this article is by david fink, who explains that with interest rates at near zero, it no longer makes sense to take the risk of borrowing gold to lend it:

With yields on government debt at unprecedented lows, it is no longer profitable to borrow gold and exchange it for risk free securities.

A gold carry trade has been in effect for over 10 years. Central banks, with hoards of gold, would lease the yellow metal to investors at a paltry 3% per annum. These investors would borrow the gold from the bank and sell it on the open market.

At the same time, they would buy futures to repurchase the gold at a later date, locking in the current price. With the proceeds from the sale of gold, they would invest in anything that could yield more than 3%. If the fund manager invested in a 10yr government bond, usually yielding around at 5%, he made some money while taking on no risk. As long as the Treasuries yielded you more than the cost to lease the bank’s gold, this was the easiest money you could make!

http://seekingalpha.com/article/1074...