Tuesday, July 13, 2010

Be Right And Sit Tight

BIS gold swap signifies a threat to Europe, not to gold
By Michael J. Kosares
A swap agreement is nothing more than a sophisticated version of a pawn ticket. The owner of the property leaves his valuable with the pawnbroker. In turn the pawnbroker offers cash against the item's perceived value. If, in time, the owner fails to reclaim the property, ownership transfers to the pawnbroker.

In the case of the BIS and our subject pawner, the gold is left with the pawnbroker, who issues cash -- in this case, probably in the form of euros.

The real question with respect to the pawn is not as the mainstream press has posited it, a threat to the gold market. It has more to do with what this swap portends for Europe.

It did not come from nowhere. It is not some inexplicable event that simply happened. Something else is going on, the full portent of which we do not yet fully understand.

No one throws gold around like an old suit of clothes, and we need to keep that in mind.


BIS swap operation signals wider use of gold
By Jan Harvey and Jane Grieve
LONDON, July 13 (Reuters) - The 346 tonnes of gold swap operations conducted by the Bank of International Settlements (BIS) in recent months highlight gold's central role in the financial system and are unlikely to lead to dumping of the metal on the market, GFMS chairman Philip Klapwijk said.

The operations, detailed in the bank's latest annual report, show the bank was holding 346 tonnes of gold as part of swap operations in exchange for currencies.

"Here we have gold being used quite creatively," Klapwijk told Reuters Insider television. "That is in a sense a validation again of gold's centrality to the financial system."


Federal budget gap tops $1 trillion through June- AP

Trade gap widens as imports and exports both rise- AP

The Double Life of Wall Street
by David Weidner
Fairy tale season is about to begin.

Wall Street banks and brokerages are readying second-quarter numbers for mass digestion. They'll show healthy balance sheets, tolerable risk levels and have all the trappings of well-run companies.

Don't believe a word of it.


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