More GOFO, MOFO

Pressure on gold will soon ease. As expected, GOFO rates have again turned negative now that April Comex deliveries have begun in earnest.

This post is simply to serve as a reminder. Once again, I ask you to re-read this post from about a month ago:

http://www.tfmetalsreport.com/blog/5530/negative-gofo-and-rising-gold-prices

Note the conclusion, conveniently copied and pasted below:

And here is where I think we are onto something. Let me explain...no, there is too much...let me sum up:

  • Extraordinary global demand (China, German gold repatriation, etc) has made the supply of readily-available and deliverable gold extremely tight.
  • Central Banks are no longer willing to lease gold into the market every single day    OR
  • The CBs do still lease every day BUT, during Comex delivery months, the extra physical demand is just enough to tip the scales out of balance and drive GOFO negative.
  • Negative GOFO indicates a shortage of London Good Delivery Bars for leasing and delivery.
  • A shortage of bars precludes the BBs from heavily shorting and driving price lower.
  • This leaves us with this conclusion for traders and stackers everywhere:

Buy when GOFO is negative. Be cautious, sell or hold off on new purchases, when GOFO is positive.

Could it be as simple as that? Yes! It may very well be, at least for now. Rest assured, I'll be following this trend very closely in the weeks and months ahead.

Back then, Pining took the chart I posted and added some color to it. Here's a reprint:

And, as you can see, this isn't very complicated at all. Price generally rises when GOFO is negative and it falls when GOFO is positive, for the reasons laid out above.

Today, as expected, the one-month GOFO rates have again turned negative. Note that, as recently as Monday, rates were firmly positive. Why the sudden plunge? Can there be an explanation other than April Comex delivery? Note that the green-shaded areas in the chart above all align with Comex delivery months!

And here is an updated chart. Maybe Pining can break open his pack of electronic Crayolas and color this one in, too?

Again, it is extraordinarily important that you understand what this means:

  1. First and foremost, physical gold in London is in extremely short supply. The anecdotal stories of "empty vaults" will likely be proven and accepted as truth by sometime later in 2014.
  2. The fact that negative GOFO only occurred for 7 days out of 6,000 before July 8, 2013 is a proof of this.
  3. Negative GOFO is now the norm as this condition has occurred on approximately 60% of all market days in the time since.
  4. Negative GOFO simply means that there is no readily-leasable gold laying around for the Bullion Banks to use in raiding price. Yes, they can still issue shorts which they will hope to cover at a later date. However, their ability to summarily dump naked short paper to raid price and paint charts is severely curtailed.
  5. Therefore, prices generally rise during periods of negative GOFO.

NEGATIVE GOFO IS NOT A MAGIC ELIXIR WHICH CAUSES NOTHING BUT UPTICKS. While rates are negative, there will still be down days for gold. Look closely at the charts above for evidence of this. However, in general, the ever-present manipulative ability of the banks is compromised while rates are negative. Therefore, expect the area around $1280 to hold as support and, as long as rates stay negative, set your sights upon $1320 as a key short-term goal.

GOFOrth and prosper.

TF

51 Comments

Blythesshrink's picture

First

First

metalsbyamile's picture

1st ...nope... but 1st

to get second...Excellent reminder Turd. The community needs to keep its pants on so to speak.War is a long process ,there are no magic elixirs.

Just a reminder , great ! Keep your heads on folks, TF has laid it out for you. The models i use conform everything TF has ever said.

What me worry?

Submitted by metalsbyamile on April 3, 2014 - 9:47am.

Emotions are running fairly high this day. Turd has told you all the closes above $1300 and $1320 are paramount to another strong upside move.That GOFo is an indicator not a prophesy,

Relax

Why are you surprised. This is the jungle baby. I also have stated,no hollered, from $1390, this move is down until June , July, august, with higher lows and then higher highs.

Until then , hide your stack, hoard your core, and trade the rest. Or don.t

1wileyz's picture

3rd or 4th

cheeky

perdman's picture

5th Well Done Turd!

Tell somebody that doubling down when you have a ten and the dealer shows a six and then they lose money when the dealer flips over a blackjack and then they get mad at you for telling them to double down. Cant win.  Your message is well taken for the rest here thanks for what you do..

tmosley's picture

Doubled down on calls

Doubled down on calls today.

Here's hopin'!

nadgeskaul's picture

I believe in Larry

One last downdraft coming to extinguish all weak hands.  Brace yourselves.

$1050 is possible.

http://www.moneyandmarkets.com/so-what-gives-larry-plus-a-very-important-update-59650

tmosley's picture

Not with negative GOFO,

Not with negative GOFO, friend.

But GOFO could go positive and we could get such a smackdown.

Turd Ferguson's picture

Ths is classic!

MODERATOR

1502 GMT: Sergei Ryabkov, Russia’s deputy foreign minister, has given an interview to Interfax on Russia-US relations following the Crimean annexation. The Ministry of Foreign Affairs published it on their own website (in Russian). Rybkov spoke of US “aggression” and “aggravation” on many issues, including missile defense, but this quote popped out at us (translated by The Interpreter:

“What can we suggest to our American colleagues? Spend more time outdoors, do some yoga, go on a Hay diet, maybe watch a comedy series on TV. It’s better than winding yourself and others up, while fully aware that the train has gone, and that all their childish sulking, tears and tantrums will not help the matter.”

http://www.interpretermag.com/category/blog/

Hagarth's picture

Jim Willie Interview with Paul Sandhu

Start it at 4 minutes to get right to the Interview.

Marchas45's picture

Great Positive Thread

Thanks Turd for the Positivity when we need it. I'm sill impressed that I'm learning a lot from you especially on charts. Thanks My Friend

Turd Ferguson's picture

Thanks

MODERATOR

Just glad to be providing value.

metalsbyamile's picture

here is something i do not like to see

USD 80.49 +0.26

twippers's picture

HUI

Gold and silver are slightly down. Anyone know why such a major hit on the hui and it's components?

Response to: Ths is classic!
Turd Ferguson's picture

Take a look at the chart from yesterday's podcast

MODERATOR

After failing 7 times to break 227 yesterday, it was due for a pullback today. No big deal.

Just as in the PMs, all of today's action is meaningless. Only tomorrow post-BLSBS matters.

Response to: HUI
metalsbyamile's picture

Will pm stocks be included

in any major correction. It would seem plausible that all boats sink.Physical is the logical alternative.

“We have no right to be surprised by a severe and imminent stock market crash,” explains Mark Spitznagel, a hedge fund manager who is notorious for his hugely profitable billion-dollar bet on the 2008 crisis. “In fact, we must absolutely expect it."

Billion-dollar investor Warren Buffett is rumored to be preparing for a crash as well. The “Warren Buffett Indicator,” also known as the “Total-Market-Cap to GDP Ratio,” is breaching sell-alert status and a collapse may happen at any moment.

freemarkettrader's picture

HUI

It would be nice though if the miners wouldn't be down 2-3% when gold is down $3/oz.

Totally agree that a pullback was coming today and that the only thing that matters for next week is the metals/miners reaction to the blsbs tomorrow.

So far this week's trading is following what happened the 1st week of Feb. when GOFO flipped to negative.  Hopefully that means a good day tomorrow. 

Preparing My Position's picture

GOFO heading south is the call to pay attention

  • Feb 2014 was Gold was slightly rising (1240ish to 1260ish) while GOFO was dropping, but as soon as it flatlined, Gold started really moving up.  
  • Dec 2013, Gold dropped $30 in the first 2 weeks while GOFO was going down. When GOFO flatlined and started moving sideways to back up was when Gold flatlined and started moving back up.  
  • Oct 2013, Gold dropped $50 in the first 2 weeks and GOFO dropped about a week in for about 8 days, until the 18th or so.  When GOFO flatlined, Gold started moving back up.  
  • Aug 2013, same thing except is wasn't 2 weeks, it was maybe 4 to 5 days at the end of July to early Aug.
  • Jun 2013, same thing but June happened in the second half instead of the first half. 
  • Apr 2013 doesn't fit...but we all know what happened there.
  • Feb 2013 has the same pattern...gold smashed as GOFO is dropping. 

To me, the GOFO dropping is because someone is attempting to hold gold in place (1 time - Feb 2014) or push it down (5 of the other 6 times), that's the demand that is driving GOFO into negative territory.  If physical is in short supply, drop the price and some physical will free up.  In my opinion, they aren't in negative rates so that they can deliver the gold, they are in negative rates to shake out some gold.

The good thing is, the drop usually only takes 5 to 10 days, and we are 2 to 4 days into it (depending on when you start the count).  

PMP

ArtL's picture

Market Collapse thoughts

Given how manipulated the markets are today, with UNLIMITED fiat creation to make whatever is desired happen in the market, it seems very unlikely that there will be a stock market collapse, until there is a catastrophic failure. there will probably not be a market decline like 2008 when the FED was unprepared. The next failure of the US markets will be something else. In 2008, there was not the recognition of the FED that they need to print whatever is needed to do whatever they needed to do.

Now the FED is much more alert to what their goal is, and that is to keep the system going, (until it doesn't) by using all the tools that they have at their disposal.

Mickey's picture

GOFO

so the 1 month is now slightly negative--2 month barely positive and all are trending to negative

Play along with the cartel- 2-3 weeks of negative and we rally in PM, then short it or write calls or just go flat and take a 1-2 week trip.

keep in mind you have trading funds and investments in PM and the investments are for the emergency. which wil suddenly appear and everybody , most everybody will be surprised.

JY896's picture

GOFO tracking template file

A few of us (Dr. Jerome, Pining, Turd) have been tracking GOFO over the last year(s). Now that the historical data is no longer available in an easy-to-use format from LBMA, I am kicking myself for not having downloaded ALL of the historical archived files directly from their server while I still had the chance.

In general, this points to the wisdom of Turd's admonition to keep a hard copy stack of important news and information. Download books, presentations, research papers to store locally, and in hard copy where appropriate/practical.

I believe I DID save the archive of the daily GOFO rates and the gold fixes, going back as far as the data was made available for GOFO (1989). In case anyone wants to tinker with it, or just to track it for themselves here is a simple template with the full historical data for tracking and graphing the GOFO rate vs. GLD inventory and the London Gold Fix. Feel free to use, redistribute, or add your own version. (link) The links for where to go to get the current numbers are in the 'Data' tab, but for convenience here they are:

LBMA gold fix and GOFO

GLD historical inventory in spreadsheet form (.CSV)

BTW, if anyone is REALLY interested, the Wayback Machine has a site capture version from Feb. 9th, 2014. It seems if you want, you can grab the daily gold and silver fixes back to 1968. There are also yearly downloads for the GOFO and SIFO data, though since they are annual, it's not an improvement on copying and pasting the annual tables:

LBMA OLD Statistics page (for historical numbers only) -- use the navigation links on the right to get to Gold/Silver Fixings and Gold/Silver Forwards

Mickey's picture

Thanks JY and associates!

I kind of figure that one day it will be permanently negative as gold will really be scarce. Simple view is China, now Japans people are soaking it up and putting it in deep storage.

and one day the US will perhaps  be accountable for the 6700 tonnes held for others , plus maybe even our 8300 tonnes.  Then, also we find out who is really holding the real deal they thought they held.

usk's picture

I am expecting a big smash in globex hour

.. and a retest of 1277 in crimex hour before BLSBS Friday numbers.

Swineflogger's picture

@Turd

God I love the "Princess Bride" quirps.  But shouldn't it be "let me splain, no there is too much, let me sum up".

Thorus's picture

State of the silver-union data point

I ordered several American Silver Eagles from Liberty early last month.  It should have shipped on the 25th of March.  It didn't.

I called them today and ended up talking with David, who said he was the Director of the Company.  He indicated that they're very short on silver, and have been for some time.  He said that his next shipment was coming in tomorrow (Friday), and that he'd make sure my order got sent out on Monday.

I'll let you know when I get it.  But it's one anecdote for those who like to keep track of how tight things are in the marketplace.  I've been happy with Liberty on several other purchases of gold and silver I've made with them.  And David was polite and responsive when I talked with him on the phone.

Regards,

Thorus

AGAU's picture

Hui

Miner smackdowns usually precede a smacking for metals also.

IMHO I think we go down again hopefully to the levels discussed by Larry Edelson au 1278 ag 1818) from there we can truly rally anything else i fear is just a bounce!

hutton11's picture

Where do the CB's get their gold?

I am trying to understand if CB's vaults are just about empty and gold is moving from West to East, hence reflected in negative GOFO ( ie no gold to lease)  But when GOFO turns positive, how does it come about that CB's have gold in their vaults once again? Where have they sourced it from?

Turd Ferguson's picture

That's a good question, isn't

MODERATOR

That's a good question, isn't it?

Some have noted that the "Ukranian Gold Airlift" story was posted one day before GOFO flipped positive last month. Connection? Impossible to say...

metalsbyamile's picture

It works until it doesn't

Like every thing else I list below. At one time these indicators were the end all.

Jim Sinclair says GOFO means nothing.Charles Nenner says it is irrelevant.

I think it is all just noise. Sure , it can be an indicator. So many things can be and are. But in a manipulated market it seems nothing is stead fast hard nor absolute. T/A-strike that a no,  F/A-strike that a no., Dollar Index-strike that a no, Oil ratio-strike that a no,  Gold/Silver Ratio-strike that a no, Inverse Dow/Gold relationship-strike that a no, 10 Year interest rate above 3%- strike that a no, Economic Turmoil-strike that a no ,War(s)-strike that a no, Gold backwardization- strike that a no, Break the Comex -strike that a no....

Nothing is the norm any longer including GOFO.

But you need some thing to hang a hat on

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