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Albert Sung is the author of the Katchum Macro-Economic Blog, monitoring breaking economic news from a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at... More
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  • Gold Forward Rates Turn Negative 2 comments
    Jul 8, 2013 1:42 PM | about stocks: GLD

    As I told before, the only parameter that is going to dictate gold lease rates, is the GOFO rate, because the Federal Reserve will always keep the fed funds rate at zero, which means the LIBOR rate will stay at zero.

    The GOFO rate though, is dependant on the demand and supply mechanics of gold. And today we have the first time that the GOFO rate actually turned negative, which is officially a backwardation in gold.

    Once such events happen, we will see a huge shortage coming in gold.

    (click to enlarge)

    Chart 1: LBMA GOFO rate turns negative

    And the subsequent rise in lease rates:

    Stocks: GLD
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  • Reven
    , contributor
    Comments (61) | Send Message
    Not quite accurate, this happened during Lehman's collapse. I wouldn't necessarily count on this to be an immediate buy signal, but it is an indication we are nearing a bottom IMHO.
    8 Jul 2013, 10:47 PM Reply Like
  • Katchum
    , contributor
    Comments (613) | Send Message
    Author’s reply » During Lehman collapse we still didn't have negative GOFO rates. (well maybe for a few days...)
    9 Jul 2013, 11:19 AM Reply Like
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