Scoop Feedback: Re.The Squeeze On Gold

Tuesday, 4 June 2002, 1:17 pm
Opinion: The Scoop Editor

Scoop Feedback: The Squeeze On Gold

In this edition: Feedback to Maree Howard’s Howard's End: The Squeeze On Gold

re: The Squeeze on Gold.

Enjoyed very much the article by Maree Howard.

If she wishes to have a follow-up, perhaps she can question the US Federal Reserve and ask them exactly how much of the 8149 tons of gold they claim to have is really there and available "unencumbered". It is believed by many that the "deep storage" gold claimed by the Fed's is actually swapped, leased, or otherwise encumbered.

This may prove to be the greatest fraud of all by Central Banks.

Thanks,

Tony DiCicco

Re: article on Gold Squeeze

In her article on the gold squeeze Ms. Howard makes no mention of the terms of the loan agreement(s).

Her angle seems to be that some critics think that gold must be in the vaults to retain it's value. That bullion banks have no other options than to repay their loans with gold from the spot or open market.

I think her view is incomplete, if not incorrect.

If these trading companies are real trading companies, and not some sort of Mafia front scheme designed to loot the central banks. Both they and the banks would have assessed their potential to pay back the gold at the expiration of the loan term or had mutually agreeable arrangements to roll over the loans. For example if a trading company is a well established company, with an earnings history and the borrowed gold is not a disproportionate percentage of its' portfolio then there are other sources of income from which to repurchase the gold, even if those trades proved unprofitable, yet that would not bankrupt the company that had balanced its' risk.

Furthermore, a truly astute trading company would have covered itself in some way regarding the repayment of the gold by purchasing offsetting gold futures or setting up some sort of hedge arrangement to smooth out future market fluctuations.

If the central banks were to fail to do their due diligence and made irresponsible loans, then there would be a future scandal similar to what we had with the public banks that lent derivative trading companies large sums of capital without a plan for repayment in times of adversity. Is there evidence, as opposed to opinion, that that was actually the case?

David Ring, Dunedin, Fl.

ENDS

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