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Politics : Dutch Central Bank Sale Announcement Imminent?
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To: Bill Murphy who wrote (5783)5/4/1999 5:29:00 PM
From: Enigma  Read Replies (1) of 80904
 
Bill - what's your take on the situation with CBs who have lent out their gold to those supposedly engaged in the gold carry trade? Are the loans simply rolled over every time they become due. As I understand the gold carry trade the gold is sold by the borrower who then buys a financial instrument which pays interest - let's call it a US Treasury. The gold borrower has already sold the gold, so it has disappeared and can't be used to pay back the loan.

1. Is the CB prepared to accept cash in lieu of the gold? Assuming the POG is no higher than it was when loaned?

2 If not, I assume the loan is just rolled over, but the liability of the borrower increases if the POG rises?

3. Do you think that the lobbying by certain countries for IMF sales is due to the fact that their CBs have large gold loans outstanding and IMF gold auctions would enable borrowers to purchase the gold and return the borrowed gold?

4. Is there any data available on how much of the gold in official reserves is actually gold which has been loaned - and possibly 'lost'
i.e. converted? My guess is that the gold loans are not broken down between gold lent to speculators and hold lent to hedgers - i.e. producers. There should be no problem with producers because the gold is returned - in theory. In practice I think the producer sells the gold in the spot market and uses the proceeds to repay the loan. Maybe not - maybe the CB insists on delivery of physical gold? It seems we should try to get to the bottom of how much this lending business has depleted the gold stocks in the hands of the CBs?

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