Where Is Gold Going In This Market

[Abrak]

Gold Swaps

Who wanted to raise cash ? Why was it done via a commercial bank ? Why didn't they just sell their gold ?

Sometime ago I suggested that Greece should sell their gold if they needed cash - Perhaps they needed the cash but did not want the world to know about it and this was the only way ?

Does it mean that Greece ( or another ) needed to raise cash without alerting the markets and is unable to do it in any other way ?

see http://ftalphaville....281601/the-bis/

No, Greece is not that stupid. Niether is any central banks. Some say they are selling gold but its just not true.

Do you think a central bank would sell gold bullion just to put the returns on the same pile of fiat that they printed up for free the day before ?

I am not a great expert on this subject but I noticed the BOE had also swapped its entire gold holding. The advantage I believe is that you can keep the gold on your balance sheet as you are lending it rather than selling it. However, looking at the BOE balance sheet it is essentially a rolling swap whereby instead of buying back the gold they simply lend it out again.

What I wonder though is to what extent all the CBs are doing this. In other words CB holdings of Gold could be grossly exaggerated or should I say non CB holdings of gold are underestimated.

[flying]

We both need to exchange our currency/money of choice.

incorrect assumption because when in America i don't need to exchange anything as my credit cards denominated in €UR or SGD are accepted everywhere.

:lol:

[flying]

Funnily enough it was 2008 that convinced me I shouldnt hold gold. Holding some gold as a hedge against not holding gold is fine. Where I dont like Flying's logic is that he has essentially admitted it is a sort of long term currency investment. If it falls to US$700, he will probably buy some more. It is difficult to claim at the same time it is cash, because cash is basically liquidity. If you have to sell gold at US$700 to buy some bread it aint good. If you hold a general 'long term' faith in gold you cant really hold it as a currency to buy goods, hospital fees, a car when you are essentially forced to sell at prices you find 'unacceptable' from a long term investment perspective. So my guess is that Flying holds cash for liquidity purposes and gold as a 'low risk' long term currency investment (but I would rather buy equities). Nothing wrong with that - I am sure Naam holds currencies to which he has no outstanding liabilities and has no need or inclination to sell them at unacceptable prices.

No I think you have me confused again with another.

I would not add more at 700 although I do not see any signs to suggest to me 700 is coming.

By that I do not mean a bunch of charts or what some talking head/economist states. I mean by what I see with my own eyes as facts not theories.

I am not so much a investor as you think. I have a plan for that gold & at the completion will probably sell that gold.

I have opted out of a system I consider quite corrupt & useless. Yes I must still function in it to some degree but will not add to it. Yes I am just one person but that is my choice...my way of walking the walk & not just talking the talk.

If it ever got to a point like you describe that I need to sell gold to buy bread,...Well then the world is truly FUBAR at that point & the other metals copper & lead that I hod will be more valuable then even gold or silver.

[Naam]

"If it ever got to a point like you describe that I need to sell gold to buy bread,... Well then the world is truly FUBAR at that point & the other metals copper & lead that I hod will be more valuable then even gold or silver."

am i right to assume you mean brass and lead and refer to your ammunition?

[Naam]

i am highly interested how the extreme goldbugs finance their living expenses and what they are planning to do with their gold holdings. as their credo is basically "i will never sell" and "no to fiat investments" the poor souls must be [YUCK] working to earn the necessary cash.

[churchill]

Gold Swaps

Who wanted to raise cash ? Why was it done via a commercial bank ? Why didn't they just sell their gold ?

Sometime ago I suggested that Greece should sell their gold if they needed cash - Perhaps they needed the cash but did not want the world to know about it and this was the only way ?

Does it mean that Greece ( or another ) needed to raise cash without alerting the markets and is unable to do it in any other way ?

see http://ftalphaville....281601/the-bis/

No, Greece is not that stupid. Niether is any central banks. Some say they are selling gold but its just not true.

Do you think a central bank would sell gold bullion just to put the returns on the same pile of fiat that they printed up for free the day before ?

I am not a great expert on this subject but I noticed the BOE had also swapped its entire gold holding. The advantage I believe is that you can keep the gold on your balance sheet as you are lending it rather than selling it. However, looking at the BOE balance sheet it is essentially a rolling swap whereby instead of buying back the gold they simply lend it out again.

What I wonder though is to what extent all the CBs are doing this. In other words CB holdings of Gold could be grossly exaggerated or should I say non CB holdings of gold are underestimated.

I don't think your right . BOE sold their gold / have they done a swap also ?

If the gold is swapped it should be taken off the balance sheet and transferred to BIS with an option to buy back at a later date - So Portugal needed cash , and unable to raise it any other way , leased their gold - presumably they saw this as a short term solution and will buy back - Otherwise they would have sold ?

[flying]

am i right to assume you mean brass and lead and refer to your ammunition?

No I meant as I wrote copper & lead..although I guess brass would be valuable too. I have a hard time imagining anyone needing brass has the copper/lead/primer & powder though

I am assuming when Abrak said needing to sell gold to buy bread he meant fiat was no longer being accepted

Another plus for golds possibility I guess ala Zimbabwe

Hence my comment that at that juncture I doubt gold or silver would be the most valuable thing...Not that I think that shall come to pass.

I also guess he could have meant someone was so stupid as to be out of everything else?

Which of course would suggest a pretty stupid individual. None that I know

Edited July 18, 2010 by flying

[flying]

i am highly interested how the extreme goldbugs finance their living expenses and what they are planning to do with their gold holdings. as their credo is basically "i will never sell" and "no to fiat investments" the poor souls must be [YUCK] working to earn the necessary cash.

I do not know as I am not an extreme bug anymore than a person with a fiat savings account is an extreme fiat bug...........

But I assume it is as you said.....Same as someone with a savings....It is there for retirement or a rainy day but it is a savings...held outside of day to day expenses.

As for fiat investments....yes I assume there are folks who do not want any.

Could be they are not versed in it....Could be they do not trust it....Could be many reasons I guess.

Yes work could be yucky too for some. Not all are blessed with work that can be dome from an easy chair. Then again many enjoy their task Im sure.

Myself for instance....I enjoy my work & see I have left my fingerprint in many lives. My customers enjoy what I sell them for generations. When ever I complete a job I am always somewhat amazed....not in a conceited way...but just amazed that a pile of materials can be made into something so useful to a family.

Beats my stint as a Systems administrator when a days or more work could sometimes vanish in a cyber glitch.

Edited July 18, 2010 by flying

[nakachalet]

Both XAU and USD are liquid investments. I don't see a difference between them other than personal bias.

And physical gold and physical currency can be even more liquid than electromagnetic versions. As well as off any radar screens scanning for something to restrict, tax or confiscate.

one can store and move only a certain amount of physical gold, USD or any cash currency. anything physical that cannot be hand carried and/or has to be declared when entering or leaving a country is not liquid but dangerously immobile.

i guess most of you guys are not really much in need of having to migrate legally or illegally to another territory or country....

having learned and witnessed a few of those difficult periods in human history.... i could very well attest that....

in time of trouble.... it is neither currencies nor gold that people in need crave the most.... not at all....

what is it then.... that people who are urgently planning to migrate want to possess the most....?

no, it is not usd nor euro nor silver nor gold....

a great number of us won't reference it.... for various reasons....

Edited July 18, 2010 by nakachalet

[SiamRose]

The value of $, euro, Baht and gold are all based on supply and demand. The only difference is that governments and central banks can't create unlimited amounts of gold at the press of a computer "enter" key.

[Naam]

i guess most of you guys are not really much in need of having to migrate legally or illegally to another territory or country....

having learned and witnessed a few of those difficult periods in human history.... i could very well attest that....

in time of trouble.... it is neither currencies nor gold that people in need crave the most.... not at all....

what is it then.... that people who are urgently planning to migrate want to possess the most....?

no, it is not usd nor euro nor silver nor gold....

a great number of us won't reference it.... for various reasons....

a hard hat in case the sky is falling?

[Naam]

yawnnnnnn.... whenever i present some facts or logical conclusions and hope for a fair and logical discussion / exchange of views the resident fundagoldalists hardly ever respond. instead they change the subject and keep on posting a bunch of irrelevant yada, yada, yada and in some cases cryptic questions; not to mention those who know exactly what various central banks are planning and doing. thank God the youtube mania has fizzled out a bit but the gospel of Dyler Turd (aka Mr Zerohedge) still dominates.

[Abrak]

I don't think your right . BOE sold their gold / have they done a swap also ?

If the gold is swapped it should be taken off the balance sheet and transferred to BIS with an option to buy back at a later date - So Portugal needed cash , and unable to raise it any other way , leased their gold - presumably they saw this as a short term solution and will buy back - Otherwise they would have sold ?

Well half right and half wrong.

The Government has two balance sheets - Central Government and BOE.

The BOE has no reserves while Central Government shows about US$11bn of gold reserves of which all are marked in the notes as 'swapped' or 'leased'. As you say most leased assets you would expect to stay on the balance sheet. I personally, not knowing much about gold swaps, I would also expect them to stay on the balance because a swap would imply and an 'obligation' to buy back in the future rather than an 'option'.

The reason I bring this up is that these 'swaps' and 'leases' could be very mis leading in terms of demand and supply if they are constantly 'rolled over'.

So tell me Churchill could things be a little different than they appear. Say the UK does a gold swap with the BIS, gold shows on its balance sheet and a liability to the BIS will be there too. The BIS has essentially acquired gold for say a year which will show up as a swap with a future payment. What happens if it simply sells its swap in the market.

I am not an accountant. I am just conjecturing whether it is possible that 'swaps' which appear as gaining loans off Central Banks without effecting the private market could actually be used to create supply in the futures market and if they are rolled over constantly then fairly permanent supply.

I realize this is a bit of a conspiracy theory I just wondered if it is possible. Also do swaps appear on banks balance sheets or are they contingent.

[badge]

The value of $, euro, Baht and gold are all based on supply and demand. The only difference is that governments and central banks can't create unlimited amounts of gold at the press of a computer "enter" key.

Not entirely.

Prices are dictated by perceptions; whether perceptions are of current supply and demand, or future prospects, trades and prices are set on the buyers/sellers perception.

Of course this applies to all free-market commods, securities and captial markets, which is why they are all susceptible to the boom and bust we have, and have always, witnessed.

[lannarebirth]

LET'S EXAMINE THE CURRENT FACT, even though it might have appeared to be elusive to some:

let's take a look at the current gold price....

just how far has gold fallen from its grace.... month to month?

perhaps, the pix will further spur the gold discussion to a new high....

Post that chart on the 31st of the month and then we'll have something to discuss.

[flying]

yawnnnnnn.... whenever i present some facts or logical conclusions and hope for a fair and logical discussion / exchange of views the resident fundagoldalists hardly ever respond. instead they change the subject and keep on posting a bunch of irrelevant yada, yada, yada and in some cases cryptic questions; not to mention those who know exactly what various central banks are planning and doing. thank God the youtube mania has fizzled out a bit but the gospel of Dyler Turd (aka Mr Zerohedge) still dominates.

:lol: Perhaps they the fundagoldalists Dont exist here?

I know I have said I am not one & have an idea

I have a plan for that gold & at the completion will probably sell that gold.

I read in another thread/forum that even one other gold guy Sokal? has sold already & was happy with his profit.

So....perhaps if you call this fundagoldalists out by name they will respond?

[churchill]

I don't think your right . BOE sold their gold / have they done a swap also ?

If the gold is swapped it should be taken off the balance sheet and transferred to BIS with an option to buy back at a later date - So Portugal needed cash , and unable to raise it any other way , leased their gold - presumably they saw this as a short term solution and will buy back - Otherwise they would have sold ?

Well half right and half wrong.

The Government has two balance sheets - Central Government and BOE.

The BOE has no reserves while Central Government shows about US$11bn of gold reserves of which all are marked in the notes as 'swapped' or 'leased'. As you say most leased assets you would expect to stay on the balance sheet. I personally, not knowing much about gold swaps, I would also expect them to stay on the balance because a swap would imply and an 'obligation' to buy back in the future rather than an 'option'.

The reason I bring this up is that these 'swaps' and 'leases' could be very mis leading in terms of demand and supply if they are constantly 'rolled over'.

So tell me Churchill could things be a little different than they appear. Say the UK does a gold swap with the BIS, gold shows on its balance sheet and a liability to the BIS will be there too. The BIS has essentially acquired gold for say a year which will show up as a swap with a future payment. What happens if it simply sells its swap in the market.

I am not an accountant. I am just conjecturing whether it is possible that 'swaps' which appear as gaining loans off Central Banks without effecting the private market could actually be used to create supply in the futures market and if they are rolled over constantly then fairly permanent supply.

I realize this is a bit of a conspiracy theory I just wondered if it is possible. Also do swaps appear on banks balance sheets or are they contingent.

So you mean BIS could sell the gold although they don't actually own it - what happens when the central bank wants to buy it back ? I suppose unless the gold is actually delivered to the buying customer , they only have a contract , and 2 or 3 other people could also have a contract for the same gold , which would only come to light if one of the 3 took delivery / There is speculation that this is happening in the Silver market at the momment see - Commentary July 17.2010 --comex having increasing problems with silver and gold http://harveyorgan.blogspot.com/2010/07/commentary-july-172010-comex-having.html

[Abrak]

Not quite what I meant. I hope this is clearer. This is how it seems to work but it is not really something I know about. It also perhaps explains why a couple of large brokers are supposed to have huge naked short positions. (I have always thought this highly unlikely because it sounds like such an unintelligent trade. I mean as far as I can tell gold is pretty much devoid of any fundamentals on which you could place fair value on it.)

So CBs looking for forex (almost certainly US$) will use the gold as collateral, pay interest on the loan, agree to unwind at a future date and retain a capital gain or loss on the underlying asset. Lets say they go to Goldman's and do the swap. Now Goldman's really isnt into the business of lending money to CBs.

But it knows the gold market and many producers are keen to lock in today's prices for production coming 9 months down the line. So Goldmans lends them the gold (with a forward repayment date) and gets its money back and will pay a 'fee' to Goldman's. In effect the Gold has now changed ownership. To reduce risk Goldman's might demand collateral but this collateral will be off-balance sheet (or it might even be deposited off balance sheet with the CB.)

Now 'according to the IMF' this will tend to lead to 'double counting' because the CB retains 'ownership' but whoever borrows it from GS will show it on their balance sheet or if they sell it, it will appear on somebody elses. Goldman's effectively puts up no capital gets interest from the CB and a fee but is short but will be covered when the contract ends. Also they could use the gold to manipulate the spot and futures market.

The main point as I see it, so long as the CB rolls over his swaps or leases, he can retain it on his balance sheet while in fact adding supply to the underlying market.

A lease would work in a similar way but provide funding for the producer.

[Naam]

So... perhaps if you call this fundagoldalists out by name they will respond?

they don't respond. only rational people who don't belong to this category (like you) respond.

[churchill]

Russia Builds Reserves

Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were unchanged for a second day at 1,314.21 metric tons yesterday, according to the company’s website. Global holdings of the metal by ETFs rose 1.6 tons to a record 2,078.1 tons yesterday, according to Bloomberg data from 10 providers.

When prices fell below $1,190 on July 16 “the buying response from the traditional physical hubs was quite significant and volumes to India were the sixth largest our sales desk in Switzerland experienced so far this year,” UBS AG analyst Edel Tully said today in a report. “Physical buyers are prepared to buy gold on a day when the metal experiences a large intraday negative swing.”

Russia’s central bank added 200,000 ounces to its gold reserves last month, increasing its stockpile to 22.8 million ounces (709.2 tons), it said today in an e-mailed statement.

http://www.businessweek.com/news/2010-07-20/gold-fluctuates-in-london-after-price-drop-increases-demand.html

as the Chinese buy gold and other assets to reduce their dollar holdings

"China has also been ramping up its gold reserves and hopes to increase future holdings through unique agreements such as the one signed recently with Coeur d'Alene Mines Corp. to buy gold concentrates from a mine in Alaska. It’s the first deal of its kind between China and a U.S. miner.

China’s voracious demand, coupled with estimates of dwindling reserves at home and abroad, could also mean much higher prices in years to come.

“If gold demand were to continue to increase so markedly, domestic supply would be unable to keep pace. Whatever the outcome, China’s outlook will almost certainly have implications for the global gold market,” the World Gold Council said in a recent report.

Over the past five years, demand for gold has risen by an average of 13 per cent a year in China, according to the World Gold Council. It says Chinese gold mining producers have stepped up gold production by 84 per cent over the past decade, while its known reserves account for 4 per cent of total known global gold reserves."

http://www.theglobeandmail.com/globe-investor/chinas-big-gold-rush/article1626211/

Not many seem to be selling apart from the IMF ?

[Abrak]

yawnnnnnn.... whenever i present some facts or logical conclusions and hope for a fair and logical discussion / exchange of views the resident fundagoldalists hardly ever respond. instead they change the subject and keep on posting a bunch of irrelevant yada, yada, yada and in some cases cryptic questions; not to mention those who know exactly what various central banks are planning and doing. thank God the youtube mania has fizzled out a bit but the gospel of Dyler Turd (aka Mr Zerohedge) still dominates.

To be honest, I think you are pretty optimistic expecting to have a fair and logical discussion/exchange of views about gold. The most interesting discussion is probably to do with outstanding futures at comex and its price correlation to gold but I only think that is interesting because I dont know if there is one. There also might be some relationship between spot prices and contangos. I assume there isnt or perhaps people might talk about it. Gold newsletters are far less coherent than this thread though.

[Naam]

"When prices fell below $1,190 on July 16 “the buying response from the traditional physical hubs was quite significant and volumes to India were the sixth largest our sales desk in Switzerland experienced so far this year,” UBS AG analyst Edel Tully said today in a report."

and Naam added "the significant purchases must have been the reason why gold trades today lower than on july 16"

[churchill]

and Naam added "the significant purchases must have been the reason why gold trades today lower than on july 16"

and why many believe even though there are more purchases than sales - the gold/silver markets - as with other markets are rigged and that we are all getting ripped off .

[flying]

and why many believe even though there are more purchases than sales - the gold/silver markets - as with other markets are rigged and that we are all getting ripped off .

Yes that is my thoughts exactly

If I were Russia or China I would be happy to be trading some paper for metal.

Let the price of the paper traded metals do what they want.

For now many assume they are one in the same.

[Naam]

and Naam added "the significant purchases must have been the reason why gold trades today lower than on july 16"

and why many believe even though there are more purchases than sales - the gold/silver markets - as with other markets are rigged and that we are all getting ripped off .

an utmost illogical conclusion Churchill. i agree that markets can be and are rigged. that is not a problem when it applies to fiat paper trading where it is possible to rig markets over a long period of time. it is however impossible to rig markets over a long period where the underlying commodity can be held physically even by "retail" investors as is the case with precious metals.

[Naam]

and why many believe even though there are more purchases than sales - the gold/silver markets - as with other markets are rigged and that we are all getting ripped off .

Yes that is my thoughts exactly

If I were Russia or China I would be happy to be trading some paper for metal. Let the price of the paper traded metals do what they want. For now many assume they are one in the same.

why believing in fairy tales Flying? there is virtually no difference between the price of paper gold and the price of a 500g or a 1 kilo bar. a significant price difference exists only where coins and minisized bars are concerned. Mrs Naam claims she has hardly ever bought gold without price comparison with the live price on her mobile phone. in Europe 1/10th of an ounce and 5g bars are sold with a markup of nearly 40%... but suckers still buy.

[nakachalet]

since 1973, i bought gold panda coins but the markup was only about 5% above spot....

wonder if it is easy to setup gold coin shops in european cities with some 40% markup profit margin....

perhaps that was one major reason among many many others, why my wife was always complaining about her living just barely above poverty level since 1973....

in

and why many believe even though there are more purchases than sales - the gold/silver markets - as with other markets are rigged and that we are all getting ripped off .

Yes that is my thoughts exactly

If I were Russia or China I would be happy to be trading some paper for metal. Let the price of the paper traded metals do what they want. For now many assume they are one in the same.

why believing in fairy tales Flying? there is virtually no difference between the price of paper gold and the price of a 500g or a 1 kilo bar. a significant price difference exists only where coins and minisized bars are concerned. Mrs Naam claims she has hardly ever bought gold without price comparison with the live price on her mobile phone. in Europe 1/10th of an ounce and 5g bars are sold with a markup of nearly 40%... but suckers still buy.

[Naam]

wonder if it is easy to setup gold coin shops in european cities with some 40% markup profit margin....

= usual distortion of subject and (futile) attempt to divert as i mentioned before i did not refer to coins but to tiny bars.

quote: "in Europe 1/10th of an ounce and 5g bars are sold with a markup of nearly 40%..."

these are not sold in gold or jewelry shops but in banks. if you try to compete with banks as far as authenticity of your gold is concerned and you will be bankrupt in no time.

[Naam]

since 1973, i bought gold panda coins but the markup was only about 5% above spot...

hmmm...

China issued its first gold coins picturing an adorable Panda design in 1982, in sizes of 1, 1/2, 1/4, and 1/10 troy oz. of 999 fine gold.

http://www.pandaamerica.com/panda_coin.ASP

[bangkokburning]

Can anyone address the drop in gold on the 16th @ 8am?

The need for JPM to cover their shorts in Gold and silver in the next week+

It appears the bank/s are driving prices lower (in hopes of covering their shorts).

Media reports could see silver into 15-16. Others boldly predicting silver in 12-13 range before any upside.

Thanks