For Lease

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#1 Thu, Jan 19, 2012 - 6:22pm
Joined: Jun 16, 2011

For Lease


Hi all, I'm posting this question in the hopes that an answer may provide a greater understanding among the folks here as well as for us avg. joes. I'm not technically inclined and would appreciate a clearer understanding of central bank gold leasing programs.

My yet to be asked question bubbled up when I read this from Jim Sinclair on the KWN Blog at

In the article Jim mentions that foreign banks with gold on deposit with the Fed in the U.S. may very well begin to repatriate their gold back from the U.S. depositories.

Now this is where the question began to form in my empty cage. As we all know, or rather suspect, the Fed and member banks have leased that gold out. I do not believe that the Fed will fail to ship the foreign gold back if the owners request it because they do indeed have custody of it. My question is directed at the leases.

Could the Fed, like a landlord might, cancel a lease and return the cash to the lease holder and thus un-encumber the foreign gold for shipment?

If so, wouldn't the lease holder, who btw just happened to sell the gold, then be obligated to buy back the contracts he sold because he would no longer posses the underlying gold he had via the lease and thus is exposed to having sold something he does not posses to sell?

And if so, could the lease holder(s) end up being the bag holders since they would be obligated to buy back their leases, or other contracts, in order to remain within legal bounds and might have to pay higher prices in order to buy back their now completely unbacked paper? Sure, they got their money back from the Fed when their lease was closed, but would that really be enough cash for them to buy back their leases and/or various contracts?

Is this where/when the dominoes begin to fall?

Any/all responses that would help in understanding the mechanics of this if it is a viable scenario would I'm sure be a big help in understanding to all. Die hards and spot checkers alike.

At this point, my one shiny coin is not for sale at any price, well, not "any" exactly since the integrity of the buyer must be as good as the cash for me to even consider a sale at this point.

Edited by: Xeno on Nov 8, 2014 - 5:30am