Sign Ohio Banking Lease Template Safe

Industry sign banking ohio lease template safe

hey guys welcome back to another quick video today I'll be talking about gold leasing and explaining how that process works now I think it's really important to start off by talking about what a lease actually is a lease is a contractual agreement calling for the lessee the user to pay the lessor the owner for use of an asset some unique assets that are leased our fitness equipment by Jim's laundry equipment by you know dry cleaners cleaning a cleaning equipment maybe by the cleaners in in office spaces a surprising one which is art probably many times when you go to like fancy office buildings you'll see that there are a lot of beautiful pieces of artworks many of those are actually leased also fire trucks police cars and ambulances a lot of the smaller municipalities that can act can actually afford to buy them outright what they do is they actually lease them from larger municipalities right and of course probably the most common one that a lot of people know about is cars now how does a car lease actually work when first leasing in car the dealership will calculate the current capitalized cost and the expected residual value after the projected lease period ultimately you pay for the difference between the car's value at the beginning of the lease and what you expect it to be worth at the end instead of your payments building equity like when you make your mortgage payments you simply make these payments to use a car during that lease period okay now what is how is a gold lease different well there is a key difference between a gold lease and a regular leased like the one for a car for the car lease the same car that was given to you must be returned however for gold if assuming the same purity a different ounce of gold can be returned at the end of the lease this means that is interchangeable with any ounce of gold on the market it is not a distinct asset in the lessers point of view so consider this say for example you go and you take out a lease on a new series 5 BMW 2016 right in 2016 edition now after you know that two-year lease period you're not going to come with a another BMW series 5 which you're going to come back with is the exact same car the same serial number everything right it's the same car that you have to return that's not the case with a gold piece right it doesn't make sense for you to take out that gold hold on to it and then give that same gold back right so a gold leaf is more easily compared to a loan when I give you $100 as a loan at the end of the month I don't expect you to give me the exact same $100 bill instead I just receive another dollar bill which is equivalent in value of course plus any additional interest this is the same for a gold lease when I least one ounce of gold to you I don't expect you to give me the exact same ounce back at the end of the month I just expect to receive one ounce of gold plus interest so why lease gold and this market gold is similar to money for the bullion banks which holds gold as debt to their customers it would be unwise to just let it sit in the vaults instead during the length of that debt the bank can lease it out and earn additional revenue on the asset this is similar to banks and the money in their vaults although they hold a certain amount on reserve which is defined under the reserve requirement rate the other portion is put to work by making additional loans right and that's really the multiplier effect that exists in the monetary system you know you when you deposit your money that bank is not going to hold on to that cash what they're going to do is they're going to hold a little bit of it back and then the other half they're going to put it back into the system by producing a loan by giving it out as a loan and etc etc so that multiplies the thing now gold is fixed and supply but similar to that when when a customer deposits gold with a bank what happens is you know then I can take that gold and then lease it out or an additional revenue but lease it out for a period where I know that that customer is not going to come back and ask me for that gold to redeem their their gold right so at least it all for maybe a year or two and then after two years when they come back and they're like hey I want my gold back you know that lease ends and you give them back that gold and actually in the meantime you actually earned a little bit of revenue while holding that okay for the bank the lease offers reduced risk now the traditional way of earning a return on gold was to sell it in the open market during that two-year period when you know the customer doesn't want it and invest the proceeds while securing a forward contract for delivery back at a later date so I would so I would sell a sell that gold invest it in a very safe bond get that that yield and then after two years when the customer is assumed to return back I secure for forward contract today when I initially sell it for that respective date and that on that respective day I then received that same amount of gold back okay now the gold lease offers a much more simple in profit above a now who uses a gold lease the precious metals leasing market so it's not only about gold there are a lot of other precious metals that are leased but this video focuses on gold now the is the precious metal leasing market is incredibly large for gold leases a few key consumers come to mind now there are the gold mining companies there's the jeweler and there are manufacturers who use gold to make their products now the miner mining companies are the best example their revenues come from the refined or they sell in the open market to generate profit and pay the bills so whatever goal they produce for them just as any other business that's their product they sell it the revenue that they get they pay their bills and then the profit remains for the owners however if productive if the production schedule assumes production at the end of the month and salaries and other expenses need to be paid at the start of the month where does the money come from in a scenario where they're expected to start production at the end of the month you know you can a general bit like a shoemaker he can make a few at any point in time but with mining companies there are set production schedules and if they're set production schedule assumes that they're going to start generating revenue at the end of the month while their bills are due at the start of the month how are they going to make up that difference through a gold lease they can borrow X amount of ounces to sell in the open market and pay the bills once production starts the same X amount of ounces is put to the side plus additional interest to pay back the lease the gold lease in this scenario is a vital cash management solution now what about the jeweler another example is the jeweler faced with a macy's order for say say for example three thousand gold rings with the order expected to take about half a year to fill the jeweler can take out a lease use the gold to fill the order and then once he receives in full his payment go to the gold mark by the ounces he leased plus any additional interest to pay back the lease this ensures protection against price volatility especially in a bear market where prices are falling so in a scenario where the jeweler looks at the gold market and is like it's probably likely that I'm assuming this gold is the price of gold is going to fall by you know ten percent in the coming six months you know I don't want to buy this gold now to see that my inventory value has fallen by 10 percent in the meantime while I'm producing this gold so instead what I do is I take out that lease I use the ounces today in order to fill that order but really the payment what I'm paying for in the market is that pretend is that ten percent lower price six months from now right so it so the gold lease can also be used to ensure protection against price volatility now what about the manufacturer consider the manufacturer who uses gold as a catalyst which is a substance that increases the rate of chemical reaction in this production process although the gold is still within the chemical solution the reclamation process takes time and in order to move to the next batch they can take out a gold lease a gold lease can actually help with inventory management as well so in certain scenarios where manufacturers use gold to speed up the chemical reaction in whatever they're making right the goal that they use in that chemical reaction it's still there they just me kind of need a sort through it find it clean it out and then kind of get it back to its original state but that takes time and if you are a company that's you know trying to meet orders on it on a very rapid basis what's going to happen is you know you don't have that time to you know kind of like clean up that gold and use it again so what you do is you rece out gold so that you can focus on your next batch while you allocate maybe a few employees to clean that gold and cover that lease right so that's what that's also helpful in inventory management now understanding the impact of gold leasing on the market this is a concern that a lot of people have hopefully you haven't read any other articles so you your unbiased when you first reading this now the number of go Lisa's actively taking out increases during a bear market a lot of people assume it's the opposite it increases during a bullish market right because all you know the market is booming and everyone's taking out no no no it sounds confusing but consider this if the price of gold is expected to fall by 5% in the next year and the annual gold lease rate this is the the similar to an interest rate when you borrow money the gold lease rate the glr is 1% what can actually happen well I can take out a lease now sell the gold in the open market today realize the 5% higher price and in a year's time when the price of gold 5 Falls by 5% I can then use some of those proceeds from the initial sale buy back the same amount of ounces and then cover the 1 percent interest rate and net overall what happens is I actually get a 4% return on my investment so nowadays there are a lot of derivative products that can be used to short the gold market but that's paper gold that's not actual physical gold it's a derivative it derives from an underlying asset in the original gold trade if you want to focus on the physical trade of gold the way the shorter market is through the gold lease and so that's why the number of gold leases in the activity of the gold lease market increases during a bear market so during the late 1980s and 1990s the gold market was in a bear market and as you can see in the glr the graph over here to the right oops where's my mouse yeah so the glr graph over here it was significantly higher so initially continued to increase in these spikes during seasonal Heights right so almost hit 6% the glr rate and actually had about nine point two percent really at the peak of the bear market right so at the trough right now what about in the current zero interest rate environment today in 2017 2016 would demand be high or low well really it's dependent on the price of gold right where is the price of gold well relative to this time period it was significantly higher right so we're assuming that the gold leaf market is going to produce an active and so that's exactly what happened so post-2001 really what happens is that you know the price of gold continues to increase especially during that boom boom period before the financial collapse and so the gold lease rate is close to zero then of course the financial collapse occurs there's a significant assumption or there's an assumption that the bear market ensues right and so the gold lease rate increases but gold actually continues to increase in value really through that recession so gold increases increases and it's actually negative so the gold lease rate was actually negative between 2009 and 2012 now how is this possible well in this scenario really what happened is that if you really wanted to take out at least the banks would actually pay you to take their gold right now this is really more of a kind of like numbers error than anything else because the gold lease rate is difference between LIBOR and the gold forward offer rate which is shorthand is go foe right so the difference between LIBOR and gofal is the gold lease right and so in this scenario when you know the central banks the global central banks really cut interest rates in order to stimulate economic performance what happens is that difference between the two declined significantly and it actually went negative in some in some months right now of course because it was such a bullish market in the gold market especially up until 2011 not a lot of people were using these leases right so not a lot of people really saw an advantage in profiting from these negative gold lease rates but they still did occur now just to talk about golfo just a little bit I don't want to confuse you too much but covering Golfo gofal is a swap rate for a gold to US dollar exchange it is the rate at which someone is ready to exchange gold for the greenback it is essentially the interest rate on the US dollar the US dollar loan when gold is used as collateral so your general bank interest rate when you take out a loan of US dollars that's the general rate now the gofal rate is say for example you use gold as collateral for that loan that's the only difference what is the rate well of course it's going to be a little bit less than the LIBOR because really you have that collateral and the difference between the two essentially captures that gold lease rate so LIBOR would be your loan like very simplified assuming no additional premium library would be the base level of what a unsecured US dollar loan would charge versus gofal which is a loan with gold as collateral so the difference between the two is that lease rate now of course as we talked about before as you see this so this is this yellow line over here is the price of gold and so we had that bare market it was declining significantly and then as it contains the ink recent increase in increase and increase during that bullish market the gofal rate fell and that makes sense as the value of your collateral increases in value you know the interest rate that's charged lowers right so you're go full rate was falling really even opposed 2009 in this area because gold is again in certain circumstances a safe haven right so the value of gold was increasing during that period while interest rates were falling and all of a sudden you got negative gold piece rates okay so that's easy to understand but the key takeaway to take away from this is that for gold leasing gold leasing is booming during bear markets and it falls significantly during bullish markets in the gold market okay so to summarize a gold lease is not like a car lease a gold lease is more similar to a loan gold miners use gold leases jewelers use gold leases manufacturers use gold leases and there is an inverse relationship between the price of gold and the gold police rate as always if you like this video please like and subscribe to my channel for more I would recommend that you check out my videos on the new case for gold it is a book by James Rickards he is a commentator in the gold market and I kind of cover his book and the different topics covered in each of the chapters in addition to some of the commentary that I have for some of the points that he proposes so if you are interested in kind of the gold market I do recommend that you check the check out those videos but as always have a nice day guys