The announcement of the deal was a big surprise for the market. It led to a sharp rise in prices in the days that followed, but also removed much of the uncertainty about the official sector`s intentions. After the markets adapted, an essential element of instability was effectively eliminated with the introduction of greater transparency. A commodity exchange is a kind of derivative contract in which two parties agree to exchange cash flows based on the price of an underlying commodity. Western European central banks, in particular, held – and hold – considerable stocks of gold in their reserves. Those in the Netherlands, Belgium, Austria, Switzerland and Great Britain had already sold gold or announced their intention to do so. Others have benefited from the growing demand for borrowed gold and have increased their use of credits, swaps and other derivatives. The increase in credit has generally led to the sale of additional gold, which means that the trend has led the market to add more deliveries. Gold had served as silver for thousands of years, until the abandonment of the gold standard for a Fiat monetary system in 1971. Since then, gold has been used as an installation. Gold is often considered a commodity; However, it is more of a currency.

The yellow metal is very weakly correlated with other raw materials and is less used in industry. Unlike national currencies, the yellow metal is not tied to a particular country. Gold is a global monetary asset and its price reflects global mood, but it is mainly influenced by macroeconomic conditions in the United States. They also announced that their loans and the use of derivatives would not increase during the same five-year period. The signatory banks then stated that the total amount of gold they had leased in September 1999 amounted to 2,119.32 tonnes. In addition to floating fixed swaps, there is another type of commodity swap called “Swap commodity for Interest”. In this type of exchange, one party undertakes to pay a return based on the price of raw materials, while the other party is bound to a variable interest rate or an agreed fixed rate. This type of exchange includes fictitious capital – a predetermined amount in dollars on which the interest exchanged is based – a fixed term and predetermined payment terms. This type of exchange helps to protect the commodity producer from the downside risk of a poor yield in the event of a fall in the market price of the commodity. As a general rule, the floating component of the swap is held by the consumer of the commodity concerned or by the institution that is willing to pay a fixed price for the product. The fixed component is usually owned by the manufacturer of the product, who agrees to pay a variable interest rate determined by the spot price of the underlying product.

At that time, central banks held nearly a quarter of the total gold, estimated at the surface in September 1999, which amounted to about 33,000 tons, and occupied an extremely influential position in the gold markets. They declared that gold would remain an important part of the world`s monetary reserves and agreed to limit their collective sales to 2,000 tons, or about 400 tons per year, over the next five years. In addition to the destabilizing effect of these sales, market fears about central banks` intentions led to a further fall in the price of gold. This has caused considerable pain for gold-producing countries. Among these were a number of developing countries, including a considerable number of countries classified as DESP (Heavily Indebted Poor Countries). The end result is that the consumer of the product benefits from a guaranteed price over a given period and the producer is in a guaranteed position that protects him from a drop in the price of raw materials over the same period. As a rule, swewings of goods are invoiced in cash, although physical delivery can be fixed in the contract. . . .

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