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 ... mmm I wonder what it portends to??
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...
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?
FOFOA article talking about GOFO and its importance from 2010: http://fofoa.blogspot.com.au/2010/07/red-alert-gold-backwardation.html'
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.
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.
where's Pirocco? I can understand only when the guy writes ... with numbers and historic perspective charts tell me nothing
"Notwithstanding the discount reaching close to 0% in early 1970, the system failed by August 1971." Shows how quickly it can happen.
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
How promising is this GOFO? Seems to be bang on the money to me; Chart from The Baron Is there a certain timeframe it has to be negative before it's worth looking at?