Why gold forward rate inversion is important

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churchill
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Why gold forward rate inversion is important

This has been covered by ft.com/alphaville for a couple of days but I have seen few comments .. I am no expert but it seems dealings behind the scenes .......

http://ftalphaville.ft.com/blog/2011/09/14/677021/why-gold-forward-rate-inversion-is-important/

Edited by admin on 11/08/2014 - 06:31
churchill
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and presumably meaning more

and presumably meaning more  gold on the market --- so bearish for prices short term ? 

Jimux
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Negative LIBOR - GOFO

This might help...

http://www.ft.com/cms/s/0/9c5ec914-deed-11e0-9af3-00144feabdc0.html

Euro banks selling/leasing their gold into the market.

Gold is a store of wealth/value for when times are hard and it is pretty much like fucking granite in europe at the moment.

Sell off into next week perhaps, then BB can drop some cash from his helicopter.

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GLD withdrawls

This might fit with the large GLD withdrawls that happend the last couple of weeks. Euro banks in trouble (SocGen/CredAgri) took delivery of their gold, rather than selling the shares on the market which would have depressed price. Used the bullion as collateral in a dollar swap deal. The GOFO rate  above LIBOR should be very bearish for gold. Normally it is the BB that lease gold into the market and collect the vig between the LIBOR and GOFO rates.

If however the recent leasing is being done by the troubled euro banks, they don't really care about the rates being negative. The LIBOR rate is an average for all banks, but the actual LIBOR rates for the troubled banks are significantly higher such that they are shut out of the markets, which makes the higher GOFO rates the best $ funding rates they can get. The euro banks are not interested in collecting the interest differential between LIBOR and GOFO as they need the dollars for their own liquidity purposes.

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