Tuesday, July 16th 11:04 AM IST

Cost of Gold borrowing rises to highest level since 2008

# gold  # silver  # US Fed Reserve  # stimulus  # Gold borrowing  

The cost of borrowing gold rose to the highest level since 2008 last week, as the recent gold sell-off has substantially tightened the leasing market. While gold miners’ hedging might have contributed to the rise in gold lease rates, the lack of liquidity is most likely behind this phenomenon, according to ETFS report.

LONDON (Bullion Street): Cost of borrowing gold has risen to the highest level since 2008 last week as Gold Forward Offered Rates (GOFO) turned negative for the first time since the Lehman crisis amdist recovery seen in gold on weak dollar and bond yields, ETF Securities Ltd said in their weekly report.

The cost of borrowing gold rose to the highest level since 2008 last week, as the recent gold sell-off has substantially tightened the leasing market. While gold miners’ hedging might have contributed to the rise in gold lease rates, the lack of liquidity is most likely behind this phenomenon, according to ETFS report.

Bernanke's dovish comments sent gold higher as Fed emphasised the need to for highly accomodative policy for the foreseeable future even if it does taper its stimulus programme. The US Dollar fell sharply after the announcement, pushing gold and silver up to almost US$1,300oz and over US$20oz, respectively.

Key events to watch this week
Bernanke’s Congressional testimony on Wednesday will be watched very carefully for further clarity on the Fed’s monetary stance. US industrial production and housing market data will also potentially drive precious metals sentiment, with strong figures supporting platinum and palladium. EU car sales, after having fallen to a 20 year low, could temper the gains in platinum if they fall further.

Photo Courtesy: BigStockPhoto.com

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