Central banks paying people to short gold http://www.fullermoney.com/x/default.html Gold bugs think fed, other central banks making it available - My thanks to a subscriber for this interesting item by Peter Brimelow for Market Watch. Here is a section:
The lease rate for gold. This is the cost of borrowing gold. Thirty years ago, this was a detail, but with the huge expansion of lending to gold mining companies in the 1980s it became a big deal. In particular it was an important part of the argument of outfits like Gold Anti-Trust Association GATA which argued that secretive activity in the gold market by central banks was crucial to understanding what was happening with gold.
In the past few days a strange thing has happened. Australia's Privateer says, "the shorter term (one and two-month) rates have actually gone into negative territory this week."
In other words, gold is being supplied to the market by the central banks. Privateer goes on: "We do not recall a previous instance of this, and there certainly has not been one since the cold bull market began in 2001-02 ...
"We have not -- until now -- seen a situation in which the central banks are actually paying the bullion banks, hedge funds, gold miners et al to borrow the stuff. And please don't forget that, in this context, leasing gold is actually "shorting" gold. Gold is not "leased" to be hoarded, it is "leased" to be sold for something that pays a far higher rate of interest ... the practice of 'leasing gold -- and silver' by the central banks has been one of their best means of suppressing the prices of these precious metals for a long time."
Goldbug conclusion: Central banks, led surreptitiously by the Fed, are supplying physical gold to the market. And wise heads like the Indians are buying it.
