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Central banks all but stop lending gold

Posted By admin On October 8, 2008 @ 11:11 am In Featured Stories | Comments Disabled

Javier Blas
Financial Times [1]
Wednesday, Oct 8, 2008

Central banks have all but stopped lending gold to commercial and investment banks and other participants in the precious metals market, in a move that on Tuesday sent the cost of borrowing bullion for one-month to more than twenty times its usual level.

The one-month gold lease rate rocketed to 2.649 per cent, its highest level since May 2001 and significantly above its five-year average of 0.12 per cent, according to data from the London Bullion Market Association.

Gold lease rates for two, three, and six months and for a year also jumped to levels not seen in the last seven years.

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Traders said the jump reflects the fact that central banks — mostly European — have almost completely stopped lending gold in the last few days and are not rolling forward old leases after maturity. This is because of fears that some borrowers might not repay their bullion loans if they are engulfed by the financial crisis.

“A number of central banks have been cutting back on their gold lending,” said Tom Kendall, a precious metals strategist at Mitsubishi in London.

John Reade, a commodities strategist at UBS, added that there had been a lot of talk about some central banks being unwilling to lend their gold because of a redoubled focus on the risk of borrowers not returning it.

Full article here [1]


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URLs in this post:

[1] Financial Times: http://www.gata.org/node/6738

[2] Central Banks Net Buyers of Gold for 1st Time in 20 Years: http://www.prisonplanet.com/central-banks-net-buyers-of-gold-for-1st-time-in-20-years.html

[3] Central Banks Catch Gold Fever: http://www.prisonplanet.com/central-banks-catch-gold-fever.html

[4] Roubini: Reduced Selling of Gold by Central Banks Should Support Gold Prices: http://www.prisonplanet.com/roubini-reduced-selling-of-gold-by-central-banks-should-support-gold-prices.html

[5] Central banks favor gold as crisis unfolds: http://www.prisonplanet.com/central-banks-favor-gold-as-crisis-unfolds.html

[6] Central Banks Dumping Gold At A Torrid Pace: http://www.prisonplanet.com/central-banks-dumping-gold-at-a-torrid-pace.html

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