Gold is not "discounted" with the swap as if it would be sold 40% below its market price...that is misleading and disingenuous representation, I think. The 40% discount is a haircut indeed, enough to give some margin for error to the bullion bank in it its collateralized loan to Venezela in case its collateral would fall by more than 40%. "if" Venezuela does not get into more trouble with its currency or its debt situation, it should be in a position to get back all its gold at the swap maturity but it will indeed suffer a charge of interest which everybody else would face whenever taking a collateralized loan...Venezuela should also get its gold back "if" the bullion bank that has most likely sold the physical to china can get it back in a few years time from somebody else than the Chinese because the Chinese ain't going to sell that gold back...
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Dollar Better Than Gold? Ask Venezuela
Gold is not "discounted" with the swap as if it would be sold 40% below its market price...that is misleading and disingenuous representation, I think. The 40% discount is a haircut indeed, enough to give some margin for error to the bullion bank in it its collateralized loan to Venezela in case its collateral would fall by more than 40%. "if" Venezuela does not get into more trouble with its currency or its debt situation, it should be in a position to get back all its gold at the swap maturity but it will indeed suffer a charge of interest which everybody else would face whenever taking a collateralized loan...Venezuela should also get its gold back "if" the bullion bank that has most likely sold the physical to china can get it back in a few years time from somebody else than the Chinese because the Chinese ain't going to sell that gold back...