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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 443.45+1.4%4:00 PM EST
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To: Zincman who wrote (101897)7/15/2013 9:00:16 PM
From: TobagoJack1 Recommendation

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Zincman

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Gold Slips Into Backwardation
For the first time since the 2008 lows, both the one and three month GOFO rates have slipped below the zero line. Normally, gold is used as collateral and swapped for dollars. GOFO is basically the rate charged for a dollar loan that is collateralized with gold. On the rare occasions when the rate goes negative, the motivation is exactly the reverse: someone is trying to obtain gold by offering dollars and is prepared to pay for it. This is analogous to gold going into backwardation in the futures markets - a rare event indeed, given the large above ground gold supply. So what does it mean? Very likely the assessment of gold's value by futures traders on the COMEX differs from that of physical buyers. Since unallocated gold accounts in London are fractionally reserved, large delivery demands can indeed lead to a temporary shortage. When we see a scramble for gold developing via a GOFO inversion, it means that someone received more delivery demands than they can satisfy with the gold they actually have at hand. It is noteworthy in this context that the previous occasions when GOFO inverted as a rule marked at least short term lows in the market, and often quite significant lows.
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