I don't believe that there is any major conspiracy, just CB's and funds making an easy buck. The structure of the gold market, at its status as a hedge against inflation means that the price differential over time can be directly related to the cost of funds.
With gold loan rates around 1.5%, there was just too much opportunity to make money buying "risk-free" US government issued securities. The CB's have the added advantage that they are somewhat covered, as they can provide physical gold if the price goes up. For decades they supplied the gold at the low lease rates, the gold was sold on the market, and covered by producers. Now it is possible to cover without being a producer, provided the gold price goes down or stays stable. With suitable provisions, you can only lose money in a rising market, where the rate of increase matches the current cost of funds.
So, no, I don't think there's a conspiracy, just the 1990's version of junk bond financing. So far, no major defaults.
Dave |
