LBMA lease rates

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#1 Wed, Feb 5, 2020 - 12:33pm
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LBMA lease rates

I've been looking for current/historical data on LBMA lease rates on palladium/platinum/gold/silver, but it's come to my attention that LBMA no longer reports them.

Are you aware of any 'proxy' data sets that have LBMA's rates as a constituent, so one could infer the relative changes in LBMA's rates?

Fri, Feb 7, 2020 - 4:28am
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I assume you already figured

I assume you already figured that theoretical lease rates are not the same as actual lease rates.

So the theoretical formula using Future:Spot basis (price difference) x time x the USD interest rate is inadequate.

That is because risk of non delivery is not priced into the above formula due to a supported bond market/suppressed interest rates (which do not discount real price risk at the moment). So interest rates represent holding cost in a non existent risk free market.

This means that if you want to create a proxy lease rate you need to add in your own preferred input for risk.

I suggest that activity might be that.

Ideally that would be gold swaps volume but we won't get that report either.

In the absence of primary data, secondary data must be derived.

The first derivative of price is price change over time. ie momentum. It's more spiky (volatile) than price.

The second derivative of price is rate of change of price change. That is extremely volatile and therefore hard to "read".

Activity might be calculated using something like price moves not confirmed by momentum, ie a Price:RSI deviation number. That number would become a multiplier for the standard (theorectical) lease rate.

You could also use volume as a momentum factor. There used to be an indicator colled "Volumentum". I never used it but it was for that. Herrick and Arms also did significant work in this area each in his own way. Y9u could read up on their work.

What time frame would you want to do this for? Daily? Hourly? Monthly, to compare to COT?

But why not merely identify where on a price chart the big players come onto the field, and just assume (ie "know intuitively") that lease rates will stress out when they trade at those times? eg at 2 / 5 / 10 year highs and lows.

It all boils down to support and resistance in the end.

Lease rates are a cost of holding price under or over a price level when it's natural location would be the other side of that level. In other words if lease rate = holding cost or opportunity cost saved by not holding, then lease spikes above theoretical lease rate represents manipulation cost, short term, in USD, over time, for that amount of price "forcing".

So excess lease rates (lease premium) paid = gain to the lessors of gold and a cost to the leasors of gold. Since central banks lease out their gold and are large holders of gold, their lease premium received will be getting set against the cost of manipulating gold ie selling and buying at strategic rather than best trading prices.

This might make more sense to some readers if it is looked upon as the munitions expended and their costs in dollars, being compared to territory gained and held, during a war, where the trenches and front line= the support and resistance levels of the price.

argentus maximus Rhythm and Price http://www.greenhobbymodel.com/rhythmnprice.html This analysis - global markets