Gold and Silver lease rates went negative on Friday
I just happened to click to randomly click on some chart while on the kitco site, and saw a really interesting chart, so I thought I would investigate it a little. This is what I found.
Anyone check out the 1 year and 1 month silver and gold lease rates? They were basically doing nothing for a long time, flat for months - really boring stuff. Then on July 5-6, they get hit hard - going negative (almost hitting -0.5% for 1-month silver).
It's even worse for gold - every type of lease (1-mo, 2-mo, 3-mo, 6-mo and 1-yr) went negative - to almost -0.5% on July 5. The 2-mo, and 3-mo recovered on July 6 to 0%, while the 1-mo, 6-mo, and 1-yr are still negative (-0.5% for the 6-mo, and 1-yr, and -0.3% for the 1-mo).
That's how the PM's were hit on Friday - huge amounts of metal were leased out (at negative rates - they're paying people to borrow metal and sell it short).
Just thought I'd share the info. Good Luck everyone.
It means to be aware - there could be rough waters ahead.
Tomorrow, we will hear FOMC minutes. As a result, there is a very strong need to bring down the price of precious metals. They will have little choice ahead with regards to QE3, and that will be a positive for gold and silver. The financial house of cards is looking very shaky at this point.
The entire World economy is based on psychology, and the current mood is very uncertain and depressive. Not only are there problems in the United States, but Europe is looking pretty bad. The only place that has a positive outlook is China, and they are experiencing a slow-down.
Michael Pento has stated that he believes that the new Basel III requirements will result in no capital requirements for holding sovereign debt, and that this will cause 1.42 trillion in M1 to come loose - purchasing sovereign debt - which will result in something like $15 trillion entering the market. Naturally, this will have a major positive impact to the price of gold and silver. As a result, they need to try to prevent people from seeking refuge in these areas.
It's precisely because of all these manipulative actions that the price of silver will take off - like a beach ball that has been held underwater.
Hi Tony, yes that is some very good information. I've always scratched my head about the whole leasing Gold thing.
Some people compare it to options, or other types of hypothecation.
I see huge problems with this paradigm. If the lessee takes delivery, what does the lessor have to do to get it back in a fight? We are talking about an ASSET here, not just pixels on a computer screen. The Value of the leased Gold does not "expire". It's a tier one Asset with no counterparty risk. Who makes the rules?
When push comes to shove, who is going to have more legal firepower? The lease holder or the Gold holder? What if the Gold holder claims he "Lost" the Gold? This isn't like repossessing a car, Gold can be hidden in very creative ways, believe me I've heard some interesting stories.
Interesting. Negative lease rates. Well silver certainly seems to be in short supply, and there is a limit to how far down silver and gold can each be manipulated downward. We are basically testing those limits IMO. There does appear to be a lot of support for both silver and gold here at these levels. Smart money is starting to flow into the sector.
If Cooke doesn't want to sell all the silver in inventory for under $28 an ounce I'm OK with that. Why the rush to sell it all and buy fiat currency to put it into a bank? If you think silver is headed to the low $20s then you probably sold already, or you should sell. Silver has been smashed it every way they can think of, and it's holding up pretty well. Meanwhile helicopter Ben is buy trying to think of new ways to force the US $ lower.
OK, it's not easy to keep the faith and stay long the PM miners. It's not easy to stay long anything. Oh well, that's OK. Maybe it's not supposed to be easy.