To gain a comprehensive understanding of the mechanics of the gold wholesale market, it's essential to be familiar with its key building blocks: swaps, leases, and forwards. In this article, we will explore these components and their interactions to be better equipped to evaluate developments in the gold market.
Dumb question here: why would someone want to borrow gold ? Is it because they have an agreement to settle some kind of trade in gold instead of in fiat ? Maybe some drones for example (just saying :))
Dumb question 2: do central banks lend gold simply to earn interest?
Prompted to ask because the RBA down under was asked why it’s gold I s stored in London and not Australia and they simply said it would cost too much to bring it home AND that it’s easier to lend. The first argument to my mind specious and possibly the second too.
1) A mining company for example might borrow gold, sell the gold spot, use the dollar proceeds to buy machinery, en repay the gold loan with future production. Suppose the gold lease rate is lower than the dollar rate.
2) To earn interest instead of paying storage costs.
Do you know the minimum amount required to participate in the gold lease market (lend out gold), or the swap market? Is this activity open at all to normal people / businesses, or reserved for central banks? Thanks
Dumb question here: why would someone want to borrow gold ? Is it because they have an agreement to settle some kind of trade in gold instead of in fiat ? Maybe some drones for example (just saying :))
Dumb question 2: do central banks lend gold simply to earn interest?
Prompted to ask because the RBA down under was asked why it’s gold I s stored in London and not Australia and they simply said it would cost too much to bring it home AND that it’s easier to lend. The first argument to my mind specious and possibly the second too.
1) A mining company for example might borrow gold, sell the gold spot, use the dollar proceeds to buy machinery, en repay the gold loan with future production. Suppose the gold lease rate is lower than the dollar rate.
2) To earn interest instead of paying storage costs.
Do you know the minimum amount required to participate in the gold lease market (lend out gold), or the swap market? Is this activity open at all to normal people / businesses, or reserved for central banks? Thanks
It's probably 1,000 ounces. You can too, if you have an account with a bullion bank, which is probably not free.
Ok, is there a resource you can turn me to where I can research this further and see about any possible options. Thanks very much for your help
You can contact any bullion bank that is a member of the LBMA or SGE. LBMA see https://www.lbma.org.uk/membership/current-membership#- SGE see https://en.sge.com.cn/membership_ListofMembers_internationalboard
Alternatively, you can lend out gold via retail companies such as Monetary Metals https://monetary-metals.com/homepage/ Or swap out gold via ie Money Metals https://www.moneymetals.com/gold-loan