On the lease rate, convenience yield and speculative effects in the gold futures market
by Giovanni Barone-Adesi; Helyette Geman; John Theal
International Journal of Financial Engineering and Risk Management (IJFERM), Vol. 1, No. 3, 2014

Abstract: By examining data on the Gold Forward Offered Rate (GOFO) and lease rates, we conclude that the convenience yield of gold is better approximated by the lease rate than the interest adjusted spread. Using the former quantity, we study the relationship between gold leasing and the level of COMEX discretionary inventory and show that lease rates are negatively related to inventories. We also show that futures prices have increasingly exceeded forward prices over the period, and this effect increases with the speculative pressure and the maturity of the contracts.

Online publication date: Tue, 21-Oct-2014

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