Wade,
I suppose that anything is possible but CBs announce their sales and many banks (e.g. in Argentina and India) have announced purchases. And, most western CBs have signed on to an agreement to limit sales.
The reason I follow the lease rates is that they have been a good indicator of the health of the carry trade. Until gold turned around in 2001, every day that the POG went down, lease rates went down. When gold turned around in 2001, they would fall every day that the POG rose and they would rise every day that the POG fell. Since I believe that lease rates are a function of supply, it seemed clear to me then that leased gold was being used to cap the POG. When BBs leased, they would reduce the supply of gold for leasing and the rates would rise and visa versa.
Back in 2001, I spoke with a couple of Wall Street Banker types every week at an indoor tennis facility. They gave me the impression of being convinced that the POG would fall as it had from 1980 until 2001 and that they were still short gold as a result of participation in the carry trade. Their big concern was a rise in interest rates and drop in bonds. I'm sure that continues to be a big concern but they, like most of us humans, hold long after we should sell and I suspect some of them still believe that, if they can cap the POG here and make their balance sheet look better today, in time, gold will fall and all will be great again. With lease rates very low and the POG treading water, this isn't surprising to me.
When the POG peaked in early 2004, the relationship between leases rates and movements in the POG became foggy. But the rates have stayed very low. They hit an all time low in mid-August and have been on the rise every since but only slightly. If lease rates are an indication of supply, then one must conclude that the supply has diminished a little recently. If my memory hasn't failed me, I believe the concern about inflation was highest in mid-August and has eased since. This would mean that CBs are slightly less concerned and are willing to allow the supply of gold for leasing to drop a little. In addition there seems to be increased confidence in the dollar.
Enough rambling for today.
Larry |
