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GOFO Rates Turned Negative,
Gold Bull Market Ahead?

For the first time since the bankruptcy of the giant Lehman Brothers (September 15th, 2008). Gold's 1 month forward offered rate (GOFO) has dipped into negative territory this February and has continued to fall to -0.106 % on July 9th, 2013.
Previous negative lows happened on September 29th, 1999 (-4.53 %) and March 9th, 2001 (-1.09 %)

Essentially the GOFO rate reflects the rate at which participants are ready to lend gold against the US dollar in a swap deal. These quotes are made for 1-, 2-, 3-, 6- and 12 month-long periods.

Lower GOFO rates means less willingness to borrow gold.

Quandl's interactive chart shows vividly that the GOFO rates rarely dip into negative territory. And when they do, they generally signal more expensive gold.

Since the year 2008, GOFO rates dipped 5 times below the 0.2 % level. Each time, a bull run was ignited and pushed prices by 25 %, 35 %, 16 % and 28 % up during the first 4 negative GOFO dips. currently we are still in the 5th dip and prices haven't gone up. Instead, gold continued to fall.

For those who believe in- (or at least hope for-) the 1976 shoot-up scenario to repeat itself, GOFO rates might be signaling the next bull market. Although, there are vastly many bearish theories out there as well.

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