Hi tophat,
Usually the Gold Lease Rate is lower than LIBOR ... called contango.
I think the story is that Central Banks lease out the gold to cover storage costs. The institution that borrows the gold sells it and puts the cash proceeds in the bank at the LIBOR rate, returns the gold plus a little bit more to make up the lease rate, and makes a profit.
In a situation of backwardation, the Gold Lease Rates are higher than LIBOR. I guess that it would be better to borrow cash at LIBOR, buy gold and lend it at the Lease Rate.
What are the current LIBOR rates? Must be close to backwardation?
Just pondering......
GK
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