Question: "What is a proxy for global interest rates?"
It is the implied rates of the gold futures market.
While the key gold futures market may be domiciled in the United States of America, it synthesizes and reflects cross-border influences of various producers, users, and governments.
Interest rates dictate the differentials or spreads of the gold futures market. These spreads are valuable indicators of the marketplace as well as provide the epoxy of the relationships between supply, demand and prices over time.
Producers, governments and banks are the key players, however, at times speculators become influential marginal factors.
Consider recent declines in the U.S. Federal Funds rate. Subsequently, the spreads in the gold futures market contracted or narrowed. This occurence reflects the relative importance of one economy relative to others. This implied interest rate may be viewed as a global interest rate.
Some recent influences are: the selling off or reduction of various central bank holdings. One wonders what would happen to gold prices if these institutions or governments reversed course?
In the past, many textbooks claimed that gold was a sterile holding. It did not produce anything but this is not accurate. You could put gold to use and collect the implied rate of return or "carrying charge". This could occur via the forward market, the futures market or the institutional borrowing/lending/leasing market.
Lending/leasing/borrowing operations provide a mechanism to re-distribute gold without outright purchases and sales. These operations can improve the liquidity of gold transactions.
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