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Gold Lease Rate Slides as European Banks Seek Dollar Funding

The interest rate for lending gold in exchange for dollars plunged to the lowest on record this week as European banks sought ways to secure the U.S. currency amid the region’s debt crisis.

The one-month lease rate on gold fell to minus 0.57 percent on Dec. 6, the lowest according to Bloomberg data going back to January 1998. The rate, derived by subtracting the gold forward offered rate from the London Interbank Offered Rate, was at minus 0.56 percent today and compares with minus 0.23 percent at the start of this year. A negative reading means banks have to pay to have their gold deposits lent.