by Alasdair Macleod, GoldMoney:
In an extraordinary week of turmoil in global bond markets, gold and silver rallied. In European trade this morning, gold was at $1672, up $28 from last Friday’s close. And silver at $19.16 is up 31 cents.
The big news was the collapse of the UK gilt market’s long maturities, which required the Bank of England to intervene, buying £65bn in long gilts on Wednesday. The situation arose out of pension funds leveraging their gilt portfolios through interest rate swaps and repurchase agreements up to seven times in an attempt to match their actuarial liabilities through liability driven investing (LDI). With over £1 trillion outstanding, a doom-loop of selling to meet margin calls was an emerging crisis which had to be stopped.