Hi,
in the past we know that banks didn't play fair and don't play fair also today. The biggest bank scandal was Lehman Brothers who did some serious bad things, which everybody knew, but they continue to do it, as they have been too big to fail.
Well this bank failed and caused by this one of the biggest crisis in the past years. Because of this failure, there have been some new rules added of what a bank can do, one of them being the Basel agreements, which tries to enforce some better securities for lending, making the banks having something to secure the lent behind.
Even with the increase demand in gold, coming from the restarted production and from the investors, the gold price is not really rising, on the contrary, it has been falling from last year, where we had it trading over $2000 and now being traded near $1800. How can this be?
Easy, this is paper gold, not the real deal, as the real gold can't be found on the market so easy and at this price. Well, the paper gold is issued by banks and at the moment is an unsecured asset, which means that it can be traded without having to hold it. Banks at the moment can issue paper gold, without having it physical in the vault.
As said, at the moment, as the Basel agreement, has a point that after the end of June, banks need to have 1 to 1 the amount in gold in their vault and can't shorten and spoof the gold any more, keeping the price low.
Can the banks manipulate by shorting the market, so that they get the raw physical gold cheaper? Of course, they proved also in the past, that they will do anything for profit.
This rule is kept still as there is much interest in it. Banks can prepare and buy without notice loads of it till they are forced to use it.
There is also an advantage in this. As they have real high debt, they can increase after that the price, to cover the uncovered debt from now. Imagine a bank with 100 mil in uncovered debt that possesses now 40 mil in gold and after the implementation of the rule, the gold value will reach 100-120 mil, the bank is in theory debt free, and will have also a big amount in credits that need to come in.
China is buying physical gold massively and have now a bigger reserve than the USA. Can this be one of the purposes?
I'm not a financial expert, so please don't take this as advice. Just watch the markets as we are going to have a very hot summer from this perspective. For references, search Basel III and Basel IV, but not only the wiki links, go deeper with the agreement as it has some nice surprises which describe some strong market moves we see today.
The important thing is, can crypto be used as gold? 1 to 1 as an asset? Is this why the bug guys start buying it?