Thu, Apr 3, 2014 - 10:26am

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:

Note the conclusion, conveniently copied and pasted below:

And here is where I think we are onto something. Let me, 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.


    About the Author

    turd [at] tfmetalsreport [dot] com ()


    Apr 3, 2014 - 10:26am



    Apr 3, 2014 - 10:29am
    Apr 3, 2014 - 10:34am

    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,


    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

    Apr 3, 2014 - 10:51am

    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..

    Apr 3, 2014 - 10:54am

    Doubled down on calls

    Doubled down on calls today.

    Here's hopin'!

    Apr 3, 2014 - 11:02am

    I believe in Larry

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

    $1050 is possible.

    Apr 3, 2014 - 11:06am

    Not with negative GOFO,

    Not with negative GOFO, friend.

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

    Apr 3, 2014 - 11:11am

    Ths is classic!

    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.”

    Apr 3, 2014 - 11:22am

    Jim Willie Interview with Paul Sandhu

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

    Video unavailable
    Apr 3, 2014 - 11:27am

    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

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