Central Bank Gold Lease Rates

Posted 08 Oct 2008

This Gold Lease Rate is, in my opinion, more important to the worldwide monetary system than the LIBOR, TED spread (which are equally ominous) or anything else.

Gold Lease Rates

During the 1990’s Mr. Rubin had devised the gold leasing scheme with the intent being elucidated by Dr. Greenspan’s testimony in 1998 “Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise.”

The gold price suppression scheme case has been pretty much cracked by GATA.  Gold Rush 21 is a great DVD.  Please make a donation to GATA, a 501(c)(3), if you can.

The asinine idea was that central banks would dishoard about 100-200 tons per year.  Instead, they bled 1,000+ per year.  Almost all available gold has been leased out.

What happens when a central bank leases gold?  Simply, a bullion bank like Goldman, HSBC and others borrow gold from a central bank.  The gold is then sold into the market for cash.  Supposedly, at some later time, if still around and solvent, the bullion bank purchases the gold in the market and returns it to the central bank.

A great thing about gold is that you either have it or not.  The coin is either in your hand (or with a trusted third party like GoldMoney) or not.

Now the central banks find themselves in an interesting predicament.  They can continue releasing physical gold to the derivative vaporized bullion banks in exchange for their promise or retain their bullion.  Retaining their bullion will severally constrict the gold available to the physical market. 

Remember, a COMEX contract is just a promise and subject to the counter-party risk of several including the Exchange itself.  Even worse for them central banks could require the bullion banks to return physical gold that they borrowed.  Either way the problem broods over their paper franchises (US$, Pound Euro, Yen, etc.) like an executioner’s axe.  As I wrote months ago, the US$ is in Hyperinflation.

2008 Gold Sales Total 

I have not sufficiently researched any third parties besides GoldMoney.  However, an easy test for bullion ownership is:  To demand physical possession immediately.