On the Lease Rate, Convenience Yield and Speculative Effects in the Gold Futures Market

Barone‐Adesi, Giovanni; Geman, Hélyette; Theal, John

doi:10.2139/ssrn.1365180

Cited by 5 publications

(1 citation statement)

References 26 publications

(12 reference statements)

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“…Lucey and O'Connor (2013) and Barone-Adesi et al (2014) have argued that lease rates -the interest that can be earned by lending the physical metal at various maturities -are potentially a more effective measure of fundamental value than convenience yield or its interest-adjusted basis proxy used above. In practice, lease rates exist because central banks hold quantities of gold that they may lease out for a return.…”

Section: Gold Lease Ratesmentioning

confidence: 99%

The shine of precious metals around the global financial crisis

Figuerola‐Ferretti

McCrorie

2016

Journal of Empirical Finance

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We analyze the price behaviour of the main precious metals -gold, silver, platinum and palladium -before, during and in the aftermath of the 2007-08 financial crisis. Using the mildly explosive/multiple bubbles technology developed by Phillips, Shi and Yu (2015, International Economic Review 56(4), 1043-1133), we find significant, short periods of mildly explosive behaviour in the spot and futures prices of all four metals. Fewer periods are detected using exchange-rate adjusted prices, and almost none when deflated prices are used.We assess whether these findings are indicative of bubble behaviour. Convenience yield is shown to have little efficacy in this regard, while other fundamentals proxy variables and position data offer only very limited evidence against prices having been anything other than fundamentals-driven. Possible exceptions are in gold in the run-up to the highpoint of the financial crisis, and in silver and palladium around the launch of specific financial products. Some froth, however, is reported and discussed for each metal.JEL classification: C22; D84; G13

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Section: Gold Lease Ratesmentioning

confidence: 99%

The shine of precious metals around the global financial crisis

Figuerola‐Ferretti

McCrorie

2016

Journal of Empirical Finance

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The regime-switching risk premium in the gold futures market

Kopchak

2015

J Econ Finan

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Do Bubbles Occur in Gold Prices? Evidence from Gold Lease Rates and Markov Switching Models

O’Connor

2012

SSRN Journal

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We assess whether two classes of bubbles occur in the spot price of gold, rational speculative and periodically bursting bubbles, using gold's' lease rates for the first time in the literature as a measures of its fundamental value. This question is of particular significance as these are the only observable market measures of a yield that can be earned by owning gold. We use tradition unit root and cointegration tests for rational speculative bubbles and Markov Switching Augmented Dickey-Fuller tests for periodically bursting bubbles. Bubbles are found to possibly exist for in ADF and cointegration bubble tests, but under the markov switching model no bubble found to be present.

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On the Lease Rate, Convenience Yield and Speculative Effects in the Gold Futures Market

Cited by 5 publications

References 26 publications

The shine of precious metals around the global financial crisis

The shine of precious metals around the global financial crisis

The regime-switching risk premium in the gold futures market

Do Bubbles Occur in Gold Prices? Evidence from Gold Lease Rates and Markov Switching Models

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