Duchaf

The 'gold lease rate' is a rather artificial measure. It is a measure of the difference between the 'forward' rate (which is the interest rate for borrowing gold) and the USD LIBOR rate. Large holders of gold, e.g. banks and hedgies, are keen to lend out their gold, so that they get some income from it. Because blocks of gold are less desirable to the market than USD, this generally requires interest rates lower than the USD.

Thanks for the explanation. I thought it might be this, but there seems to be a lot of people who read it as the actual loan rate (= forward rate).

1. There is a massive swing in gold/supply demand - where there is abnormally high demand for gold on loan, and/or abnormally low supply. In other words, there is very heavy shorting, and/or institutions are trying to recall their loaned gold (possibly to sell, possibly because of concerns over counterparty risk, etc.)

2. There has been a swing in USD supply/demand - with some modest drops in USD LIBOR recently - likely as a result of FED policy in providing 'liquidity'.

So the fundamentals of this move in lease-rate are bullish (recall, counter-party risk, inflation risk)

...

or possibly bearish (lots of investors think it is going down, so are shorting)

...

so, anything could happen on Monday...

Most of the market indicators are manipulated.

Fair point - we should concentrate on the real fundamentals - bailing out banks, printing money, etc, etc. I certainly intend to remain long and top up on dips as funds become available...

Please read my earlier post about the FED setting up swat teams to go after brokers and all markets. This is the Plunge Protection Team on steroids. We are well on the way to Central Economic Planning or Communism. I always wonder why news like this hits the wires on Friday PM or at the weekend.

It is getting very messy.... how much reach would the fed have in the UK - but I suppose a mess in the US is a mess for everybody.. Anyway, I guess we'll just adopt the same policy in 3 months, as usual

This is a good point to say thanks to you, GF and the others for all of your advice over the last 12+ months - I feel my family has at least got some security. Still pretty worrying, though.

Thanks Pluto

I think I should have been a bit more simple in my first post ... I still don't really know what the Kitco lease rates are. are they the actual 'interest rate' that you'd pay on the loan, or are they the more complex 'discount from LIBOR'? If they are the latter then the situation would be as you describe here:

Now if the borrower is confident the price of Gold is going to go down they are going to want to borrow more to sell into the market, which in turn will force the price I will ask for borrowing go up.

Otherwise I guess the same assumption would mean an expectation that the price of gold is going up.

Now, I would not read too much into lease rates.

I'm struggling to read much from any of the market indicators...!

I also find all this lease-rate stuff confusing

I seem to have picked up that there are two ways to express lease rates - the actual leasing cost (equivalent to APR, say - I think this is properly called the forward-rate) and the discount from LIBOR (ie, the expected percentage gain for the borrower compared with the value of money - assuming the price of gold remains constant). Note that this latter approach has cheaper borrowing expressed as a positive lease-rate. I thought the Kitco lease information was expressed as the discount from LIBOR. This would mean that they're not actually paying you to borrow the gold - quite the reverse .. At the moment the quoted lease rate is negative, suggesting that gold has a higher lending rate than LIBOR.

Or, put another way, this would suggest that at the moment gold is being valued higher than money by the markets. Isn't this a bullish sign for gold?

(Still, gold is being lent out at lower rates than banks are lending money to each other... perhaps they do value money higher after all...)

Kitco quotes a lease of -0.07ish for Friday, which is only just negative, but at least it is negative. The spike for Friday's lease rate at -2.5ish (if it isn't just an anomaly) could mean that there was strong interest in borrowing gold (say, to roll-over a short, perhaps because of an expected increase in the price of gold because of news leaked that was to be announced over the weekend...), but few willing to lend it (say, because of a perceived risk that the lenders wouldn't return the gold, or the day's allocation for leasing being fulfilled ... or perhaps too many people are now hoarding gold...)

Or is the above the reason I should stay with cash in the BS...

[hello all - my first post so be gentle... ]