posted on Jun, 30 2010 @ 01:02 PM
Cloudbreak is on the money.
Gold is leased from central banks, and also from bullion banks. Generally it is leased to commercial banks - pick from the usual list of suspects; JP
Morgan, Citi, Goldman, Scum Inc etc ..
These guys then dump the gold into the market at strategic times to depress the gold price - it is purely a strategy to manipulate the price of gold
Now, the other side of this coin is, that theoretically - the gold they sold needs to be returned to said bullion banks, and central banks. However -
due to the volumes sold - it is more than unlikely that any gold repayment will happen.
Instead the commercial bank will either simply 'roll over' its loan, continuing to collect the interest (as its negative) - or if they are tired of
gaming and manipulating the system, they simply default and offer a cash settlement.
This is among the reasons why serious gold bugs feel there is little to no gold left in central banks and bullion banks that claim great stores of the
Yes, this is weird and strange, yes it mean something -but it is a positive for the long term gold price, not a negative. It is however not great for
countries who believe their currency is strongly gold backed - chances are - the gold just ain't there.
Oh, one more thing I should note - because this practice of leasing gold may potentially harm a currency - the central banks use obfuscation when
entering ledger entries for these leases. The ledgers for gold leases is the same for other sell and buy transactions - so if someone pays back in
cash - it is impossible to tell, and the total gold is not adjusted down - so the total amount of gold in these banks is basically unknown.
Fort Knox has not been audited for over 50 yrs, although there are some first hand accounts indicating the gold, some or all of it is actually there -
it is not possible to determine unless it is audited - which is well over due.
[edit on 30-6-2010 by Amagnon]