bis-says-gold-is-currency-not-commodity

Welcome to the Precious Metals Bug Forums

Welcome to the PMBug forums - a watering hole for folks interested in gold, silver, precious metals, sound money, investing, market and economic news, central bank monetary policies, politics and more. You can visit the forum page to see the list of forum nodes (categories/rooms) for topics.

Why not register an account and join the discussions? When you register an account and log in, you may enjoy additional benefits including no Google ads, market data/charts, access to trade/barter with the community and much more. Registering an account is free - you have nothing to lose!

E

escobar

Predaceous Stink Bug
Messages
154
Reaction score
3
Points
0
http://goldchat.blogspot.com/2012/06/bis-says-gold-is-currency-not-commodity.html

From the Bank for International Settlements International Convergence of Capital Measurement and Capital Standards:

Page 179

“Gold is to be dealt with as a foreign exchange position rather than a commodity because its volatility is more in line with foreign currencies and banks manage it in a similar manner to foreign currencies.”

Page 182

“718(xLiii). This section establishes a minimum capital standard to cover the risk of holding or taking positions in commodities, including precious metals, but excluding gold (which is treated as a foreign currency according to the methodology set out in paragraphs 718(xxx) to 718(xLii) above). ... The price risk in commodities is often more complex and volatile than that associated with currencies [ie gold] and interest rates. Commodity markets may also be less liquid than those for interest rates and currencies and, as a result, changes in supply and demand can have a more dramatic effect on price and volatility.”

Who's to argue with the eggheads at the BIS? Well, a lot of financial market people who hate gold always call it a commodity, which hides its special nature.

Any commodity with around 60 years of above ground inventory would have a price close to zero. The fact that gold has a price tells you it is not a commodity.
 
...you guys don't know, that gold is nothing but a "tradition" ;)

http://www.pmbug.com/forum/f9/tradition-148/

(it became kind of joke-on-duty here on PMBug, ever since, you can see somebody posting "Tradition!", and everybody knows the drill. Just a quick update for "newbies" (hey, thanks to you, I am not a newbie here myself anymore ;)
 
Last edited:
Gold swaps by the Bank for International Settlements rose markedly in May, according to the bank's monthly account statement, published this week:
...
The bank’s gold swaps are estimated to be 188 tonnes as of May 31, a 39% increase over the 135 tonnes reported as of April 30. As shown in Table B below, recent months have brought much volatility in the level of swaps.

Evidence of the significant trading carried out via BIS gold swaps is provided by the changes in the monthly volumes of swaps since October 2022. At that time there were an estimated 7 tonnes of swaps outstanding, but this increased to 105 tonnes at November 30 and then fell back to none at December 31.

Significant changes and continued this year, with 103 tonnes of gold swaps estimated as of January 31, followed by 136 tonnes as of February 28, 78 tonnes as of March 31, 135 tonnes as of April 30, and 188 tonnes as of May 31.

Once again it seems reasonable to suspect that the BIS has entered these swaps on behalf of the U.S. Federal Reserve. With the new deal on the U.S. federal government debt ceiling causing political turmoil in May, a rising gold price probably would have been unwelcome by U.S. authorities.

The basic transaction that the BIS undertakes with gold swaps is to exchange dollars for gold from a bullion bank and then deposit the gold in a gold sight account at a central bank, almost certainly being the central bank that is using the BIS to execute the gold swap on its behalf.

Given the recent volatility in the level of BIS gold swaps, it seems likely that the swaps are mainly of a short duration. Why a central bank would need the BIS to undertake these gold swaps isn't clear, but the swaps may be linked to short-term trading needs. This trading could aim to suppress the gold price.

Using the May 31 gold price of $1,966 (per USAGold.com), the 188 tonnes of BIS gold swaps as of May 31 are valued at about $11.9 billion. Hence it is evident that the recent volatility in BIS gold swaps involves high value and shows that gold remains a significant monetary asset.
...
Click to expand...

Robert Lambourne: BIS gold swaps rose 39% in May amid U.S. debt turmoil | Gold Anti-Trust Action Committee | Exposing the long-term manipulation of the gold market

gata.org gata.org

I'm not so sure about his speculations, but it is interesting to note that the swap activity increased roughly 50% in the month of May. $11.9B is a drop in the bucket for the Fed and that number is considering the total number of swaps - not just the new swap activity for May.
 
...
From information in the BIS' August 31 statement of account, published this week -- ... -- it is estimated that the volume of the bank's gold swaps increased 26 tonnes, from 103 to 129 tonnes, in the month ending July 31.
...
Click to expand...

Robert Lambourne: BIS gold swaps rise 26 tonnes as soaring debt makes price suppression harder | Gold Anti-Trust Action Committee | Exposing the long-term manipulation of the gold market

gata.org gata.org

Seems like the monthly swap totals are bouncing around between a May high of 188 tonnes and 0 from back in December last year.
 
Gold swaps update:
Trading in gold swaps by the Bank for International Settlements, the central bank of the central banks, continued in October. From information in the BIS statement of account for the month, published this week —


-- it is estimated that the volume of the bank's gold swaps decreased by 28 tonnes, from 96 to 68 tonnes.

The BIS' gold swaps had fallen to zero as of December 31, 2022, and reached a peak for 2023 so far of 188 tonnes as of May 31.

There seems no reason to alter the assumption that the BIS has entered these swaps on behalf of the U.S. Federal Reserve. There is no evidence to suggest that any other major central bank is actively trading this much gold, and many central banks have been openly accumulating physical gold.

The basic transaction that the BIS is believed to undertake is to swap dollars for gold from a bullion bank, then to deposit this gold in a gold sight account at a central bank, presumed to be the Fed but almost certainly being the central bank that is using the BIS to execute the gold swap on its behalf.

Given the recent volatility in the levels of BIS gold swaps, it seems likely that most are of a short duration. Why a central bank needs the BIS to undertake gold swaps isn't clear, but the swaps are likely connected with short-term trading needs, which could include suppressing the gold price.
...
Click to expand...

Robert Lambourne: BIS gold swaps fell 28 tonnes in October as U.S. debt burden soared | Gold Anti-Trust Action Committee | Exposing the long-term manipulation of the gold market

gata.org gata.org
 

Gold Intervention via Bank for International Settlements (BIS) Rose 21% in December​

Trading in gold swaps by the Bank for International Settlements, the central bank of the central banks, continued in December. From information in the BIS statement of account for December, published this week --

https://www.bis.org/banking/balsheet/statofacc231231.pdf

-- it is estimated that the volume of the bank’s gold swaps increased in December by 21 tonnes, from 100 tonnes at the end of November to 121 tonnes, up 21%. In the last two months the estimated level of gold swaps is up by 78%

The BIS' gold swaps had fallen to zero as of December 31, 2022, and reached a peak for 2023 of 188 tonnes as of May 31.

Hence trading in gold swaps via the BIS remains active and is still large in volume.

There seem to be no new reasons to alter the assumption that the BIS is continuing to enter these swaps on behalf of the U.S. Federal Reserve. There is no evidence to suggest that any other major central bank is actively trading this much gold, and it remains clear that many central banks are accumulating record levels of physical gold.

The basic transaction that the BIS is believed to undertake is to swap dollars for gold that is transferred from a bullion bank, then to deposit this gold in a gold sight account at a central bank, presumed to be the Fed but almost certainly being the central bank that is using the BIS to execute the gold swap on its behalf.

Given the recent volatility in the level of BIS gold swaps, it seems likely that most are of a short duration. Why a central bank needs the BIS to undertake gold swaps isn’t clear. The swaps are likely connected with short-term trading needs -- perhaps being used to aid suppression the gold price via the futures markets.

Full article:

 
That marketwatch link is paywalled. This link is not:

Japan's state pension fund, the world's largest, is seeking information on bitcoin (BTC) as it considers options for portfolio diversification in response to changes in society, the economy and technology.

The Government Pension Investment Fund (GPIF), which has $1.4 trillion in assets under management, requested data on potential investment diversification tools such as bitcoin and precious metals like gold, which the company considers illiquid and does not currently hold, it said Tuesday.

For the time being, GPIF invests in domestic bonds, domestic stocks, foreign bonds, foreign stocks, private equity, real estate and infrastructure. While the pension fund is seeking information about bitcoin, there's no guarantee it will choose to invest in the world's largest cryptocurrency once the evaluation is completed.

The fund is seeking basic information, including academic studies, analytical tools and indexes "including investment examples, investment philosophy, how to incorporate into the portfolio of pension funds," it said.
...
Click to expand...


Here is the actual RFI:
...
We request information on the mechanism through which a global low yield environment is created and entrenched.
  • Basic information on illiquidity assets, including infrastructure, real estate and private equity. (information on market environment, market size, trading volume, types of investments, and academic findings and papers)
  • Measurement methods for illiquid assets, including infrastructure, real estate and private equity. (measurement methods related to expected return, risk, performance assessment, and ESG assessment)
  • Basic information on illiquidity assets other than those currently considered by the corporation as assets under management (GPIF currently invests on domestic bonds, domestic stocks, foreign bonds, foreign stocks, real estate, infrastructure, private equity)
(e.g., basic information on forests, farmland, gold, crypto-assets (bitcoin etc.) of investment examples, investment philosophy, how to incorporate into the portfolio of pension funds)
...
Click to expand...

 
I don't understand...
First, this is the Japanese State Pension Fund.
They are asking information... to whom?

Second... "which the company considers illiquid"
How can the analysts of the Japanese State Pension Fund be so financially illiterate to consider gold illiquid?
Where do they live?


Average Daily Trading Volumes​

Gold Trading Volume | Gold Daily Volume | World Gold Council

The average Gold trading volume ranks among the largest financial assets in the world. Explore gold volume data with our overview of gold trading volumes.
www.gold.org www.gold.org

1710862578982.png
 
Peter89 said:
...
They are asking information... to whom?
...
Click to expand...

Anyone. The public. It's likely required by law over there before they invest funds in any new asset class, but that's me speculating. They likely don't even need or will seriously consider public comments. They likely already know what they want to do and are just going through the motions to satisfy regulatory requirements.
 
You must log in or register to reply here.
Back
Top Bottom