GOFO Back Beyond Its ‘Old’ Tricks
Thanks to John Chew for bringing this post to our attention.
Here is an excerpt as insight into what is discussed.
“As of this morning, 1-month GOFO is historically low at -18.5 bps, with the 6-month tenor now negative at -1.7 bps. Gold has always had a tangled and tortured relationship with the “modern dollar” due in full part to the inner plumbing of interbank methodology. A negative GOFO rate outwardly implies a significant shortage of physical metal, which intuitively should mean a surge in prices or at least serious upward pressure in that direction. Yet, time and again negative GOFO coincides with the opposite, as I noted last December during what was the last negative forward episode:
In truth, the physical squeeze never disappeared it was only buried under the much larger needs of the interbank cash markets. The size disparity in terms of actual dollars is why an uptick in gold collateralized lending can overwhelm even the most blatant (and continuous) shortage.”
Al/Cory
Interesting that Chew has been advising the top financial leaders in China on the economics of it all.
Not that I disagree…a very savvy man…………………..
Gold is a personal hedge against government. It is NOT money – for that is determined ONLY by the majority of people. Gold has no worth unless another desires it. By itself, gold is just a metal – pretty, but still just an object. It became desirable first for jewelry – it was considered the tears of the sun god. It is a hedge against government when government fails for then and only then capital seeks to preserve itself by fleeing to the private sector from public. M Armdttong
http://armstrongeconomics.com/2014/11/07/gold-falling-from-grace/
It is strange, then, Bobby, how the elite only want gold as a barter item between themselves at duty-free airports. Anyone with net worth below $100 million and not “in the club” can just live with fiat currency and fractional reserve banking with financial repression for transactions between individuals. But for those in power, gold is a medium of exchange.
JJ, not sure you will see this. Thank you very much for mentioning Yen/gold relationship. It make sense now.
Appreciate it greatly. Do you subscribe Armstrong Economics?
Just want to confirm one thing. Does Martin consider yen carry trade as good as QE?