Gold rental is a new side hustle? Rich investors ‘rent’ out gold bars sitting in vaults
Industry experts say that people are not just buying gold and waiting for the price to increase; they are “renting” out the metal.
Amid the rising gold prices, some wealthy investors are reportedly “renting out” the gold bars which are kept in their vaults. They are leasing them to jewellers, fabricators, and refiners for interest.
“We’ve got a whole bunch of phone calls with people saying, I have $2 million of gold bars, I have a million dollars-worth of gold bars. Can you lease it out for me?” founder of SafeGold, Gaurav Mathur, told CNBC.
“What’s changed very substantially in the last few months is that a lot of the wealthier customers have now got comfortable with leasing.” He added that the leasing volume at his company has substantially increased from $2 million to $40 million this year.
During an interview with the outlet, industry expert Keith Weiner, founder and CEO of Monetary Metals, stated that wealthy investors and family offices are not buying gold in anticipation of a price increase. “People are no longer just buying gold and waiting for it to go up to $5,000.” Weiner’s company arranges gold leases between industrial users and global investors.
Jewellers and fabricators use the “rented” item to fund the gold they need for their daily production.
A US entrepreneur, Joseph, told the outlet that he has doubled the amount of his gold through leasing. “The only certain bet I know is that currencies will depreciate,” he said.
“Central banks have been accumulating gold at an extraordinary rate. We live in a world where the global debt is unprecedented. Accumulating gold is the easiest, stress-free decision one can make,” he added.
How does gold leasing work?
The outlet described that leasing of gold works on the same idea as a loan. However, the asset is gold, not money. The difference is that the investors give the gold to a leasing platform or financier, who, in turn, lends the metal to a business.
Why is gold leasing popular?
CEO of Kilo Capital, Wade Brennan, told the outlet, “Gold leasing solves two problems,” adding, “It gives them the funding they need and removes the price risk. If they bought gold with a bank loan, they’d have to hedge, or they’d be exposed to the gold price. Most business people aren’t savvy with futures.”
However, it also carries a risk, as there is a chance that the borrower won’t repay the loan. Also, they can pay back “fake” gold or metal bars that don't have the same value.
“Lending gold – whether on a lease or a swap – carries a counterparty risk. In other words, the risk that the borrower may not pay you back,” said World Gold Council’s John Reade.
