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An interesting piece explaining the way the Bullion Banks run. How their fractional reserve bullion activities effectively suppress the demand for real gold and so is one way in which they suppress the gold price and prop up the fiat currency system. You deposit [lend] your currency into an unallocated bullion account thinking it will be used to buy gold which is then held on deposit for you.when in reality to lend it to the bank who ends up using it elsewhere. The same sort of thing is thought to happen on the share market. You deposit currency in an electronic share dealing account thinking you are buying shares. We used to get share certificates but now we have electronic entries and shares are not held in our names. 

If you don't hold it, you don't own it. 

https://www.bullionstar.com/gold-university/bullion-banking-mechanics

Always cast your vote - Spoil your ballot slip. Put 'Spoilt Ballot - I do not consent.' These votes are counted. If you do not do this you are consenting to the tyranny. None of them are fit for purpose. 
A tyranny relies on propaganda and force. Once the propaganda fails all that's left is force.

COVID-19 is a cover story for the collapsing economy. Green Energy isn't Green and it isn't Renewable.

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  • 2 years later...

This is an interesting article by Alasdair Macleod setting out the implications of low interest rates for bullion banks and gold.

https://www.goldmoney.com/research/goldmoney-insights/negative-interest-rates-and-gold

Prior to reading this, I thought low/negative interest rates meant that people were willing to hold gold as a safe haven, however, the article contends that low/negative interest rates bring into question the current business model used by bullion banks – and that this could be a major factor in the increase in the price of gold.

I’ve tried to pull out the main points as I see them, but I am no expert:

Since the 1980s, “a bullion bank could lease gold from a central bank and use it as collateral to invest in US Treasury bills. Gold’s time preference was reflected in a lease rate of typically 1.5-2% (though there were some spikes to 3-5%)... Meanwhile, 6-month UST bills yielded about 6% or more, giving bullion banks a fat profit over the lease rate.”

“Bullion banks extended their operations to offer bullion accounts for wealthier individuals around the world, almost entirely on an unallocated basis. Unallocated accounts allow a bullion bank to own the gold deposited with it and to leverage its use as collateral for carry trades and other opportunities of interest rate arbitrage... We have no way of knowing the true level of paper gold leverage today. A working assumption that actual gearing is closer to between ten or twenty times seems more realistic...”.

Due to the fall in interest rates, and the threat of negative rates: “Look at it from a central bank’s point of view: if a lease [for gold] is coming due, there is no incentive to renew it...  We can conclude that the basis for highly geared interest rate arbitrage by borrowing gold is running into a brick wall.  Not only is there no incentive for lessors but also there is also a diminishing appetite for lessees, because the opportunities are vanishing."

“It is impossible to quantify the extent to which the gold price will rise as the bullion banks scramble to unwind or even reverse their habitual short positions, but if there is a surprise it is likely to be on the upside.

There is also a YouTube video (but I am having trouble attaching it), in it Macleod says this is the background to what’s happening in gold – not the actions of gold bugs, chartists, or hedge fund speculators.  This is an interesting argument that I had not seen put forward before.

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9 hours ago, Zhorro said:

This is an interesting article by Alasdair Macleod setting out the implications of low interest rates for bullion banks and gold.

https://www.goldmoney.com/research/goldmoney-insights/negative-interest-rates-and-gold

Prior to reading this, I thought low/negative interest rates meant that people were willing to hold gold as a safe haven, however, the article contends that low/negative interest rates bring into question the current business model used by bullion banks – and that this could be a major factor in the increase in the price of gold.

I’ve tried to pull out the main points as I see them, but I am no expert:

Since the 1980s, “a bullion bank could lease gold from a central bank and use it as collateral to invest in US Treasury bills. Gold’s time preference was reflected in a lease rate of typically 1.5-2% (though there were some spikes to 3-5%)... Meanwhile, 6-month UST bills yielded about 6% or more, giving bullion banks a fat profit over the lease rate.”

“Bullion banks extended their operations to offer bullion accounts for wealthier individuals around the world, almost entirely on an unallocated basis. Unallocated accounts allow a bullion bank to own the gold deposited with it and to leverage its use as collateral for carry trades and other opportunities of interest rate arbitrage... We have no way of knowing the true level of paper gold leverage today. A working assumption that actual gearing is closer to between ten or twenty times seems more realistic...”.

Due to the fall in interest rates, and the threat of negative rates: “Look at it from a central bank’s point of view: if a lease [for gold] is coming due, there is no incentive to renew it...  We can conclude that the basis for highly geared interest rate arbitrage by borrowing gold is running into a brick wall.  Not only is there no incentive for lessors but also there is also a diminishing appetite for lessees, because the opportunities are vanishing."

“It is impossible to quantify the extent to which the gold price will rise as the bullion banks scramble to unwind or even reverse their habitual short positions, but if there is a surprise it is likely to be on the upside.

There is also a YouTube video (but I am having trouble attaching it), in it Macleod says this is the background to what’s happening in gold – not the actions of gold bugs, chartists, or hedge fund speculators.  This is an interesting argument that I had not seen put forward before.

This is the YouTube video that I was referring to (in particular minutes 7.40 to 19.00).

 

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