What Do Gold Leasing Rates Say About Markets?

In 2025, gold leasing rates surged, partially from increased gold demand and tightening supply. That’s because confidence in gold is up, and confidence in the global economy is crashing.

Institutions like the “bullion banks” at JPMorgan and HSBC, and even central banks, lease their gold holdings, especially during times of duress. Gold leasing rates are an often-overlooked indicator when it comes to understanding sovereign debt stress and economic malaise.

Just as higher Treasury yields signal uncertainty because of higher risk for holding US debt, gold leasing rates are up because market confidence, especially in the US economy, is cratering.

Lessees provide gold to manufacturers, refiners, and even jewelers in exchange for a fee, paid in the form of a lease rate (usually an annualized percentage). Gold leasing is tied to the gold carry trade, where borrowers profit from the difference between lease rates paid to lease the gold and interest rates earned by investing the sale proceeds.

The borrower is expected to return the gold at the end of the lease period. This process allows central banks and other institutions to generate income without selling physical gold, allowing them to use it for other purposes like trading or investing. Gold leasing adds liquidity into the market and influences bullion prices. Gold leasing rates reflect the cost of borrowing gold, which can have a push-and-pull effect on the gold market and are an economic indicator beyond the price of gold itself. Leasing rates and gold prices don’t always correlate, but they affect one another, and they both tell a story.

Gold Price, 1-Year

A high lease rate indicates a high demand for gold in the market, often because there is stress or a scarcity of physical gold. A low lease rate indicates a more stable or liquid gold market, with no immediate signs of stress. These rates are sensitive to various factors, including central bank policies. A central bank may increase its gold reserves or decrease them, affecting the supply of gold available for leasing.

Higher interest rates may make gold less attractive compared to other assets, affecting the demand for gold leasing. Gold leasing can also be a way to provide liquidity when financial markets are under stress. And if a country is facing debt stress, it may seek to raise liquidity by borrowing gold.

When investors are concerned about sovereign debt crises or financial instability, such as a country’s inability to service its debt, they turn to gold as a safe-haven asset. This drives up the demand for gold, which in turn drives up leasing rates. A sharp increase in leasing rates can indicate that markets are beginning to worry about debt sustainability or creditworthiness.

During periods of sovereign debt stress, governments or financial institutions also may be more likely to lease gold as a form of collateral to raise cash quickly. The increased borrowing of gold for liquidity purposes can signal that credit markets are tightening, and lenders are concerned about the borrower’s ability to meet debt obligations. This can be an early warning sign of trouble.

When a country’s currency comes under pressure due to sovereign debt concerns, it can lead to increased borrowing of gold to stabilize the currency or to provide liquidity. If gold leasing rates surge, markets are concerned about the currency’s stability, and the country’s ability to service its debt.

Today was an unusually strong day for precious metals. Not only was gold up 2%, but silver rose 2.5%, palladium jumped 4%, and platinum shot up over 5%. A broadening of the precious metals rally indicates rising inflation risks. This is bearish for the dollar and Treasuries.

— Peter Schiff (@PeterSchiff) May 20, 2025

Gold leasing rates often rise during periods of market turmoil, when liquidity becomes scarce. Sovereign debt stress can lead to broader financial market dislocations, making it harder for market participants to obtain the liquidity they need. In these conditions, gold leasing rates can become an indicator of stress in the financial system, especially if there is a rush to secure gold for trading or as a collateral asset.

The Fed doesn’t engage in gold leasing, but during the 1997 Asian Financial Crisis, when Thailand ended its dollar peg and the region faced massive sovereign debt issues, it triggered a currency crisis. Gold leasing rates surged as central banks and financial institutions sought to manage liquidity and raise capital in an unstable environment. The leasing of gold was one of the tools used to manage financial stress during this period.

Later, from 2010 to 2012, in the wake of Greece’s debt crisis and the broader Eurozone sovereign debt issues, there were fluctuations in gold leasing rates. Investors sought safe-haven assets like gold, driving up demand for gold leases. In response, central banks adjusted their gold leasing policies to cope with the financial turmoil.

During the early stages of the COVID-19 pandemic, there were fears of a global recession and sovereign debt crises as countries took on massive amounts of debt to combat the economic fallout. Gold leasing rates were closely watched as an indicator of liquidity stress. Central banks around the world were also forced to implement emergency measures, including gold leasing, to stabilize the global financial system.

When analyzing gold leasing rates as a potential signal of sovereign debt stress, there are a few key factors to watch for. A sudden and sharp increase in gold leasing rates can signal a tightening of liquidity, possibly due to concerns over sovereign debt sustainability. Investors may be scrambling for gold as a safe-haven asset.

A prolonged period of high leasing rates could also indicate that the market is anticipating a larger debt crisis or financial instability. Central banks and corporate banks that begin leasing more gold may be doing so to raise funds or manage liquidity, signaling concerns about their own financial situation or broader market stress. 

If gold leasing rates rise in conjunction with other market indicators like widening credit spreads or falling sovereign bond prices, this could provide additional confirmation that sovereign debt stress is a growing concern.

10-Year Treasury Yields, 1-Year

Gold lending rates are easy to overlook, especially when the skyrocketing price of gold itself provides such a powerful signal about economic malaise. But they’re a separate and related factor that paints a more complete picture about the state of the economy. 

Especially when that painting says, in shiny yellow letters, “Divest from Fiat Currency.” 

In the US, the writing is on the wall.