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Central Bank Gold Market Operations

January 26, 2015

Central Bank Gold Market Operations

I ran across these two speeches the other day, referenced by a GATA article about gold price suppression.

The speeches were by the Director of Market Operations at the French Central Bank, and they were given to LBMA audiences.  In fact, you can see that both are sourced from the LBMA website.  They are from 2013 and 2014.

The first, “Managing Gold as a Central Bank”:

http://www.lbma.org.uk/assets/Gautier%2020130930.pdf

The second, “Managing Gold as a Reserve Asset”:

http://www.lbma.org.uk/assets/Speeches/S3_4_Gautier.pdf

One paragraph particularly caught my eye:

We are still active in the gold market for our own account. We have a desk dedicated to FX activity, which is small, but now we are diversifying into gold, meaning that we are in the market nearly on a daily basis. The question of loan restart is pending. Of course, we can see some yields that are attractive, but the point is that the environment is totally different. In the past, we used to lend some gold totally blank in the market, meaning without collateral and I am not sure it would be acceptable to the risk committee to lend gold for one or more years without collateral. This is the reason the issue is still pending.

What I hear him saying is (in context of this speech, as well as the other), they’d love to make money lending gold, but the current environment is seen as quite risky.  Still, they do engage in operations “almost daily” (although its not clear if those are FX operations or gold operations), and again in context of the other things in the other speech (several price charts with the caption “time to buy or time to sell?”), that clearly suggests  they do take positions and trade for their own account.  In a real sense, they operate as a hedge fund in the gold and FX markets, with the goal of making money.

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

 

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