Before 2002, analyst Frank Veneroso estimated that between a third and half of all central bank gold had been leased or swapped, sold into the market and lost. More recently, leasing centres such as the Bank of England transferred ownership from lessor to lessee by book entry transfer, the gold not normally leaving the vault. That changed with the recent panic, with lessees queuing up to take gold out of the Bank’s vault and ship it to New York.
This article is about the gold leasing trade, and why the sudden return to conditions before the book entry transfer system threatens a new liquidity crisis in spot markets.
