr, 19 2004 @ 06:47 AM
There are several other aspect of all of this as well. It is not simple to understand. The futures traders have been short selling gold for more than
What has been happening is that the bullion banks have been leasing gold, at very low interest rates. So smart operators lease the gold from the
banks, and immediately sell it on the open market earning cash. They then buy US treasury bonds that pay more interest than the cost of the gold
If you can borrow money at 2%, and invest it somewhere else and earn 5%, you make an absolute fortune. It is called the gold carry trade.
This has quite a few side effects that have made a lot of people very happy and very wealthy UP TILL NOW.
The first happy people are the bullion banks. Instead of having that moldy old gold sitting in a vault, it is now out earning interest. They keep it
on their books as gold receivable, and the accountants write it up as an asset still held by the bank. The bank now has an empty vault, but the gold
is still on their books as a bank asset.
The bullion traders are happy because they are selling all this gold and depressing the price. For years they were flooding the market and the price
dropped to around $ 252 per ounce. As long as the price kept dropping they knew they could buy it back for less than they sold it in the first place,
and make even more profit.
The FED and the government were happy because someone was buying all their treasury notes for cash, which kept the bond market buoyant. A low gold
price also makes the US dollar look very strong as well, so they turned a blind eye to all the crooked goings on.
This game has been going on for years, but it must end when the gold supply held by central banks finally runs out. This is about to happen any time
now. We now have a lot of very unhappy about to be bankrupt people.
First the central banks now realise that their vaults are empty and the gold is now in the hands of private investors. Those gold receivable slips are
worth nothing, they are beginning to realise that their gold is now gone, and it is not coming back ! The amount of interest they have received is
almost nothing compared to the value of the gold.
The next lot of unhappy people are the smart carry trade people. Originally gold was cheap to lease, and US interest rates were high. This spread is
what made them wealthy. Unfortunately now, interest rates have dropped very low, and gold lease rates have risen sharply. The carry trade is now
working in reverse and bleeding them dry. They cannot buy the gold back either, because if they try, the price is going to explode upwards. So they
are completely trapped.
The FED and the government are in tears as well. Nobody wants treasury notes anymore, also the US dollar is sinking and gold is going up. As interest
rates fall and the US dollar falls, more money gets sucked out of the USA and returns home to Japan and Europe.
The whole thing is about to collapse in a stinking heap. The only people that are laughing now, are the people
like me that bought some of that gold when it was dirt cheap well below $300 per ounce.
There is a lot more to this story, but I have tried to keep it as simple as possible.