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No, gold leased from central banks doesn't always have to be returned
1:17p ICT Wednesday, March 21, 2018
Dear Friend of GATA and Gold:
One could spend a lifetime trying to correct the unsupported beliefs about the gold market expressed by Keith Weiner of Monetary Metals, but your secretary/treasurer has his own failings to correct, like his own omission yesterday, in "Does Weiner Really Know What Central Bankers Think Better Than They Themselves Do?" --
-- of another telling detail refuting a major assertion by Weiner in his latest essay, "Standing Ready to Lease Gold":
http://news.goldseek.com/GoldSeek/1521468000.php
Weiner argued that gold leasing by central banks has little effect on the gold price because leased gold has to be returned eventually: "A lease allows the lessee to put the physical commodity into the market to alleviate the shortage, and get it back later when the shortage has passed."
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In response your secretary/treasurer noted yesterday that a decade of gold leasing by central banks, the 1990s, was followed by a decade of gold selling by central banks, the 2000s. If the gold sold in the latter decade was the same gold as was leased in the former decade, the leased gold was not returned.
But documents refuting Weiner were not provided.
The first is a statement issued in February 2006 by the most notorious borrower of central bank gold, Barrick Gold, which touted the generous terms of its gold leasing contracts, which it called master trading agreements.
The Barrick statement said: "In most cases, under the terms of the MTAs, the period over which we are required to deliver gold is extended annually by one year, or kept 'evergreen,' regardless of the intended delivery dates, unless otherwise notified by the counterparty. This means that, with each year that passes, the termination date of most MTAs is extended into the future by one year":
https://www.barrick.com/investors/news/news-details/2006/BarrickEarnsMil...
And in PDF format:
http://gata.org/files/BarrickReleaseLeasing-02-22-2006.pdf
That is, central banks really didn't want their gold back at any particular time at all. They wanted to keep it circulating, preventing supply shortages that might increase the gold price.
In the second document, produced in 2003, Barrick was even more explicit. In its motion filed in U.S. District Court for the Eastern District of Louisiana in New Orleans, seeking to dismiss a lawsuit accusing it of manipulating the gold market, Barrick went so far as to claim to share the sovereign immunity of central banks against suit, because in leasing gold and selling it into the market, Barrick claimed to be helping to implement central bank policy:
The court denied Barrick's motion and the mining company soon settled the lawsuit by promising to stop hedging its future gold production. Barrick went on to reduce its hedge book of borrowed gold.
GATA has produced many documents, including admissions by central bankers themselves, confirming an international central bank policy, largely surreptitious, of controlling the price of gold to protect government currencies and bonds and to control interest rates, a policy of manipulating markets deceptively:
http://www.gata.org/taxonomy/term/21
The effectiveness of various aspects of this policy may be questioned, but its general objective is plain, and to refute Weiner it is not necessary to understand fully every detail of the policy.
For Weiner's primary assertion is as broad as it is unsupported: that central banks don't care about gold, even as practically every week produces new proof that they care desperately.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org
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