Mystery Theater: GOFAUX artifacts and Germanic bankster tragedy

Fri, Sep 6, 2013 - 4:09pm

As you may have noticed, there has been a bit of discussion lately about the GOFO – the Gold Forward Offered Rate, published by the LBMA and generated by the member banks. According to the LBMA, it “represent the rates at which dealers will lend gold on a swap basis against US dollars”.

In more detail from the official LBMA FAQ (emphasis mine):

“The contributors are the Market Making Members of the LBMA: The Bank of Nova Scotia–ScotiaMocatta, Barclays Bank Plc, Deutsche Bank AG, HSBC Bank USA London Branch, Goldman Sachs, JP Morgan Chase Bank, Société Générale and UBS AG.

The means are set at 11 am London time. These are the rates shown on the LBMA website. To show derived gold lease rates, the GOFO means are subtracted from the corresponding values of the LIBOR (London Interbank Offered Rates) US dollar means. These rates are also available on the LBMA website.

At 10.30 am London time, the Reuters page is cleared of all rates. Contributors then enter their rates for all time periods. A minimum of six contributors must enter rates in order for the means to be calculated. At 11.00 am, the mean is established for each maturity by discarding the highest and lowest quotations in each period and averaging the remaining rates.

They provide a basis for some finance and loan agreements as well as for the settlement of gold Interest Rate Swaps.”

All of the numbers displayed in the charts below can be found at these sources:

LBMA Gold Forwards

LBMA Gold Fixings

SPDR GLD Historical Data

The more recent activity of the various maturities can be followed here:

  Image cannot be displayed

The longer-term picture looks thus:

  Image cannot be displayed

Unsatisfied with the clarity these charts provide as to HOW exactly GOFO may presage up- or downturns in gold price (which is a perennially popular, yet to my feeble mind insufficiently explained 'truism'), I decided to play around with the numbers a little bit. Everything that follows on this topic is pure ‘sophistry’ for lack of a better term. None of the metrics displayed have been sanctioned by any precious metals gurus, analysts, bankers or economists (that I know of – though examples of similar approaches would be very welcome).

So, what is a lad to do when trying to analyze a trend over time, and the straight numbers don’t offer clarity? Why, make the dataset more complicated, of course! What I’ve done below is remarkably simple (and only debatably useful) – calculated the per-ounce cost of borrowing gold on a swap basis against USD, adjusted to the prevailing gold price at the time. Behold: GOFAUX™

  Image cannot be displayed

In the interest of saving a bit of time, I will spare you the other (less productive) rabbit holes I went down and try to cut straight to the chase. But one interjection is needed – why plot the data only from 2000? A strange little set of things happened from 1999 onwards, timeline courtesy of Bloomberg:

May 1999: Bank of England announces sales of gold reserves in five auctions.

August 1999: Gold falls to low of $251.95

September 1999: First Central Bank Gold Agreement announced where 15 European central banks including the European Central Bank agreed to limit collective sales to 2,000 metric tons over five years through 2004.

2003: First gold-backed exchange-traded fund started.

March 2004: Second Central Bank Gold Agreement limiting collective sales of European central banks to 2,500 tons through 2009.

November 2004: SPDR Gold Trust, world’s biggest gold-backed exchange-traded fund, created.

So, suspending disbelief for a moment, please consider the following in light of the fact that you are reading the ramblings of a dope with a spreadsheet and a penchant for goal-seeking patterns that he WANTS to be able to see:

  • There is an odd similarity in the shape of the GOFAUX™ (daily GOFO x daily gold PM London fix price) curve and that of the prevalent gold prices ca. 1358 days later (the average of the timespans between ‘peaks’ and ‘lows’ on the chart).
  • Any and all economic, financial, demographic data – heck ANY data controlled and disseminated by .gov, banks and MSM is suspect. The very basis of all of this could very well be mere fantasy based on garbage in, garbage out.
  • There could be NO rational connection between DAILY gyrations in GOFO and gold prices from 4.5 years ago to the activity of the gold markets TODAY. Could there? This has all got to be irrelevant, arbitrary conjecture from a dilettante.
  • Well, I thought there has GOT to be some fallacy involved in my train of thought. There MUST be a fundamental (and quite simple) obvious explanation for seeing this. And there very well may be, I look forward to your thoughts on this.

    But taking this madness one step further, I did one more transformation – I shifted the dates for this arbitrary and artificial GOFO/ounce metric by the average number of days between peaks/troughs ‘observed’ (capriciously picked by eyeballing the chart in haste, due to a lack of graphing/analytic software to plot and capture ACTUAL highs and lows, slopes, differences and retracements). The chart below displays gold price in ‘real’ time, and lined up with it shows the GOFAUX average values from 1358 trading days prior.

      Image cannot be displayed

    The correlation coefficient for the 1,130 data points involved: 0.9063. If the thought process and underlying data could be considered sound, the odds of this occurring by chance would be VERY CLOSELY asymptotic to zero.

    In the interest of getting this posted, further detailed speculation on this imaginary and potentially specious metric will have to wait for another day. But some baseline assumptions/questions:

  • Is it POSSIBLE that entities (banks, dealers, hedge funds, ETFs, sovereigns and agents of all of the above) engaged in MASSIVE amounts of gold leasing and lending in the 2004-2008 timeframe, creating (unreported) long-term lending agreements with (unreported) swap/lease rates, with a maturity of, oh I dunno, 5 years or so?
  • Could the current activity we are witnessing in both gold prices and GOFO rates be in part due to the expiration of these contracts on a very literal, day-by-day basis? What, exactly WOULD we expect to be happening if this were the case? How would registered/disclosed gold inventories change? What exactly would the lessor and the lender be doing, what specific assets would they be moving (or not moving) upon reaching the maturity of these make-believe long-term gold lending contracts?
  • GOFO can clearly go negative, while actual gold price cannot (at least in accounting terms). The correlation depicted above HAS to break at some point between now and 4.5 years from now (when the negative average GOFO rate would drag the GOFAUX in to subzero values). WHEN, exactly, can this be expected to occur?
  • Completely non-sequitur (?) secondary mystery of the week -- question for the German-speaking Turdites (and perhaps Jim Willie's source):

    There is a potentially very bizarre (though of course possibly explained via completely mundane reasons) scandal of sorts in the German/Swiss financial sector that caught my eye. There was an article (and embedded compilation of links to background stories) that sounds like something straight out of Jim Willie’s accounts:

    “New details are emerging about the suicide of Pierre Wauthier, the 53-year old CFO of Zurich Insurance, that can only be bad for Josef Ackermann, his boss and the former CEO of Deutsche Bank. After Wauthier took his own life last week Ackermann promptly resigned as Zurich’s chairman, saying it was because Wauthier’s family was blaming him—an explanation that seemed dubious to some. Now, various reports published over the last 24 hours have revealed a troubled relationship between the two men. […]

    The CFO’s body was discovered by police on Monday, August 26, when he didn’t show up for work. According to the Wall Street Journal, Ackermann called a meeting of Zurich’s board of directors the next day. During the meeting, he read Wauthier’s suicide note, which repeatedly heaped blame on Ackermann and his tough management style. Ackermann was apparently deeply affected, and wouldn’t respond to directors’ phone calls after the meeting adjourned.

    When the meeting commenced the next afternoon, Ackermann dropped a bombshell: he announced his resignation, effective immediately.

      Image cannot be displayed

    (Pierre on the left, Herr JosefA on the right)

    Think of it this way, as a matter of perspective – JamieD resigns from the top dog spot at JPM to enjoy his spoils of war, and to take the ‘golf-intensive’ job of replacing aging Uncle Warren as the head of Berkshire Hathaway. Two years later, instead of resigning in protest (and taking an even-better option at another financial powerhouse), the CFO of the latter company commits suicide and scrawls a dying condemnation of the top bankster in his own blood.

    Is it just ME that thinks this is EXTREMELY unusual for Swiss financial circles? That there may be more behind this tragedy of avoidable, violent catharsis presumably stemming from gargantuan hubris on the part of Uncle Josef? A true moral conflict on the part of Pierre coming out of the realization of what he had done (presumably under the direction/pressure of JosefA)? Bankster infighting collateral damage, aimed at removing JosefA much as DSK was publicly drawn-and-quartered – and Pierre was a mere bishop sacrificed to checkmate the King (aka guided-projectile Arkancide)?

    About the Author


    Mr. Fix
    Sep 7, 2013 - 1:50am


    I very much enjoyed reading your post, and I thank you for your contribution.

    I've been checking in to see what's going on. As far as bankers dying, I'm always suspicious of the circumstances, especially nowadays, there are just too many skeletons in too many closets, and I suspect a lot of them are running for the hills. I find it hard to believe that someone who spends a lot of time accumulating that much in the way of worldly possessions would suddenly decide to go meet his maker as opposed to opting for an early retirement. It does not add up.

    The numbers make my head spin, so I'm not going there.

    So far, California Lawyers thread is still alive and well, it's a place where I feel quite at home.

    That's enough for tonight,

    I really need to catch some sleep.

    Sep 7, 2013 - 1:26am


    @rtabit -- r=0.91 is as close to certainty as is likely to get... But, as mentioned many times, causation is NOT at all a certainty. It could indeed be pure coincidence (I just don't believe in such), it could be mutually caused by an independent, third factor (not likely so far apart in time).

    @Mr. Fix -- glad to be able to provide SOMETHING of interest... Truthfully I was wary to bring it up in case the most likely (tragic, but non-global-finance-related events) scenario was the case. But as mentioned above, there are NO coincidences where the Masters of the Universe are concerned.

    BTW, this is not, strictly speaking, TA. It's just looking for patterns, signal in the noise. But clouds can produce seemingly meaningful patterns, if one looks hard and long enough. Wheter it's dragons & elephants or the warning signs of an approaching hurricane is the question.

    @Occasnltrvlr -- Funny you should ask. I was pondering the EXACT same question off and on over the last few months, way before the specific speculation of recent days. THAT would indeed be the (likely too late) signal to put on boogie shoes and take a powder. Do YOU think travel routes abroad would be available after such an event? I am inclined to think that at that point it just might be too late...

    Sep 6, 2013 - 11:39pm

    I Want To Know What You (Yes, YOU) Think

    OT, yes, guilty as charged, but no intention here to "derail."

    You've read, heard, and seen the reports of the SC "warning" of a possible nuclear incident, and the undocumented movement of nukes.

    If the EE really does it, a false-flag nuke on US soil, would that be enough to induce you to leave? If not, what would be enough, or are you resigned to staying?

    This is a sincere inquiry; I've no intention to stir debate or controversy.

    If, to you, this sounds bat-shit crazy, well, it is, and so am I, so please ignore it.



    Mr. Fix
    Sep 6, 2013 - 11:18pm

    Green Lantern Point well taken.

    I'm pretty sure I've explained my position on technical analysis,

    I seriously doubt if anyone who trades these markets has any respect for my opinion anyway.

    The last couple of threads were right up my alley, this one, not so much. I said so.


    Your theory is excellent, I like yours more than the author.

    Sep 6, 2013 - 11:10pm
    Sep 6, 2013 - 11:00pm


    Near the bottom of your 2nd paragraph.... a question doesn't make sense. "We are to believed that with UN inspectors on the ground in Syria, he would use chemical weapons?"

    Did you mean to say, "Are we to believe....?"

    Sep 6, 2013 - 10:59pm

    @Mr. Fix

    The NSA wants people to think that they have this capability. And if everyone thinks that the NSA is Big Brother’s Big Brother, all-seeing and all-knowing, then not only will everyone be terrified, but everyone will simply stop using encryption. After all, why bother going through the hassle of encrypting/decrypting if the NSA can still read the contents of your email? This statement from that article is just silly, suggesting people only encrypt data so the NSA can't see it. But I also don't think the NSA has this capability. I think the NSA put this out in the media only so they can later prove to the public how this technology is not possible, hoping that will persuade the public into doubting other legitimate claims that the NSA has the capability of doing.

    Sep 6, 2013 - 10:52pm

    I shall

    I'm just so pissed off I could spit! LOL

    I should probably add something about the upcoming false flag that will be used to incite war.

    Green Lantern
    Sep 6, 2013 - 10:35pm

    Mr. Fix.   I enjoy reading

    Mr. Fix. I enjoy reading your missives and I don't often comment. Ya just can't comment on everything. But I'd like to think as a community we are dedicated to putting out a very high quality information.

    I know it's hard to be on your toes about every aspect of everything we talk about but sharing such strong conclusions without any good support is not fair to anybody. Is that fair to others who do the work or to maybe new people who come here that like what you post and you might influence them?

    I am as concerned you are about everything else. War, prepping, end game scenario's, etc....

    Some of the things you frequently comment on such as when gold and silver will go up (like when everything has collapsed), what the end game will look like are beliefs based on unclear assumptions and principles.

    Ok, I'm picking on you a little bit and you know by now that's not my style but my one persian flaw is throwing out information to others that you really haven't considered yourself. It might not be important to you but it is to other people.

    My biggest complaint about the conspiracy forums in the past was that people were just throwing shit out with out good analysis. And since I'm part of that crowd that believe what others call conspiracy, it makes me look bad too. I believe alot of stuff but I do everything in my power to provide factual support. I like to think of that as a service to others. And I hope others consider the same in return when sharing.

    And yes, the official numbers are suspect but that doesn't mean price charts are.

    I know you are concerned about wars. Did you know that wars are cyclical too and all that data sits in a super computer someplace along with other related data?

    Mr. Fix
    Sep 6, 2013 - 10:31pm

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