Could GOFO go negative

[Joy]

It seems like physical gold is getting harder to borrow. It is quite conceivable that Gold forward rates could turn negative. One could make more money lending gold than dollars. WOW!

http://www.lbma.org.uk/stats/currstat

Not that I would ever lend my Gold out!

[krakknisse]

Re: Could GOFO go negative

It seems like physical gold is getting harder to borrow. It is quite conceivable that Gold forward rates could turn negative. One could make more money lending gold than dollars. WOW!

http://www.lbma.org.uk/stats/currstat

Not that I would ever lend my Gold out!

The answer is: yes. Go here: http://lbma.org.uk/?area=stats&page=gofo/2008gofo. Simply change the year in the URL to whatever you want. The data go back to 1989. On Sept 29th and 30th 1999, the GOFO went seriously negative (-4.5%) because of a short squeeze in connection with the Washington agreement. Apart from that, the current very low GOFOs (just raw, not subtracting LIBOR) have not been lower since 1989. I'm just an amateur, but it seems bullish.

Note that LBMA seems to have switched their reporting. Previously, they reported "derived gold lease rates" as GOFO-LIBOR. Now, they only report "LIBOR-GOFO". So it will no longer turn negative...

The LBMA derived gold lease rate (GOFO-LIBOR) is 1 month: -1.45%, 3 month: -2.1%, 6 month: -1.82%, 12 month: -1.7%.

The KITCO lease rates seem to come from a different source, as they didn't turn negative (and are still showing significantly higher values than LBMA). AFAIK, LBMA is the major physical gold market.

Shows both LBMA and the "market rate": http://www.kitco.com/market/LFrate.html
Historical lease rates (not LBMA): http://www.kitco.com/lease.chart.html

I think what would be most interesting is if gold goes to backwardation.
http://www.financialsense.com/editor...2006/0604.html

K