Suggests a plentiful supply of gold from whatever source
Easier or more cost effective for Producers or Speculators to borrow gold, sell short and invest the proceeds and hence pocket the difference between the gold lease rate and the bond rate for example. Producers sell short or forward sell to fix the price for future delivery and also to pick up some of the interest rate differential in the form of Contango (is that condition whereby more distant futures prices are at a premium over the nearby.)
Hence low or falling lease rates MAY indicate an abundance and potential easing of the Bullion prices
Suggest a shortage of gold. -- Maybe Producers or Speculators caught in a short position and needing to make delivery of bullion at higher prices.
Harder or less cost effective for Producers or Speculators to borrow gold – sell it and invest the proceeds. There is little or no difference between the lease rate and the bond rate. Gold would likely be in Backwardation: (when the nearby futures sell at a premium and the more distant futures are at a discount)
Hence high or rising lease rates May indicate a shortage and potential increase in of the bullion price
