On the Lease Rate, Convenience Yield and Speculative Effects in the Gold Futures Market
36 Pages Posted: 21 Mar 2009 Last revised: 6 Sep 2010
Date Written: August 6, 2010
By examining data on the gold forward offered rate (GOFO) and lease rates over the period 1996- 2009, we conclude that the convenience yield of gold is better approximated by the lease rate than the interest-adjusted spread of Fama & French (1983). Using the latter quantity, we study the relationship between gold leasing and the level of COMEX discretionary inventory and exhibit 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.
Keywords: gold futures market, convenience yield, gold lease rate, speculative pressure
JEL Classification: C22, E44, G15
Suggested Citation: Suggested Citation