Although the price of gold remains weak, retail investors and industries continue to pay a premium to buy the physical metal now. What appears to be occurring is gold is moving from weak hands, ETF holders and etc, to strong holders, that is physical holders.
On Tuesday, one-month lease rates for gold hit a four-year high and rose to 0.3%.
The lease rate is important because it in an indication of industry demand. Jewelry stores will borrow gold, which is backed by the future sales of their products. Mining companies will also borrow gold at the lease rate and then pay back the loan with future production.
According to Kitco, Keith Weiner, president of the Gold Standard Institute USA and CEO of Monetary Metals, has been watching the physical market closely and said factors like backwardation, the rise in lease rates and low inventories in Comex vaults is an indication that buyers are becoming more aggressive in the marketplace.
Martin Arnold, director of research at ETF Securities, said that demand in Asian, particularly India and China, has been the key driver in taking the supply out of the marketplace. He said in their research, they have been monitoring three factors: the Shanghai Metals Exchange, gold imports into Hong Kong and sales at major jewelry stories in China.
“There is still a lot of physical demand in China,” he said.
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