question about gold leasing. ...

It works this way.

While central banks traditionally have said they lease gold to earn a little money on a supposedly dead asset, in 1998 Federal Reserve Chairman Alan Greenspan told Congress that this was not true. Central banks lease gold, Greenspan admitted, to suppress its price:

http://www.federalreserve.gov/boardd...

For years prior to 2000, gold leasing fueled what was called the gold carry trade. Investment houses leased gold from central banks, paying the central banks a tiny annual interest rate, usually well below 1 percent of the value of the gold leased, and then sold the gold into the market and invested the proceeds in government bonds, earning perhaps 5 percent annually. The huge difference in interest rates meant a virtually free stream of income for the investment houses, income paid by central banks as interest on the government bonds purchased by the investment houses, secure as long as the investment houses could be protected against sudden rises in the price of gold.

Gold-leasing governments liked this scheme because it supported government bond prices and government currencies and kept interest rates down — below where a free market would have set them. The results were the worldwide, credit-fueled boom, a vast misallocation of capital into unprofitable, unsustainable enterprises, and the worldwide bust now under way.

When the price of gold reached bottom in 1999 and turned up, threatening the investment houses that had sold leased gold even as Western central bank gold reserves began to decline markedly, the Western European central banks, under the supervision of the U.S. government, announced the Central Bank Gold Agreement:

http://www.reserveasset.gold.org/cen...

The U.S. government was not formally a signatory to the agreement, but it was announced in Washington and has been called the Washington Agreement. So it is fairly surmised that the U.S. government helped organize the agreement and had a big interest in it -- the continuing support of the U.S. dollar and U.S. government bonds through gold price suppression. Gold price suppression was the essence of the "strong dollar policy." The Washington Agreement was a plan of dishoarding and sale of the gold reserves of the Western European central banks.

While the agreement's participants said they meant to support the gold price by limiting and co-ordinating their gold dishoarding, in fact they were arranging cash settlement of their gold loans, allowing the investment houses that were short gold to close their positions in cash rather than in gold itself. The investment houses were allowed to settle in cash because if they had been required to settle in gold, they would have had to go into the open market to get it and the gold price would have shot up very high, bankrupting the investment houses and greatly diminishing the value of all government currencies and bonds.

That is, central banks do not want their leased gold back. That is what you are missing.

Ever since the Washington Agreement in 1999 the Western central banks have been managing their controlled retreat with the gold price, letting gold rise a fairly steady 15-20 percent per year on average, stretching out their dishoarding as far as they can while trying to maintain some gold on hand for emergency intervention in the currency markets.

Barrick Gold, the biggest hedger (short) among the gold miners, confirmed all this when it announced some years ago that most of its gold loans had 15-year terms and were what the company called "evergreen" -- always allowed to be rolled over year after year so that the gold never had to be repaid as long as Barrick paid the tiny amount of cash interest due on it every year.

Barrick is short more than 9 million ounces of gold and until a few years ago was short much more than that. Who would lend so much gold indefinitely and for a mere pittance in interest? Only a central bank that meant to suppress gold as part of a scheme to keep government currencies and government bonds up and interest rates down.

Defending against Blanchard & Co.'s gold price-fixing lawsuit in U.S. District Court in New Orleans in 2003, Barrick went so far as to claim to be the agent of the central banks when it leased and sold gold and to share their sovereign immunity against lawsuit:

http://www.gata.org/files/BarrickCon...

That is, gold is only the tail on the dog here. But it's a very strong tail.

You can find more detail about the gold price suppression scheme here:

http://www.gata.org/node/6519