Joltin,

as you said yourself, your area of expertise was not in the commodities markets.

First, it is not my theory, it is fact.

Secound, I said the central banks would lend the gold to any institution that they deemed credit worthy. Thus obviously, the entity has collateral to back up the loan. The very financial instrument that the entity exchanges the gold for could be the collateral or any other type of investment.

In the case of the US Fed who's most powerful voting members are the bullion banks like Goldman Sach's & JP Morgan to name a couple. Do you believe they are not going to consider themselves credit worthy?

Third, I never stated that whom ever leased the gold would just put it in storage. I stated that leasing gold was strictly to sell it on the spot market to raise faux currency, short the spot price of gold and arbitrage interest rate differentials. Whom ever just stored the gold would end up paying interest on it with no gain as long as the rates are positive. The rates for the 1 month lease are so small at the moment it still would not be worth to just store it and collect the interest.

This was a very profitable strategy from the late 1980 untill 2001 for the reasons mentioned above and the fact that the bullion banks also charge a fee to broker gold leases with other institutions.

It was very profitable untill the price of gold got so undervalued and paper assets so overvalued gold started to rise and paper fall. By this time the Gold Carry Trade had become so large that it cannot be unwound as is evident by the amount of paper gold out there. Someone is not going to get their bullion back. Do you want to take a guess who it will be hahahaha.

Fourthy, why would the central banks and US Treasury pay a storage fee when they have their own vaults to store their gold in?. Answer, they would not.

With your last statement I agree with you totally. It is rediculous. However what is more rediculous, is that a low level rogue trader was able to lose Societe General Bank 7.1 billion US recently, banks giving loans to people with no assets, no job and even in some cases not asking for identification. Banks taking all this bad debt given to people and in some cases corporations, passing it off to investors in the markets as investment grade.

If you want proof I suggest you do some DD. I am not going to spend the time posting hundreds of pages of proof for you. Besides, the proof is everywhere you look in the markets today with banks going under, markets collapsing and the credit system grinding to a halt.

Joltin, your posts strikes me as pure semantics and since the board judging from the number of thumbs up this line of conversation gets, does not seem, unfortunately, interested in this very important topic. Then I see no further point in wasting my time discussing it.

It is unfortunate because the resulting short squeeze in the futures market and subsequent default on bullion deliveries from this sector of the gold market is what will really cause the spot price of gold to rise. Thus making our ARU that much more valuable.

It is about the all important "why" things occure so that an investor can position himself in order to take advantage of the situation in the future. Cause & effect, supply and demand, it is that simple.

Regards,

F.F.