Monday, August 30, 2010

Gold Lease Rate Spiking, 3rd Time in 6 Months

Gold lease rate is a "derived" rate. It is calculated by subtracting GOFO (Gold Foward Offered Rate) from LIBOR:

LIBOR - GOFO = gold lease rate

So, for the gold lease rate to spike higher, either LIBOR spikes higher or GOFO drops sharply.

It may mean the gold carry trade is on again, and that the gold price is set to decline in the near term. A similar spike in gold lease rate happened in October 2008, which resulted in volatile decline in gold price.


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