Sorry, this content is not available in your region. According to popular opinion, gold does not bear interest. Although that is true for retail investors, gold lending is an forex is not a zero sum game part of the gold wholesale market. What is gold leasing and how does it affect gold prices?
A lease is a contract where an asset is rent to someone else. As odd as it sounds, gold is also leased. Well, on the one hand, some entities own gold they need to put to work, e. On the other hand, there are companies in the gold industry who, for some reasons, prefer to borrow the metal instead of buying it outright. There is a lot of misunderstanding about the gold leasing. However, the cause and effect actually work the other way around.
When the price of gold declines, the demand for borrowing gold increases. This chart shows two more interesting things. Second, the GLR were negative most of the time in 2009-2012, which seems absurd, since it would mean that bullion banks were paying to lease gold to somebody. To sum up, gold may be leased, or lent and borrowed, just like any other currency.
Some analysts argue that gold leasing artificially suppresses the gold prices. However, in fact the changes in the price of gold drive the gold leasing market, not the other way around. Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. When entering a trade, how do you choose the point of the stop loss and take profit?
Clearly, this decision will have an impact on how profitable your trades are. However, did you know that the placement of youdr exit levels can actually have more of a bearing on your profitability than the decision on which direction to trade? In the volatile forex market, it is actually true. Given how important this decision is, it is surprising how little thought many traders give to this component of their trade.