Research On The Relationship Between Gold Lease Rate And Gold Market

Gold Lease Rate (GLR) measures the interests paid for borrowing gold as well as the opportunity costs of holding gold. This paper wants to study the gold market from the angle of GLR and tries to learn the mechanism theoretically and empirically. In this paper, the fundamentals of gold market such as supply and demand are studied firstly, and then the historical behavior of GLR is reviewed. Finally some empirical research is made to verify these hypotheses. The result shows that the relations between GLR and gold mine production as well as investment demand are consistent with hypotheses put forward before. As to the relation between GLR and gold price, Result of Granger causality test shows that they interact as both cause and effect. Finally it is found that GLR could serve as a measure of the real interest rate. As the gold lending market has become an important part of the global financial market since it was founded at last 80’s, its development in our country still shows some weakness and some pieces of advice are offered in the last part of this paper.