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.”