Gold Derivatives: GLD and Ass Backwardation

File this under no one cares until it blows up in their face. GLD, paper proxy for gold, has become an influential tool of control.

... the design of GLD is a distinct improvement upon the [gold] carry trade as a vehicle for blunting upward pressure on gold prices from rising investment demand. Gold moves in and out of GLD in 'baskets' of 10,000 ounces created by 'authorized participants.' The list of authorized participants includes all the major bullion banks, which as noted appear free to create baskets with gold loaned or swapped to them by central banks and then to transfer those baskets to GLD in return for shares to be sold to investors.

"In that event, unlike the gold carry trade, official gold is not fully surrendered to the international market by the intermediary bullion banks and subsequently transported to God only knows where. Rather, with GLD as the (presumably bona-fide) purchaser from the intermediary bank, the gold moves to an identified vault subject to the jurisdiction and laws of the United Kingdom. The central banks, as before, can continue to count it in their gold reserves, but now with more practical justification since it also remains within the banking system and their effective control."

Source: goldensextant.com