Negative lease rates for gold (and silver)

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Lease rates show that today's selloff has nothing to do with the physical market:

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Lease rates are still slowly climbing. As prices fall, physical supply gets tighter and tighter. Especially short term gold rates look interesting:

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On Monday, May 14, something happened that hasn’t happened since Dec of 2008. Two successive near-month precious metals futures contracts were in backwardation at the same time. ...

... Both May and July silver are backwardated. And June gold is backwardated. Incredibly, the May silver contract is giving away a 3% annualized profit to anyone who would sell physical silver and buy a May future that delivers in a few weeks (thus recovering the same position). Even more incredibly, no one can or will take the profit that is dangling out there!

July silver backwardation is smaller, and June gold backwardation is even smaller. But still! This should not be possible at all.

Because the next successive contracts are not in backwardation (in silver, all contracts from Jul 2015 on are backwardated), it is not a collapse of trust. I think that it is a lack of unencumbered metal. The markets for precious metals, silver more than gold, have become quite tight.
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http://www.zerohedge.com/news/guest-post-backwardation-gold-and-silver
 
Gold rates retreated somewhat today. Silver stayed stronger, especially the longer-term rates:

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Very weird moves in kitco quoted lease rates recently. LBMA forward rates don't show these moves, so I think kitco is misquoting.

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For comparison, the LBMA gold forward rates:

1 month / 2m / 3m / 6m / 1 year

03-Jul-12
0.35000 0.37667 0.42000 0.52000 0.56667
04-Jul-12
0.34333 0.37000 0.42333 0.52167 0.55667
05-Jul-12
0.35500 0.39000 0.43500 0.52500 0.56500
06-Jul-12
0.34500 0.38750 0.43250 0.52750 0.55750
09-Jul-12
0.34167 0.38167 0.42333 0.52333 0.55167

http://www.lbma.org.uk/pages/index.cfm?page_id=55&show=2012

Same for silver:

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03-Jul-12
0.50833 0.48500 0.48667 0.46000 0.40667
04-Jul-12
0.51000 0.48500 0.48500 0.45333 0.40667
05-Jul-12
0.50833 0.48333 0.48500 0.45000 0.40500
06-Jul-12
0.47500 0.47000 0.46500 0.45000 0.40000
09-Jul-12
0.48167 0.47167 0.46833 0.44500 0.39833

http://www.lbma.org.uk/pages/index.cfm?page_id=56&title=silver_forwards&show=2012
 
Short term lease rates are trending negative again.

Experienced precious metals investors are familiar with the topic of “negative lease rates” for gold and silver bullion. However, even novice investors can infer what is being discussed: paying someone to “borrow” gold/silver bullion.

In general, any time we contemplate a situation where lenders are paying borrowers to borrow, the word “dump” immediately comes to mind. This is because we begin the scenario with a lender choosing to enter into a transaction with the deliberate outcome of losing money. Because the world of commerce is entirely devoted to earning profits rather than creating losses, this automatically also implies market-manipulation – and thus fraud.
...
Click to expand...

More: http://silvergoldbull.com/blog/analysis-fraud-of-negative-lease-rates/
 
Lease rates had been falling ever since the QE rally started. Now they've begun to trend higher again. That's a clear sign that the correction should be over soon:

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(Short term) lease rates are continuing their rise today. Seems like somebody is buying a lot of physical currently.
 
They (the LBMA) are making it more and more opaque. Less and less information is being made available. Specifically, what’s happened here is that the LBMA had been reporting the silver lending rate and comparing it to the LIBOR rate.

For the past couple of years I have contended that this was a fictitious rate because, in reality, I believe silver is in backwardation. In other words, the future months are below the spot months, and so you should have a negative silver forward rate. But it’s not reported that way on the LBMA site.

They (the LBMA) consistently show a positive silver forward rate. Now, what the LBMA said is they are no longer going to report silver interest rates and silver forward rates.....

The reason they (the LBMA) gave is they said it is just an indication and you can’t really trade at that price anyway.

So what that does is prove the point that I’ve been making, that these are artificial rates which are just there to paint the tape and to mislead people into thinking the silver market is actually in a normal contango. But in reality it (silver) is actually in backwardation.
...
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http://kingworldnews.com/kingworldn...s_Moving_To_Cover_Up_Silver_Manipulation.html

Hmmm...
 
These rates have served as great indicators for 6 years and now they're suddenly useless. Surely that's the true reason for giving them up. :doodoo:
Maybe GATA is right about the imminent jaw-dropping news regarding silver and JPM afterall :mrt:
A simple indicator that the LBMAs logic is flawed is the fact that they're still posting rates for gold. Why should it be different there...


James Turk could be right about silver backwardation by the way:
The longer term forward rates have been lower than the short term ones the last time they were posted on Nov. 2nd
02-Nov-12 0.62000 0.61600 0.61800 0.61200 0.56800
http://www.lbma.org.uk/pages/index.cfm?page_id=56&show=2012

COMEX silver futures are only very partially in backwardation, though. Starting with the Jul16 contract:
http://www.cmegroup.com/trading/metals/precious/silver.html
 
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To translate this starters:
NLL thinks backwardation is back in silver. Last time we had this (in February 2011), silver went from 28 to 48 in 4 months.
 
swissaustrian said:
To translate this starters:
NLL thinks backwardation is back in silver. Last time we had this (in February 2011), silver went from 28 to 48 in 4 months.
Click to expand...

lets see, based on my buying patterns.... sell sell selll !!!! :rotflmbo:
 
Here's something interesting about the big physical buyers.
LBMA 1 month gold forward rates have just hit a yearly low today.
Longer term rates have also fallen but not that heavy:

1m / 2m / 3m / 6m / 1y
18-Dec-12 0.34200 0.36600 0.39400 0.46000 0.49200
19-Dec-12 0.34800 0.36800 0.39600 0.45800 0.49200
20-Dec-12 0.34600 0.36400 0.38800 0.45000 0.49000
21-Dec-12 0.32333 0.36000 0.38833 0.44667 0.48167
24-Dec-12 0.32200 0.34600 0.37800 0.43600 0.48400
27-Dec-12 0.30600 0.33200 0.35800 0.42800 0.47400
28-Dec-12 0.28400 0.32000 0.34600 0.42400 0.47400
http://www.lbma.org.uk/pages/index.cfm?page_id=55&title=gold_forwards&show=2012

What this probably means:
Somebody is buying the dip. And the "sellers" are leasing the gold on a short term basis, ie mainly 1-2 months.
 
And here's the phony explanation of the LBMA for the discontinuation of the SIFO publications (for details see NLL's article above):

Cessation of SIFO 11:00 Means with effect from 5th November 2012
Following consultation with the LBMA forward Market Makers, and more generally with other market participants, the LBMA Management Committee has agreed that after 2nd November 2012, the forward Market Makers will cease making contributions of their mid-price silver forward rates to allow the calculation of the SIFO means on the Reuters system each day. The reason for the withdrawal of the dataset was that unlike GOFO these rates were indicative rates only and therefore not dealable rates between forward Market Makers. In addition, since January 2011, the LBMA forward Market Makers have jointly contributed essentially the same data :doodoo: :doodoo: (but covering an extended range of maturities – from spot to 3 years) to the LBMA’s daily forward curve for silver. This forward curve can be obtained from a variety of data vendors (Thomson Reuters, Bloomberg and others). If you are interested in receiving this dataset please refer to the Silver Forward curve page on the LBMA website for further details.
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http://www.lbma.org.uk/pages/index.cfm?page_id=56&title=silver_forwards

Sounds like Libor all over again...
 
Kitco is publishing silver lease rates again. They've started putting data in since Dec 21st. I Don't know where they're getting it from as the LBMA doesn't post the data any longer (see above)

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Gold forward rates from 1 month to 6 months have been falling massively on the current price drop. 1 year rates haven't moved much. A possible explanation is short term leasing into the market to suppress prices.

1m / 2m / 3m / 6m / 1y
06-Feb-13 0.29000 0.30667 0.32667 0.39333 0.42833
07-Feb-13 0.28400 0.29800 0.32200 0.38600 0.43200
08-Feb-13 0.28333 0.30167 0.32500 0.38833 0.43000
11-Feb-13 0.27333 0.28833 0.31167 0.37833 0.42667
12-Feb-13 0.25333 0.27000 0.29500 0.36167 0.41833
13-Feb-13 0.22833 0.26000 0.28000 0.35000 0.41333
14-Feb-13 0.20333 0.22500 0.25000 0.33167 0.40167
http://www.lbma.org.uk/pages/index.cfm?page_id=55&show=2013

That's even lower than in late December when we had reached very low rates, too. The December rates were not even spike low rates. They've stayed ther until five days ago:
http://www.pmbug.com/forum/f2/negative-lease-rates-gold-silver-341/index6.html#post17377


You have to go back to early summer of 2011 to find similar rates for gold
http://www.lbma.org.uk/pages/?page_id=55&title=gold_forwards&show=2011
 
aand another decrease in rates:

1m / 2m / 3m / 6m / 1y
14-Feb-13 0.20333 0.22500 0.25000 0.33167 0.40167
15-Feb-13 0.18333 0.20500 0.23833 0.31833 0.38000

at this rate, we'd be in backwardation in ten days.

combine this with that:
Market talk of strong demand for spot Gold around the current session lows - unconfirmed; trades USD 1613.33 (-1.32%)

'Market talk’ – Signifies information that has not been formally tested through traditional journalistic channels and therefore is to be treated as unsubstantiated. Any interpretation of the talk is taken at the readers own risk and is a representation of the rumours within the market place and never generated by ourselves.
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http://ransquawk.com/headlines/mark...nconfirmed-trades-usd-1613-33-1-32-15-02-2013
 
Gold forward rates have declined a tiny bit more during the last two days.

1m / 2m / 3m / 6m / 1y
15-Feb-13 0.18333 0.20500 0.23833 0.31833 0.38000
18-Feb-13 0.18000 0.20000 0.22667 0.31000 0.37333
19-Feb-13 0.17667 0.19833 0.22500 0.31000 0.37333
 
The physical gold market seems to be getting tighter and tighter:


1m / 2m / 3m / 6m / 1y
20-Feb-13 0.18000 0.19833 0.21667 0.30167 0.36667
21-Feb-13 0.18600 0.19800 0.21400 0.30000 0.37400
22-Feb-13 0.16500 0.18833 0.20667 0.29333 0.36333
25-Feb-13 0.16167 0.18500 0.20333 0.29667 0.35333
26-Feb-13 0.14500 0.17167 0.19833 0.29000 0.34833
27-Feb-13 0.14750 0.17000 0.20250 0.29750 0.35250
28-Feb-13 0.13333 0.15333 0.18000 0.26500 0.33167

The last time we had such low forward rates was in late January / early February 2010: http://www.lbma.org.uk/pages/?page_id=55&title=gold_forwards&show=2010

Look at what happened thereafter:
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Meanwhile the physical market is back at the tightness from two weeks ago. China is back from holidays in early April.

1m / 2m / 3m / 6m / 1y
28-Mar-13 0.24167 0.26333 0.27667 0.31333 0.36500
02-Apr-13 0.23500 0.25833 0.27333 0.30833 0.35833
03-Apr-13 0.22500 0.24333 0.26000 0.30667 0.34833
04-Apr-13 0.19333 0.21167 0.23333 0.29000 0.33833
05-Apr-13 0.18000 0.20333 0.22833 0.28333 0.33167
08-Apr-13 0.17800 0.19800 0.22000 0.27600 0.32600
09-Apr-13 0.17667 0.19333 0.21167 0.26833 0.32500
 
Lowest 1m forward rate since Nov. 2008
About to go negative?

1y rate at record low levels.

Curve basicly flat.

Phyiscal market seems to get ultra tight.

I lack the time to post more. I'll be back in two weeks or so.

1m / 2m / 3m / 6m / 1y
30-Apr-13 0.17667 0.19000 0.20500 0.23000 0.27167
01-May-13 0.18000 0.19500 0.20500 0.22833 0.26333
02-May-13 0.17800 0.18600 0.19400 0.22400 0.25800
03-May-13 0.17000 0.18500 0.19500 0.22500 0.25667
07-May-13 0.16000 0.17167 0.18333 0.20500 0.25667
08-May-13 0.15600 0.16600 0.18400 0.21000 0.25400
09-May-13 0.09333 0.10000 0.11333 0.15500 0.21667
 
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Wow! That's a pretty significant change - roughly 40% drop in 1 day.
 
LOWER:
09-May-13 0.09333 0.10000 0.11333 0.15500 0.21667
10-May-13 0.08400 0.09600 0.10600 0.14800 0.22000

Makes total sense given the 2% drop in gold today, NOT :flail:

Just as an explanation: These record low rates mean that spot gold is in such high demand that the premium for future delivery in 1 / 2 / 3 / 6 / 12 months, the so called forward rate, is close to nothing. This is unprecedented.
 
Back from 2008, the all time low with NEGATIVE 1 and 2 month rates:
21-Nov-08 -0.11667 -0.07429 0.05000 0.44000 0.86857

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This time arround 6 month and 12 month rates are much lower
 
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Looking at the link SwissAustrian provided, I see the rates are even lower today!

http://www.lbma.org.uk/pages/index.cfm?page_id=55&title=gold_forwards&show=2013

1m / 2m / 3m / 6m / 1y

08-May-13: 0.15600 0.16600 0.18400 0.21000 0.25400
09-May-13: 0.09333 0.10000 0.11333 0.15500 0.21667
10-May-13: 0.08400 0.09600 0.10600 0.14800 0.22000
13-May-13: 0.03833 0.05833 0.07167 0.13167 0.20500
14-May-13: 0.00333 0.03167 0.04833 0.10333 0.17500
 
As rates were about to go negative, somebody (likely official sector) obviously found some supply:

15-May-13 0.03500 0.05667 0.07667 0.11833 0.18833
 
How long will it last at these prices?

6a00e54f7dcd468833014e602b7450970c-pi
 
Price goes down, rates go up. ???

16-May-13 0.04833 0.06833 0.08000 0.12333 0.18833
 
Flatten that curve....

17-May-13 0.04833 0.06500 0.07833 0.12167 0.18500
 
I'd bet that central banks are busy leasing gold into the market to deal with the shortages. Rates would have gone negative already otherwise.
 
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