IMF - BIS Engaged in Gold Swaps to About 380 Tonnes; Organized Looting of Sovereign Wealth
These swaps have significance because of the speculation that the public sale of gold by the IMF, which was secretive and selective, was not a legitimate sale to raise funds, but a means of bailing out the bullion banks who had taken gold previously on lease and sold it into the public markets, but were unble to return it because of the tightness of supply in the physical bullion market, increasingly disconnected from the NY based paper market.
Several private bullion buyers, including Eric Sprott, are reported to have made firm and well priced offers to buy large tranches of gold from the IMF, only to be curtly turned away as 'ineligible.' The IMF is selling at the prices they determine ex-market to the people to whom they wish to sell. It appears that they may be managing this through BIS.
Just as Gordon Brown sold England's gold at artificially low prices to bail out the bullion banks in NY and the City, so the IMF and its constituent members are selling the public stores of gold, largely from a few developed western nations, to support what essentially appears to be a crony capitalist banking fraud involving the secretive sale of public assets at artificial prices with the gains pocketed by a few state-sponsored banks.
John Brimelow reports that "The news of the day, of course, was the discovery by the Virtual Metals analyst (Matthew Turner) that the BIS engaged in what appears to have been the biggest gold swap in history prior to the end of their FY end on March 31st.
Thebulliondesk.com (first of the wire services to report) says:
“In its 2010 annual report, the BIS said that "gold, which the bank held in connection with gold swap operations, under which the bank exchanges currencies for physical gold," stands at 8,160.1 million in special drawing rights, equivalent to 346 tonnes this year, up from nil in 2009.
While the data is relevant to the end of BIS’ 2010 financial year in March, data posted to the International Monetary Fund and carried by Bloomberg show the swap still growing in April, analyst Andy Smith of Bache Commodities noted.
To now, this implies a swap of about 380 tonnes from the end of 2009, he said in a report.”
The new Washington Agreement, which started at the end of last September, allowed signatories to engage in gold derivative transactions for the first time in a decade. Very convenient.
Although none of the major bullion banks (actual or potential CB counterparties) will want to discuss this, the high probability is that much of this gold was actually sold into the market. Very likely this accounts for the contra-seasonal slump of gold in December, which it will be recalled was neither preceded by the usual loss of physical premiums nor accompanied by the usual open interest action.
This in effect means the end of the Washington Agreement restraint on CB gold selling, at a time when several signatories are in bad shape. Most likely this is what caused the selling pressure in gold today, especially after the NY open."
As we have most recently seen with the bloated CDS and CDO credit markets, long standing control frauds can cause quite a splash when they inevitably collapse. We need to bear this in mind when the governments start making their excuses, once again, for taking the 'necessary actions' to support the banks for the good of the people, from whom they have once again stolen billions to provide a fat living for their friends and themselves.
http://jessescrossroadscafe.blogspot.com/2010/07/imf-engaged-in-gold-swaps-to-about-380.html
European banks use gold reserves to raise cash
European commercial banks have begun using their holdings of gold to raise cash with the Bank for International Settlements, in a further sign of strains in the money markets on which many rely for funding.
The BIS, the so-called "central banks' central bank," took 346 tonnes of gold in exchange for foreign currency in "swap operations" in the financial year to March 31, according to a note in its latest annual report.
In a gold swap, one counterparty, in this case a bank, sells its gold to the other, in this case the BIS, with an agreement to buy it back at a later date.
In the past the BIS has occasionally engaged in gold swaps.
There has been no mention, though, of any such operation in recent years.
The gold swaps detailed in the annual report began in December last year, according to monthly data from the International Monetary Fund, and have surged since January, when the Greek debt crisis erupted.
The amount raised in the operations, just over $13 billion at current prices, is small compared with the wholesale money markets. But the fact that banks are using their gold holdings to raise capital is a further indication of the stress in the sector.
Euribor, the rate at which eurozone banks lend to each other, has risen for 27 successive days, while markets are nervous about the impending release of bank stress tests in Europe, scheduled to be published at the end of the month.
The BIS annual report says the gold received in the swaps was held "at central banks."
Talk of the swaps caused a stir in the gold market, with some traders citing it as a reason for gold's fall to a five-week low below $1,200 a troy ounce.
In the past the BIS has occasionally engaged in gold swaps.
There has been no mention, though, of any such operation in recent years.
The gold swaps detailed in the annual report began in December last year, according to monthly data from the International Monetary Fund, and have surged since January, when the Greek debt crisis erupted.
The amount raised in the operations, just over $13 billion at current prices, is small compared with the wholesale money markets. But the fact that banks are using their gold holdings to raise capital is a further indication of the stress in the sector.
Euribor, the rate at which eurozone banks lend to each other, has risen for 27 successive days, while markets are nervous about the impending release of bank stress tests in Europe, scheduled to be published at the end of the month.
The BIS annual report says the gold received in the swaps was held "at central banks."
Talk of the swaps caused a stir in the gold market, with some traders citing it as a reason for gold's fall to a five-week low below $1,200 a troy ounce.
http://www.ft.com/cms/s/0/e3ed5836-8949-11df-8ecd-00144feab49a.html
IMF Gold Swaps Misrepresented
By: Jim Sinclair
Reports about a large gold swap done by the IMF are being colored by a glib analysis of what a swap is as compared to a lease.
If the IMF was legally able to and leased this gold, I would agree with the fear of market sales as a means of bailing out euro banks or other entities.
Gold swaps are done with monetary authorities. Gold leases are done with "for profit entities" such as gold banks.
Gold Swaps are usually undertaken by monetary authorities. The gold is exchanged for foreign exchange deposits with an agreement that the transaction be unwound at a future time at an agreed upon price. The IMF will pay interest on the foreign exchange received. Historically swaps occur when entities like the IMF have a need for foreign exchange, but do not wish to sell the gold. In this case gold is a leveraging device for needed currency to meet requirements.
Conclusion:
The many reports today that characterize the large IMF gold swap as a sale of gold into the markets do not understand the difference between a swap and a lease as defined by with whom it is done and why.
All that scary crap written today is just that, crap.
The IMF swap so talked about today is not a threat to the gold price. In retrospect neither was the gold leasing as it was happening $1000 points lower. Certainly the swap is not and the various commentators today are not familiar with the differences.
http://jsmineset.com/2010/07/06/imf-gold-swaps-misrepresented/
With the US trapped in depression, this really is starting to feel like 1932
By Ambrose Evans-Pritchard
"The economy is still in the gravitational pull of the Great Recession," said Robert Reich, former US labour secretary. "All the booster rockets for getting us beyond it are failing."
"Home sales are down. Retail sales are down. Factory orders in May suffered their biggest tumble since March of last year. So what are we doing about it? Less than nothing," he said.
California is tightening faster than Greece. State workers have seen a 14pc fall in earnings this year due to forced furloughs. Governor Arnold Schwarzenegger is cutting pay for 200,000 state workers to the minimum wage of $7.25 an hour to cover his $19bn (£15bn) deficit.
Can Illinois be far behind? The state has a deficit of $12bn and is $5bn in arrears to schools, nursing homes, child care centres, and prisons. "It is getting worse every single day," said state comptroller Daniel Hynes. "We are not paying bills for absolutely essential services. That is obscene."
Roughly a million Americans have dropped out of the jobs market altogether over the past two months. That is the only reason why the headline unemployment rate is not exploding to a post-war high.
Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP.
The share of the US working-age population with jobs in June actually fell from 58.7pc to 58.5pc. This is the real stress indicator. The ratio was 63pc three years ago. Eight million jobs have been lost.
The average time needed to find a job has risen to a record 35.2 weeks. Nothing like this has been seen before in the post-war era. Jeff Weniger, of Harris Private Bank, said this compares with a peak of 21.2 weeks in the Volcker recession of the early 1980s.
"Legions of individuals have been left with stale skills, and little prospect of finding meaningful work, and benefits that are being exhausted. By our math the crop of people who are unemployed but not receiving a check amounts to 9.2m."
Republicans on Capitol Hill are filibustering a bill to extend the dole for up to 1.2m jobless facing an imminent cut-off. Dean Heller from Nevada called them "hobos". This really is starting to feel like 1932.
Washington's fiscal stimulus is draining away. It peaked in the first quarter, yet even then the economy eked out a growth rate of just 2.7pc. This compares with 5.1pc, 9.3pc, 8.1pc and 8.5pc in the four quarters coming off recession in the early 1980s.
The housing market is already crumbling as government props are pulled away. The expiry of homebuyers' tax credit led to a 30pc fall in the number of buyers signing contracts in May. "It is cataclysmic," said David Bloom from HSBC.
Federal tax rises are automatically baked into the pie. The Congressional Budget Office said fiscal policy will swing from
a net +2pc of GDP to -2pc by late 2011. The states and counties may have to cut as much as $180bn.
Investors are starting to chew over the awful possibility that America's recovery will stall just as Asia hits the buffers. China's manufacturing index has been falling since January, with a downward lurch in June to 50.4, just above the break-even line of 50. Momentum seems to be flagging everywhere, whether in Australian building permits, Turkish exports, or Japanese industrial output.
On Friday, Jacques Cailloux from RBS put out a "double-dip alert" for Europe. "The risk is rising fast. Absent an effective policy intervention to tackle the debt crisis on the periphery over coming months, the European economy will double dip in 2011," he said.
It is obvious what that policy should be for Europe, America, and Japan. If budgets are to shrink in an orderly fashion over several years – as they must, to avoid sovereign debt spirals – then central banks will have to cushion the blow keeping monetary policy ultra-loose for as long it takes.
The Fed is already eyeing the printing press again. "It's appropriate to think about what we would do under a deflationary scenario," said Dennis Lockhart for the Atlanta Fed. His colleague Kevin Warsh said the pros and cons of purchasing more bonds should be subject to "strict scrutiny", a comment I took as confirmation that the Fed Board is arguing internally about QE2.
Perhaps naively, I still think central banks have the tools to head off disaster. The question is whether they will do so fast enough, or even whether they wish to resist the chorus of 1930s liquidation taking charge of the debate. Last week the Bank for International Settlements called for combined fiscal and monetary tightening, lending its great authority to the forces of debt-deflation and mass unemployment. If even the BIS has lost the plot, God help us.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7871421/With-the-US-trapped-in-depression-this-really-is-starting-to-feel-like-1932.html
Gold again took it on the chin today as the US Dollar fell further. How bizarre... Do NOT despair. The shakeout in Gold is at or near an end here...I suspect a sudden turnaround may surface by Thursday this week, Friday at the latest.
Price support at 1196 is being severely tested today. This support has now become the first hurdle of resistance should prices turn higher. Gold must clear 1213 to halt the present downward momentum in price.
Gold fell below it's 50 day moving average late last week. This is a common ploy of the Gold Cartel to shake weak longs from the paper market, and enhance downward price manipulation. This also emboldens those short these Precious metals markets, and at the same time sets a trap for them.
Silver has steadied and remained steadfast the past two trading days. There is a very serious supply shortage in the Silver markets. It is unlikely many longs will willingly give up their positions this close to an upward explosion in the price of Silver.
As for the entire Precious Metal complex...the bullion banks in there desperation to extract themselves and the financial system from almost certain destruction have offered the common man an opportunity to purchase Gold, the last vestige of value in the financial system, at sale prices....while supplies last.
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