More on Germany's gold hoard.

In an earlier post I have referenced a post that appeared elsewhere:

http://geezerbinexile.blogspot.com/2012/10/german-gold-hoard-is-gone.html

King World News had raised the issue that part of Germany's gold in custody of the UScontracts of gold delivery.  was characterized differently then the rest. The possibility was considered that this portion of the German gold was rented out. It might have been used to suppress gold prices by backing the periodic takedown of gold.

How does the price suppression work?

On the COMEX traders buy and sell contracts for gold delivery. The trader does not pay for the entire price of the gold the contract represents, but only part of it. The rest is covered by margin (borrowed money). In order to protect himself, the trader sets a "stop loss." If the price of gold falls below that price, the contract is automatically sold at a loss to the trader. Thus, an unscrupulous entity bent on controlling gold price can dump a bunch of contracts on the market (and do it in the middle of the night and in a very short time to maximize the effect), make the gold price drop then scoop up the contracts that will be sold because of the stop losses.

So, why is it necessary to borrow the gold?

Because the contracts have to be covered by actual gold. Buyers of the contracts can demand delivery and some do. Thus, the amount of gold that can be used in the suppression scheme gets smaller and more of it gets delivered to China and India.

How about the German gold?

The Germans admit that they can not repatriate their entire hoard. And we are talking about significant amounts. The US hoard is over 8,000 tons, while the German hoard is over 3,000 tons.

How short is the German hoard?

Unknown at present. We know that a certain amount has been rented out and may have gone to China.