Yah, Well...GOFO Yourself!

49
Mon, Dec 9, 2013 - 11:19am

One week ago, London GOFO rates were comfortably positive. One week ago, I warned you that they were about to go negative again and, today, they did. Add this to the pile of bullish fundamentals as we head into the rest of this month and 2014.

Again, why would we expect GOFO to be negative. To make a long story short...physical gold is scarce.

  • The GLD has been drained by over 500 metric tonnes YTD.
  • The Comex has been drained of another 75 mts YTD.
  • China has "officially" imported 1,260 mts through October. (https://www.zerohedge.com/news/2013-12-08/china-october-gold-imports-sur...)
  • And now JPMorgan is sucking up what gold remains at The Comex, stopping to their HOUSE account 96% of the gold deliveries made thus far in December. (https://www.cmegroup.com/delivery_reports/MetalsIssuesAndStopsYTDReport.pdf)
  • So, in what should come as no surprise, GOFO rates declined sharply all last week and finally turned negative again today. You can find the data here: (https://www.lbma.org.uk/pages/?page_id=55&title=gold_forwards&sh...) But it looks like this:

    DATE 1-mo 2-mo 3-mo 6-mo 12-mo

    29-Nov-13 0.07167 0.09167 0.10500 0.13333 0.16333
    02-Dec-13 0.06667 0.09167 0.10500 0.13333 0.16333
    03-Dec-13 0.06000 0.08333 0.10000 0.13500 0.16500
    04-Dec-13 0.05833 0.07500 0.09500 0.13000 0.16500
    05-Dec-13 0.03500 0.04833 0.06000 0.11333 0.14833
    06-Dec-13 0.00667 0.01500 0.02833 0.08000 0.14500
    09-Dec-13 -0.02000 -0.00333 0.01000 0.06167 0.13167

    As a reminder, negative GOFO means this:

    "A negative GOFO rate means that gold in hand today is worth more than U.S. dollars in hand. Think about that the next time someone tries to explain to you why gold has no value. This is a sophisticated transaction being executed by sophisticated banks. They are not in the business of leaving money on the table for others. If they are willing to pay money to get their hands on gold, it means they are placing a higher value on gold than on dollars. That's just the law of the time value of money in action."

    (More here: https://truthingold.blogspot.com/2013/07/gofo-explained-and-why-its-now-very.html)

    Again, prior to 2013...BEFORE THIS MASSIVE, COORDINATED, COUNTER-INTUITIVE AND CARTEL-DESIGNED BEATDOWN SCHEME...negative GOFO was extremely rare. It occurred for two days in 1999, two days in 2001 and for three days at the height of The Great Financial Crisis in 2008. GOFO then went negative again on 7/8/13 and stayed there for 40 trading days. Over that time, which coincided with JPM hoarding July silver AND August gold Comex deliveries, the price of gold rallied over 17%, from $1221 to $1434. GOFO turned negative again during the October delivery month and stayed there for 15 trading days from 10/16 - 11/5. During that time, gold only rallied 8.45% from $1254 to $1360. Note that on both occasions, gold rallied, on average, about 2% per week while GOFO was negative.

    So, here we are again.

    • Negative GOFO tells us that physical gold is temporarily(?) scarce.
    • Sentiment is terrible and nearly every pundit and "analyst" is telling you to sell.
    • The CoT structure is even more bullish than it was at the June price bottom.
    • The BPR structure is similarly more bullish than at any time on record.

    It sure sounds to me that we are set up for some MOASS. If the pattern from July-August and October-November holds, we should see gold rally about 2%/week as long as GOFO is negative. And with the record Spec short positions, even 2%/week is likely a very conservative estimate. What does this mean? Well, provided GOFO stays negative, and I expect it to, we will see:

    This week: Gold to rally toward $1255-$1260. Note the chart below that shows clear resistance there.

    Next week: Resistance breaks and gold rallies another 2% toward $1285-$1290.

    End of 2013: Gold continues to rally and finishes the year pressed up against our old friend, $1320.

    Silver will, of course, come along for the ride. It will rally, too, and finish the year near $22, just like I've told you for weeks.

    Note that gold has broken it's down trendline and is clearly basing/bottoming. Silver is now trending higher.

    Two other updates before we close for today...

    Crude continues to rally and The Pig continues to slide. I expect this general trend to continue, too. By holding these gains, crude will next challenge -0 and The Pig looks like it's ready to fall toward the 79.75 region.

    That's all for now. More in the podcast later.

    TF

    About the Author

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      49 Comments

    tyberious
    Dec 9, 2013 - 11:21am

    First

    On Monday.

    Dec 9, 2013 - 11:29am

    And this is simply fantastic

    PLEASE READ: https://www.theburningplatform.com/2013/12/08/may-the-odds-ever-be-in-yo...

    It includes this chart. The "bottom" 60-80% ain't gonna stand for this very much longer. What happens when The Pig finally loses superiority and all those printed dollars come home to roost?

    Table 1: Income, net worth, and financial worth in the U.S. by percentile, in 2010 dollars

    Wealth or income class

    Mean household income

    Mean household net worth

    Mean household financial (non-home) wealth

    Top 1 percent

    $1,318,200

    $16,439,400

    $15,171,600

    Top 20 percent

    $226,200

    $2,061,600

    $1,719,800

    60th-80th percentile

    $72,000

    $216,900

    $100,700

    40th-60th percentile

    $41,700

    $61,000

    $12,200

    Bottom 40 percent

    $17,300

    -$10,600

    -$14,800

    From Wolff (2012); only mean figures are available, not medians. Note that income and wealth are separate measures; so, for example, the top 1% of income-earners is not exactly the same group of people as the top 1% of wealth-holders, although there is considerable overlap.

    R man J
    Dec 9, 2013 - 11:36am

    Australia Wants It's Gold Back

    Actually it looks like just a petition drive, but it could lead somewhere. This would also help drive a negative GOFO rate.

    https://goldsilverworlds.com/physical-market/australia-wants-its-gold-back/

    ...Australia has 80 tonnes of gold which is managed by the Reserve Bank of Australia (RBA) as part of its foreign reserves assets. The RBA’s PR department has stated that Australia’s 80 tonnes of Gold Reserves is stored at the Bank of England, in London for cost efficiency and security reasons. However, Australia has international standard bullion storage facilities with capacity to store Australia’s gold at cost competitive rates. Also the cost to build a new Federal Government owned facility is negligible when compared to the current value of Australia’s gold ($3.3 billion)...

    But I guess that since we have been told that the Perth Mint has an constant supply, never any shortage, this is a moot point. Perth can just borrow it to the government as needed. Or the government can give them cash for it.

    rl999
    Dec 9, 2013 - 11:36am

    NUGT

    Bought NUGT & JNUG today - I place it in the 5+ year investment plan, and now intend to forget that I own it.

    Will go looking for other miners throughout the week. As this is my first foray into that area I would be grateful to learn what other members own. ??

    2nd

    Brought to you by the Second Amendment and by Second Class Citizens, all the veterans (& others) that have had their rights raped away by a government that is at best incompetent and at worst evil. By the scheming court system, by the diabolic three letter agencies, by the militarized police, and by a general public that is drugged up, dumbed down, out of touch and almost out of time.

    Remember that you are only allowed to protect your life if the .gov says so. Soon there will be few people with rights. The .gov has already excluded felons, seriously decreased the rights of people seeking treatment for mental maladies, and tipped their hand with the trick about passports and back taxes.

    Mr. Fix
    Dec 9, 2013 - 11:41am

    Isn't it interesting:

    We seem to focus on the only commodities whereby the more bullish the fundamentals are, the lower the price drops.

    Warning! Warning! Warning!!!

    All indicators are now more bullish than ever,

    look out below!

    ArtL
    Dec 9, 2013 - 11:43am

    6th!

    6th amendment.

    In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the Assistance of Counsel for his defence

    this one seems to cause a lot of problems for the criminal state. much easier to lock em up after a forced plea bargain.

    USLV doing great, if you want to speculate with some play money.

    Dec 9, 2013 - 11:45am
    Dec 9, 2013 - 11:47am

    Recall that we discussed this

    Recall that we discussed this extensively a couple of months ago. A more accurate rate of unemployment is 3-4% higher.

    https://nypost.com/2013/12/07/warning-jobless-rate-may-be-rigged/

    GoldenWizardrl999
    Dec 9, 2013 - 12:27pm

    NUGT

    During the down wave last week picked up some NGD (New Gold) and OSK (Osisko Mining). I think as Eric Sprott has to say when Gold and Silver make new highs (hopefully next year) then the gold and silver stocks which are already producing will rise faster as they will capitalize on the rising PM prices as well as their increased mining production.

    Orange
    Dec 9, 2013 - 1:06pm

    NUGT

    I also bought NUGT last week.

    In Sept 2011 it was above $2,100 per share, so if one were to buy 1,000 shares today for about $27,000 when gold gets to $1,900 your shares would be worth $2.1 million.

    If Sprott is correct and gold goes to $2,400 by next year, the 1,000 shares should be (a guess) over $4 million.

    Of course when you sell, convert it physical gold.

    Hence, 22 oz now could be converted to 1,667 oz excluding taxes.

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