Comments on: The Gold Carry Trade http://whiskeyandgunpowder.com/the-gold-carry-trade/ Whiskey and Gunpowder features articles on gold, oil, currencies, emerging markets, energy, and more. Sun, 12 Feb 2012 12:05:21 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Bron Suchecki http://whiskeyandgunpowder.com/the-gold-carry-trade/comment-page-1/#comment-20583 Bron Suchecki Sat, 16 Apr 2011 12:23:49 +0000 http://agoratestsite.com/wordpresswhiskey/?p=531#comment-20583 "The BBs take it to the LBM and sell it on the open market. The BBs take the cash from selling the bullion and in turn buy Treasuries. ... they buy futures contracts to hedge their risk. ... keep the price of gold suppressed in order to keep real inflation suppressed" When the BBs sell their leased gold yes this will depress the spot price. However you said they buy futures contracts, which will increase the future price. The increasing gap between spot and futures prices would create an arbitrage opportunity for other market players not involved, who would buy spot and sell futures. If this was not happening then we would see an increasing gap between spot and futures prices (contango) and we do not. Another way of putting this is that selling bullion and buying futures cancel themselves out in terms of impact on the price of gold in the market. As you say, the BB is "hedged" so logically there cannot be any suppression of the price. The only way to suppress the price is to sell, without hedging oneself by buying. “The BBs take it to the LBM and sell it on the open market. The BBs take the cash from selling the bullion and in turn buy Treasuries. … they buy futures contracts to hedge their risk. … keep the price of gold suppressed in order to keep real inflation suppressed”

When the BBs sell their leased gold yes this will depress the spot price. However you said they buy futures contracts, which will increase the future price. The increasing gap between spot and futures prices would create an arbitrage opportunity for other market players not involved, who would buy spot and sell futures. If this was not happening then we would see an increasing gap between spot and futures prices (contango) and we do not.

Another way of putting this is that selling bullion and buying futures cancel themselves out in terms of impact on the price of gold in the market. As you say, the BB is “hedged” so logically there cannot be any suppression of the price. The only way to suppress the price is to sell, without hedging oneself by buying.

]]> By: Cómo preservar capital en un mercado manipulado, de Fernando Suárez en El Confidencial « Reggio’s Weblog http://whiskeyandgunpowder.com/the-gold-carry-trade/comment-page-1/#comment-631 Cómo preservar capital en un mercado manipulado, de Fernando Suárez en El Confidencial « Reggio’s Weblog Fri, 16 Jan 2009 06:27:15 +0000 http://agoratestsite.com/wordpresswhiskey/?p=531#comment-631 [...] a través del Central Bank Gold Agreement, próximo a renovarse, y las diversas variedades de Gold Carry Trade, cuyo precursor fue el London Gold Pool de los años sesenta que permitió a los bancos centrales [...] [...] a través del Central Bank Gold Agreement, próximo a renovarse, y las diversas variedades de Gold Carry Trade, cuyo precursor fue el London Gold Pool de los años sesenta que permitió a los bancos centrales [...]

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