Chemistry:Gold leasing
Gold leasing is a practice whereby central banks and other financial institutions lend gold out on an unsecured basis.
Difference between gold leases and gold swaps
Gold leases have to be distinguished from gold swaps. In a gold swap, one bank gives gold to another bank as collateral and borrows currency (usually US dollars). In a gold lease, by contrast, one bank loans gold to another bank and does not ask for any collateral.[1]
The gold lease rate
The gold lease rate is simply the interest rate charged to a gold borrower when the loan is paid back.
There is no publicly available database that announces what the gold lease rate is. However, the theory of interest rate differentials implies that the gold lease rate should be equal to US dollar LIBOR minus the gold forward offer rate (GOFO).
Prior to January 30, 2015, the LBMA calculated the implied gold lease rate each day and published it on its website. However, it stopped publishing the info on its website after this date.
Since then, many investment bloggers have tried to provide updated calculations of this rate, with mixed success.
Gold leasing and gold price manipulation
Gold leasing has often been accused of being a kind of "price manipulation" whereby central banks artificially increase the supply of gold.[2] However, defenders of the practice say that it is simply a way for central banks to earn interest on gold that would otherwise be unproductive.
References
- ↑ "GOFO And The Gold Wholesale Market" (in en-US). Koos Jansen. 2016-02-22. https://www.bullionstar.com/blogs/koos-jansen/gofo-and-the-gold-wholesale-market/.
- ↑ "Gold Manipulation: It’s Much Bigger Than You Think" (in en-US). Investment Research Dynamics. 2015-07-29. http://investmentresearchdynamics.com/gold-manipulation-its-much-bigger-than-you.
- 1. GOFO and The Wholesale Gold Market. https://www.bullionstar.com/blogs/koos-jansen/gofo-and-the-gold-wholesale-market/
- 2. Prices Explained. http://www.lbma.org.uk/Default.aspx?PageID=13257035&A=SearchResult&SearchID=2478652&ObjectID=13257035&ObjectType=1
- 3. Pricing and Statistics. https://web.archive.org/web/20140702024638/http://www.lbma.org.uk/pricing-and-statistics
- 4. Gold Leasing Explained. https://seekingalpha.com/article/3975420-gold-leasing-explained
- 5. Gold Manipulation: It's Much Bigger Than You Think. http://investmentresearchdynamics.com/gold-manipulation-its-much-bigger-than-you-think/
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