A Historic Inversion: Gold GOFO Rates Turn Negative

Discussion in 'Gold' started by thatguy, Jul 9, 2013.

  1. thatguy

    thatguy Active Member

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    A Historic Inversion: Gold GOFO Rates Turn Negative For The First Time Since Lehman
    http://www.zerohedge.com/news/2013-...ld-gofo-rates-turn-negative-first-time-lehman
    [​IMG]
    ...
    mmm I wonder what it portends to??
     
  2. TheEnd

    TheEnd Well-Known Member

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    Waaaay over my head!
     
  3. thatguy

    thatguy Active Member

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    Yeah same... I was like... Huh?? then errghm?? I did cross check the previous date of negative against the chart and it look positive for us silverslackers...
     
  4. TheEnd

    TheEnd Well-Known Member

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    Unfortuneately this whole stacking game is just one big waiting game........wait for this day, month, year, wait for that artcile or statistic to be realised ......I'm getting tired of it.....And are we in GFC 2 yet or what?
     
  5. grinners

    grinners Active Member Silver Stacker

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    FOFOA article talking about GOFO and its importance from 2010:

    http://fofoa.blogspot.com.au/2010/07/red-alert-gold-backwardation.html'

     
  6. Eureka Moments

    Eureka Moments Well-Known Member Silver Stacker

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    Yes, but No.

    Does that help? :)
     
  7. gazzahere

    gazzahere Member Silver Stacker

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    Well,

    Confusing or not, this could be a big deal.

    It could also mean that we have indeed seen the bottom - around the $1200 mark.

    The next couple of weeks may well tell the story.

    If indeed this is the turn then the lt chart looks very good to me.


    Let's hope.

    Have a great night


    Gazza.
     
  8. wrcmad

    wrcmad Well-Known Member Silver Stacker

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    In a nut-shell:

    GOFO is the rate of interest you pay if you swap your gold (short term) for US dollars. Alternatively, it is the rate of interest you receive for lending US dollars against gold.

    If the GOFO rate has been falling it indicates a few things. Firstly, it tells us that gold's value as security for a US dollar loan has increased. If a bank needs to get US dollars in a hurry (as often happens in a liquidity crisis) then using gold as collateral (security) is the cheapest way to do this.

    A negative GOFO rate says banks will pay you to swap US dollars for gold. It suggests they are desperate to get their hands on gold...physical gold.

    Why?

    Just as a government bond rises in price as its yield falls, so should the price of gold rise as its implied yield (via GOFO) falls. But this doesn't happen in the gold market.

    In fact, it's the opposite. That's because in times of a liquidity crisis or deflationary scare you have leveraged paper gold holders selling, while at the same time increasing fear leads unallocated gold 'owners' to request taking ownership of their gold...and moving it out of the 'system', or out of the London bullion market.

    If the GOFO rate goes negative, it means physical gold is in high demand in the bullion banking system.
     
  9. menotcrimex

    menotcrimex Member Silver Stacker

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    Banksters touching cloth
     
  10. worldbubble

    worldbubble Active Member

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    where's Pirocco?
    I can understand only when the guy writes ... with numbers and historic perspective
    charts tell me nothing
     
  11. CriticalSilver

    CriticalSilver New Member Silver Stacker

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    "....but the end is not yet."

     
  12. CriticalSilver

    CriticalSilver New Member Silver Stacker

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  13. House

    House Well-Known Member Silver Stacker

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    From the Financial Times;
     
  14. pmbug

    pmbug Active Member

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    Still negative out to 6 months. :popcorn:
     
  15. thatguy

    thatguy Active Member

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    http://www.maxkeiser.com/2013/07/sandeep-jaitly-on-negative-gold-forward-rates-gofo/

    Gold bit cheeze
     
  16. grinners

    grinners Active Member Silver Stacker

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    "Notwithstanding the discount reaching close to 0% in early 1970, the system failed by August 1971."

    Shows how quickly it can happen.
     
  17. pmbug

    pmbug Active Member

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    Still negative out to 3 months.
     
  18. mmissinglink

    mmissinglink Active Member

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    Same here...the bottom is not in yet


    .
     
  19. gazzahere

    gazzahere Member Silver Stacker

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    Well, how are we looking now?

    When I get to the office I will put a couple of trend lines on, but roughly by eye, we are lookin pretty good.


    Have a great day all


    Gazza
     
  20. House

    House Well-Known Member Silver Stacker

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    How promising is this GOFO? Seems to be bang on the money to me;
    [​IMG]
    Chart from The Baron

    Is there a certain timeframe it has to be negative before it's worth looking at?
     

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