Precious Metals Products Overview

Lease Rate Swaps

In the Precious Metal Lease Rate Swap trade worksheet, you can capture the Gold Interest Rate Swap, also called Gold Deposit Rate Swap (GDRS). It is an agreement between two counterparties, A and B. Counterparty A would pay fixed rate and receive floating rate and Counterparty B would receive fixed rate and pay floating rate. The floating rate is tied to the gold deposit rate.

GDRS is an exchange of a series of fixed cashflows versus floating cashflows in ounces of gold. The payment amount is calculated based on an agreed notional in troy ounces at trade inception. Settlement takes place at the contracted interest payment dates. It will be net cash settlement of fixed and floating cashflows in a deliverable currency such as USD, EUR or GBP, using a specific rate fixing page for gold. A drop-down menu will be provided in the trade input screen for users to select the required settlement currency. 

There is no delivery of the physical gold.

GDRS are traded over-the-counter (OTC).

Note that you can capture a vanilla interest rate swap using the Precious Metal Lease Rate Swap worksheet when the settlement currency is the same as the currency in both legs.

Leases

Forward Leases

The precious metal lease can begin on the spot date, or a forward lease can begin on a date in the future. The lender transfers the quantity of the precious metal to the borrower on the value date. On the maturity date, the borrower returns the quantity plus interest. The interest is often payable in the physical precious metal, but can be settled in currency.

Spots

The precious metal is exchanged for currency and settled in two business days.

The price is based on Loco London (base location). Spreads are added for delivery in other locations and if the precious metal is allocated.

Forwards

An agreement to buy a quantity of the precious metal at a specified location on a future date for an agreement upon price.

The price is based on Loco London (base location). Spreads are added for delivery in other locations and if the precious metal is allocated.

Swaps

An agreement to buy a quantity of the precious metal at a specified location on an agreed upon date and price, and to sell the same quantity of the precious metal at the same or different location on another agreed upon date and price.

The price is based on Loco London (base location). Spreads are added for delivery in other locations and if the precious metal is allocated.

Options

The right but not the obligation to buy a quantity of the precious metal for an agreed upon price on a future date.