Gold Lease Rate: Trend is a little concerning

The sudden drop in lease rate is a bit concerning...

Chart 1: Gold Lease Rate

Quick Update: Gold/Silver Lease Rates

I cautioned that the silver price could plunge due to silver lease rates going down in this post on 19th August, 2012.

I forecasted that when lease rates go down, the silver price would go down with it a few months later.

That has come true, but now the lease rates are starting to go back up. So we could be close to a bottom formation. I'm getting my cash ready to buy silver again in a week or two.

Chart 1: Silver Lease Rate

The same is happening with gold lease rates.

Chart 2: Gold Lease Rate

Silver Lease Rates Jump To One Year High (and then fall back to where they were previously)

Recently, the long term silver (PSLV) (SLV) lease rates jumped to a one year high since May 2011 (Chart 1).

On 17 April 2012, the one year lease rate was 1.05%, the 6 month lease rate was 0.73%, the 3 month lease rate was 0.47% and the 1 month lease rate was -0.26%.

It is notable that the 1 month lease rate didn't increase as much as the longer term lease rates. Another interesting point is that the long term lease rates almost doubled in a very short period, indicating scarcity in silver metal liquidity.  According to the London Bullion Market Association’s over-the-counter guide published on its website: “Heavy forward selling activity or a decrease in the supply of liquidity will push down forward swap rates and lead to upward pressure on lease rates.” What happened today is very bullish for the silver price.

Chart 1: Silver Lease Rates

I already wrote about gold lease rates in this previous article, pointing out that high lease rates are an omen of easing price manipulation by bullion banks like J.P. Morgan and HSBC. When silver lease rates go up, it means that we can expect an increase in the silver price in the next few months.


It has to be said that silver lease rates are still below their all time high of 2% in 2008, but it's especially the sharpness of the increase that's notable.


The expiry date for the CME May silver options is 25 April 2011. Mostly, the price movements near options expiry dates are in declining mode just before the options expiry. This way call options are made worthless. After the expiry date, we could have a huge boost in silver price fueled by this increase in lease rates.


Edit:

Apparently it was a mistake from Kitco's chart. The real silver lease rates are given here:

Table 1: Real Silver lease Rates

Well, too good to be true...