Glad tidings of good cheer

          London is also the centre for gold leases – the borrowing and lending of precious metals, with bullion banks typically borrowing from central banks or other market participants and lending to quality institutions that borrow gold thus earning a spread. Borrowers include jewellery manufacturing groups, miners and ...those who are shorting the market (they borrow gold to sell it in the expectation that prices will fall, where they make a profit). But if the cost of borrowing gold goes through the roof … as it has ... then that trade can get deeply unattractive and expensive very quickly. 

Inter-bank gold lease rates are typically sub 0.5% while market counterparts could pay between 1% to 3% pa depending upon credit worthiness. Well interbank borrowing costs for 1 to 3 months perioods recently rose to a peak of about 12%. That hurts.

So that's what we have today … and that takes us back to New York. Speculators who have been running a leveraged short gold position are closing out these bets by buying gold because it is expensive to run (and likely taking a loss) … and hence the price rally. Everything is connected.

We estimate that so far 280 tonnes of gold has been flown from London to New York in the last month – so between 50 to 60 flights will have been carrying the metal into CME registered vaults to fill the demand. If no tariffs, then likely that metal will come home to London over the next few months. It's once again time to start sharing the good news about gold .