05 August 2015

Gold Leasing Rates Suggest Tightness in the New York Physical Markets

Gold rarely sees a pronounced backwardation in the futures markets, as we have seen in other commodities.   Even a slight backwardation over a period of time is unusual.

This might be related to the lack of heavy physical delivery coming out (being withdrawn)  from the Comex complex, especially in recent times where the number of potential claims are much greater than the ounces of physical bullion actually available for delivery.

Why would you pay a premium for physical within a system that deals in physical at ratios of 120 to 1?   It would seem to be a 'sink' for physical supply, rather than a source.  And the more I look at it the more that The Bucket Shop appears to be a clubby little arrangement amongst cronies.

Does this seem all that hard to believe?  Eric Hunsader says he can now prove that the US Stock Exchanges favor of class of trader over all others.  And the tighter world of NY and London commodity dealing dominated by a few big trading houses is different?

The higher rates to lease gold suggest a tightness in supply to satisfy short term demand.  We saw something like this in December 2013 when gold put in a short term bottom.

The gold is used to satisfy commitments in the market, and then replaced at a later date if the lease is not renewed and rolled over.

I do not know of a reliable source to show how much gold is actuall being leased to satisfy market demands.   But price is at least some indication of the upward pressure that implies some scarcity.

Thanks to the data wrangler Nick Laird at sharelynx.com.