A Historic Inversion: Gold GOFO Rates Turn Negative

GOFO is now positive, but LIBOR hasn't changed much, so the lease rates (LIBOR - GOFO) have gone down. That makes it less attractive to lease gold into the market (as I understand it).
 
After only being negative for 7 of the previous 5,000 days, GOFO went negative for 40, consecutive market days from July 8, 2013 to September 2, 2013. And what happened to price during that time?

On Friday, July 5, price closed at $1213 and GOFO went negative in the morning of Monday, July 8. After rallying through July and August, price peaked on Wednesday, August 28 at $1433. That's a move of $220 or 18%. Not coincidentally, GOFO rates "bottomed" on August 22 and flipped back to positive on September 2. Price began to move sharply lower and, by September 18, had fallen as low as $1308. Though there was a brief period of flat rates in mid-September, GOFO rates remained positive until October 16, 2013.

But, now, negative GOFO is the new norm. Why? Because the CBs no longer have the gold to lease to the BBs. Without this readily available physical supply, the BBs are unable to aggressively manage price on a day-to-day basis and they are forced to stand down. Instead of daily 7:00 am London time price raids, we only get one per week. Instead of "waterfall" declines on the Comex, we get gradual and steady price increases.

This leaves us with this conclusion for traders and stackers everywhere:

Buy when GOFO is negative. Be cautious, sell or hold off on new purchases, when GOFO is positive.
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TFMetals
 
During recent years, the CB's re-added 1200 tonnes to their stockpile, a substantial part coming from the outflow from ETF's.
No gold to lease?

And that negative GOFO has the same relevance to the gold price trend as the wings of a duck that paddles on the water.
It's the relative that matters, not the absolute, as shown in my older post.
 
Still hitting records;

Gold Shortage, Worst In 21st Century, Sends 1Y GOFO To Lowest Ever... And India Just Made It Worse
Which brings us to today, when not only is the 1 Month GOFO rate [15]the most negative it has been since 2001, not only is 2 through 6 Month GOFO also negative, and in fact the 6 Month GOFO is now negative for the longest stretch in history clocking in at 11 consecutive days, but, strangest of all, the gold curve backwardation is about to become absolutely historic with 1 Year GOFO just a whisper away from hitting negative territory for the first time ever at 0.02667%.
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ZH
 
Check my blog out for some recent articles on this. This negative GOFO is not historic once you take away the distortion of the US' zero interest rate policy.
 
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