Home » Posts tagged 'gold swaps'

Tag Archives: gold swaps

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Post Archives by Category

How Central Banks Use Gold Swaps To “Boost” Their Gold Holdings | Zero Hedge

November 15, 2014

How Central Banks Use Gold Swaps To “Boost” Their Gold Holdings | Zero Hedge.

With the specter of a “yes” outcome to the Swiss gold referendum finally being priced in by the market, and the frontrunning of the SNB’s potential 1,500 tons of gold purchases starting to move the price of gold higher, a question has emerged: is there enough physical gold to satisfy Swiss gold demand in case of a favorable outcome to the referendum. Well, as Deutsche Bank reports, that may not even be an issue. Because as the following step by step explanation demonstrates, the SNB may simply “window dress” its balance sheet with gold swaps.

So for anyone curious how banks “represent and warrant” that they have thousands of tons of physical gold when in reality they have far less if not zero physical in storage and all in “synthetic” form, here is the blow by blow.

From Robin Winkler of Deutsche Bank

An early suggestion of the ‘gold initiative’ was to transfer Swiss gold reserves to a sovereign wealth fund to protect them from perceived mismanagement by the SNB. This idea was soon dropped. The concern behind the referendum is not the SNB’s management competence but the perceived shortage of gold reserves. Transferring the SNB’s FX reserves to a fund to avoid gold purchases would therefore be a blatant disregard of the political will and probably involve another referendum.

Gold swaps a more realistic option

Another option for the SNB would be using gold swaps to ‘window dress’ its balance sheet rather than holding physical gold or futures contracts. The SNB could borrow gold from counterparties prior to monthly balance sheet reporting dates, re-exchanging it for currency the following day.

 

…click on the above link to read the rest of the article…

Olduvai IV: Courage
Click on image to read excerpts

Olduvai II: Exodus
Click on image to purchase

Click on image to purchase @ FriesenPress