At USDCAD Lifts on Emergency Bank of Canada Rate Cut, we are continuously researching the number of USDCAD Lifts on Emergency Bank of Canada rate cut. The reasoning is simple.
If you had no clue that Bank of Canada rate cut was going to occur, I’ll bet you had an inkling. If you weren’t already aware, there is the Bank of Canada.
For most Canadians, the Bank of Canada, for many, has become synonymous with the Canadian dollar and it’s weakness. After all, they make the central bank of our country. And yet, they are allowing their gold to be taken by the London Gold Exchange as collateral.
The people who sell the gold to the London Gold Exchange don’t own it. This is only done because they don’t want to pay back their borrowing institutions.
Now, what did we just say? You see, the banks are borrowing against the gold held by the central bank, just like the loan they are now doing with the Bank of Canada. So, why isn’t the Bank of Canada considering defaulting on its current gold loan?
In this day and age, the lending institutions who make loans to the Bank of Canada, which is our country’s central bank, are in dire need of gold. For most, the fact that the Bank of Canada holds a third of our world’s gold supply is considered to be a fortunate situation.
However, as we have stated before, the lending institutions do not want to make good on their loans when their own central bank has defaulted on its gold debt. They simply don’t have the gold. And therefore, they want to sell it.
That’s why the Bank of Canada has defaulted on their gold loan to their central bank. No one wants to risk getting nothing back from the central bank and the country’s banks.
So, no matter how low the central bank’s gold reserve is, it’s still protected by the same policies used to protect the U.S. dollar. Now, the Bank of Canada doesn’t make any direct cash on the sale of the gold, but their banks do.
The reason the Bank of Canada has forced itself into default with their central bank is so they can easily sell the gold as collateral on another deal. Banks are the most convenient lender to the central bank, because they take the other side of the debt.
Why is the central bank of Canada forcing itself into default on its gold debt? We don’t know.
The Bank of Canada simply wants to sell their gold so that they can take it back from the central bank’s banks and be reimbursed the value of the gold. Or, perhaps, their central bank will just realize their mistake and buy back the gold they lost, as well.