Another Review of GOFO and Gold Price

39
Wed, May 28, 2014 - 12:10pm

As you know, we've been monitoring this since last summer. The trend continues and the effect on price is obvious.

As we begin, let's first review. Remember that negative GOFO essentially means gold in the hand is more valuable than dollars in the hand or, put another way, holders of physical gold are reluctant to offer their gold out for lease in exchange for dollars. This makes negative GOFO a signal of extreme physical tightness, particularly in London and for the standard, 400-ounce, London good delivery bars.

The LBMA publishes historical records of GOFO rates going back to 1989. In reviewing this information, we find that negative GOFO is a very rare occurrence. In fact, of all the market days between January 1989 and July 2013, GOFO was only negative for seven days total. Considering that's about 6,000 days, being negative for just 7 equates to about 0.117% of the time.

Of course, we all know what has happened lately. In a desperate attempt to MOPE their way through the current quantitative easing madness, the Central Banks have enforced a counter-intuitive raid on the price of gold since October of 2012, driving price down from $1800 to a low of $1180 on June 28, 2013. This extreme and desperate move only served to increase global demand for physical metal and, not surprisingly, has depleted the availability of metal in London. Remember what Ken Hoffman of Bloomberg Industries told us last December:

So, in hindsight, it should not have been surprising when GOFO flipped to negative on July 8, 2013 after being positive every day since November 24, 2008. It should also comes as no surprise that negative GOFO is now the norm, not the exception. In fact, since the price bottom at $1180 on June 28th of last year, there have been 229 market days. Of those days, GOFO has been negative for 133 of them or 58% of the time! GOFO has been in positive territory just 42% of the time or 96 days. Again, you must note that for the previous 24.5 years, GOFO had only been negative for just 7 days. Now, after the massive and counter-intuitive price slam, it's negative nearly 60% of the time?!?

<It's important to note here that some Cartel apologists have written that this can all be explained by low interest rates. If that's the case, why has the Federal Reserve policy of "ZIRP" been in place since 2009 yet GOFO only went negative in July of 2013?>

And here's another curious item...GOFO rates in London have a clear tendency to flip negative during Comex delivery months in New York. Now why would that be? I'm open to hearing any explanation outside of "extreme physical tightness". If you can come up with one after reviewing the chart below, please post your theory in the comments section.

So, here's your updated chart. The green rectangles denote periods of negative GOFO and higher prices. The red rectangles denote periods of positive GOFO and lower prices. The black rectangles at the top of the chart denote Comex delivery months and the numbers in the bubbles denote overall price change for each period.

Cumulatively, during the five periods of negative GOFO, price has risen 6 for an average move of .20. For the four periods of positive GOFO, price has fallen 4 for an average of .50. Given this clear correlation, it should come as no surprise that GOFO, after being negative for nearly six weeks from April 3 to May 19, flipped back to positive on May 20. In the six market days since, the price of gold has declined by from 94 to the current 58.

What's ahead? Clearly, more price weakness. As long as GOFO remains positive, there is plenty of leasable gold available for the bullion banks to utilize in raiding price. However, deliveries of June Comex gold begin on Friday of this week so we can be relatively certain that GOFO will be flipping back to negative sometime in the next two weeks. Once it does, the current selling pressure will abate and price will begin to recover.

An average positive-GOFO move of would drop price back toward 30. An average negative-GOFO rally of in June/July would then push price back higher toward 00 and the all-important red trendline on this chart:

Again, these are just averages and I'm not predicting an imminent drop to 30...though that's only from here. The point of this is to remind you again of the clear, current correlation of GOFO with price trend AND, more importantly, remind you again of The Big Picture:

"You could go into a vault in London a couple of years ago and they were packed to the rafters with gold and the gold would trade from me to you to somebody else. You can walk in those vaults today and they're virtually empty. All the gold has been transferred out of London. 26,000,000 ounces has gone to Switzerland where it's been recast into a higher grade and shipped off to Hong Kong and then into China, never to return. So the most interesting thing, especially as we look into 2014, is if there ever is interest in gold again, and I'm not saying there is or isn't, that gold is just not there anymore."

--- Ken Hoffman, Head of Metals and Mining for Bloomberg Research on Bloomberg Television, December 13, 2013

I remain convinced that the "new normal" of negative GOFO is, in fact, symptomatic of extreme physical tightness and empty vaults in London. Knowing this and the clear correlation of GOFO with price, you should adjust your trading strategies accordingly. For those of us who are stacking only, persistently negative GOFO is just another clue that the end of the fractional reserve bullion banking system is near. Whether or not that "end" comes in 2014 or 2015 matters little. It is coming, regardless, and we should continue to look at these manipulated and suppressed prices as one last gift from the soulless central bankers who have plundered our national treasure and set our posterity on a course of permanent debt enslavement.

TF

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  39 Comments

  Refresh
philipat
May 29, 2014 - 9:49pm

CB's

Problem is, what we call manipulation is known to the CB's as "Monetary Policy". And the CB's are above the law. So long as the Paper tail continues to wag the Physical dog, unfortunately they will remain in firm control.

judejinjudejin
May 29, 2014 - 12:00pm

correction:last year about 150 tons stood for delivery

correction:last year about 150 tons stood for delivery

judejin
May 29, 2014 - 11:53am

shanghai silver backwardation getting more intense

shanghai silver june contract is trading at 8% premium to comex, and almost 3% premium to shanghai dec. contract!

shanghai wholesale physical silver is quoted at 7%-8% premium to comex, before tax!

OI of the june contract is 675 tons much higher than the OI at the same time of last year, which was 300 tons. since the june contract requires more margin, most of the positions have already been rolled into dec. delivery dates are june 16-20.

last year, 300 tons stood for delivery!

but right now, shanghai futures exchange only has 230 tons of silver inventory!

i believe some of the remaining OI in the June contract is seriously threatening to stand for delivery, which is why the backwardation and premium is getting bigger.

flyinkel
May 29, 2014 - 2:44am

Silver/Gold Blue Light Specials

Edit: Silver $18.81/oz right now Kitco, Gold $1252

goldcomLibero
May 29, 2014 - 2:40am

About GOFO

GOFO was something I heard about and someone from the group here posted some thoughts of Turds earlier analysis on GOFO in the Kitco forum. I wanted to learn more about it so I stopped my lurking around here once in a while and became a paying customer. To my surprise Craig F emailed me and thanked me for checking the site out. I replied about this GOFO thing. That it didn't seem to be reacting to the negative period as I thought it might. He told me negGOFO is still something they can suppress and that it was challenging for them to outright raid like they are doing now that it is positive so they still have some price management. Some day soon I hope they won't.

Thought it was kinda cool to get a response from Turd after he thanked me for being a member. Nice personal marketing touch, thanks Turd.

metalsbyamile
May 29, 2014 - 12:25am

How can we trust

Obama to deal with Russia and China when he treats his own soldiers like this?

Worthy of repetition .

Justice for Taryn and Tanner

May 28, 2014 - 4:25 AM

By Michelle Malkin

Subscribe to Michelle Malkin RSS

Follow Michelle Malkin on Twitter

My comments-With actions like these, how will the west regain the trust of its citizens.Bloody shameful. I had a relative die at the Battle of Vimy Ridge.At the time the very least those soldiers were afforded, along with their families, respect, honor, a proper military burial, or civilian depending..Read this and see if you agree. The whole world has gone mad.

Behold Canada and America. One country supports the efforts of a U.S. Special Forces soldier's widow to hold accountable the jihadist who killed her husband and the father of her two young children. The other country helped free that jihadist from Guantanamo Bay in a shady deal that appeased his far-left allies.

Guess which side President Obama's on.

The widow is Tabitha Speer. Her children are Taryn and Tanner. Their husband and father was an American hero: Sergeant First Class Christopher Speer, a 28-year-old medic with the U.S. Special Forces. As I reported in my syndicated column 11 years ago, Speer died in Afghanistan during an ambush by al-Qaida operatives. The remorseless Islamic zealot who lobbed the fatal grenade that killed Speer in 2002: 15-year-old Omar Khadr.

Bleeding-heart activists painted Khadr as a brainwashed "child" soldier — while ignoring Speer's then 3-year-old daughter and 11-month-old son left fatherless in the name of Allah. Khadr knew exactly what he was doing: targeting Americans for murder. Sergeant First Class Layne Morris of South Jordan, Utah, was there. He lost his right eye in the ambush and said after the attack: "That was a trained al-Qaida who wanted to make his last act on Earth the killing of an American."

The FBI called Khadr, who was detained at Gitmo in November 2002, "cold and callous." Terrorist videos showed the teen smiling as he rigged explosives in preparation for the fight. The thought of killing our soldiers brightened his day, he said. One of his leaders exulted on tape as they readied their bombs and grenades: "Allah willing, we will get a good number of Americans."

Confused, innocent "child" of upstanding peace-seekers? Bull. Following Khadr's capture, I should remind you, his sister said the death of Speer was no "big deal". His mother declared she would rather see her sons at al-Qaida training camps than "be on drugs or having some homosexual relation." One brother openly admitted: "We are an al-Qaida family." And another brother stated: "Every Muslim dreams of being a shahid (martyr) for Islam."

Last week, as politicians paid lip service to honoring those who have served and sacrificed, Tabitha Speer and Morris were doing what they could to uphold honor and fight for real justice for the fallen. They filed a civil suit against Canadian-born Khadr, who had pleaded guilty, guilty, guilty, guilty and guilty in 2010 to five war crimes including murder and attempted murder related to the ambush in Afghanistan.

There is a precedent for such courtroom accountability: Mrs. Speer and Morris successfully sued the estate of Khadr's jihadi father and al-Qaida financier Ahmed Said Khadr. The terrorist patriarch died in a gun battle near the Pakistan-Afghanistan border in 2003, so a jury's $100 million civil award to Khadr's victims has never been collected.

But it did send a message. When necessary, American civilians will do the job their leaders won't do: pursue jihadist murderers whenever and wherever they can, and keep the legacies of our heroes in uniform alive. The new suit comes as coddled leftwing cause celebre Omar Khadr, now 27, prepares to sue the Canadian government for $20 million in civil rights damages.

The conservative Canadian government lent its public support to the Speer family and to Morris on the eve of Memorial Day weekend. "Our government supports the efforts of Tabitha Speer and fellow soldiers to receive compensation for their horrible loss." Good for them.

How about America's leaders? AWOL. The reason Khadr is in Canada, in case you didn't know, is that Obama freed Khadr from Gitmo after intense lobbying from the "compassionate" social justice crowd. He was repatriated to Canada just weeks before America's November 2012 election. Leading the pressure campaign on Obama: the Center for Constitutional Rights, which also crusaded for the release of former Gitmo jihadist Abu Sufian bin Qumu, a primary suspect in the Benghazi consulate attacks.

Canadian conservative writer and activist Ezra Levant, who has advocated tirelessly for the Speers and for other victims of jihad, noted recently that the liberal Canadian press has mentioned the Speer children a scant six times as Khadr milks leftist sympathies.

But what does it say when the Canadian government shows more compassion for the fatherless children of a U.S. soldier than their own government? A search for the Speer children on the White House website yielded: "No results."

https://www.cnsnews.com/commentary/michelle-malkin/justice-taryn-and-tanner

Visit the FAQ page to learn how to track your last read comment, add images, embed videos, tweets, and animated gifs, and more.

Libero
May 28, 2014 - 11:09pm

About this GOFO thing...

As I recall about 2-3 weeks ago when GOFO turned negative we were all hyped (me too) that gold was going to rally. There was about 10 days of negative GOFO but... gold did not rally. And there were many comments on this blog that it did not work this time.

Now, I don't want to be jaundiced here , but there always seems to be some "reason" for this and for that, some splainin' here, some splainin' there.

I don't think ANYONE knows what the heck is going on. There'd be zillionaires by now.

Just sayin.

Bollocks
May 28, 2014 - 6:12pm

Sorry Clarki Stomias

I misread TD as TF.

Mucho Apologioso. I stand corrected.

Got to get an eye test .

Subscribe or login to read all comments.

Contribute

Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 8/10

8/10 10:00 ET Job openings
8/11 8:30 ET Producer Price Idx
8/12 8:30 ET Consumer Price Idx
8/13 8:30 ET Initial jobless claims
8/13 8:30 ET Import Price Idx
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Unit Labor Costs
8/14 8:30 ET Cap Ute and Ind Prod
8/14 10:00 ET Business Inventories

Key Economic Events Week of 8/3

8/3 9:45 ET Markit Manu PMI July
8/3 10:00 ET ISM Manu PMI July
8/3 10:00 ET Construction Spending
8/4 10:00 ET Factory Orders
8/5 8:15 ET ADP employment July
8/5 9:45 ET Markit Service PMI
8/5 10:00 ET ISM Service PMI
8/6 8:30 ET Initial jobless claims
8/7 8:30 ET BLSBS for July
8/7 10:00 ET Wholesale Inventories

Key Economic Events Week of 7/27

7/27 8:30 ET Durable Goods
7/28 9:00 ET Case-Shiller home prices
7/29 8:30 ET Advance trade in goods
7/29 2:00 ET FOMC Fedlines
7/29 2:30 ET CGP presser
7/30 8:30 ET Q2 GDP first guess
7/31 8:30 ET Personal Income and Spending
7/31 8:30 ET Core inflation
7/31 9:45 ET Chicago PMI

Key Economic Events Week of 7/20

7/21 8:30 ET Chicago Fed
7/21 2:00 ET Senate vote on Judy Shelton
7/22 10:00 ET Existing home sales
7/23 8:30 ET Jobless claims
7/23 10:00 ET Leading Economic Indicators
7/24 9:45 ET Markit flash PMIs for July

Key Economic Events Week of 7/13

7/13 11:30 ET Goon Williams speech
7/13 1:00 ET Goon Kaplan speech
7/14 8:30 ET CPI for June
7/14 2:30 ET Goon Bullard speech
7/15 8:30 ET Empire State and Import Price Idx
7/15 9:15 ET Cap Ute and Ind Prod
7/16 8:30 ET Retail Sales and Philly Fed
7/16 11:00 ET Goon Williams again
7/17 8:30 ET Housing Starts and Permits

Key Economic Events Week of 7/6

7/6 9:45 ET Markit Service PMI
7/6 10:00 ET ISM Service PMI
7/7 10:00 ET Job openings
7/9 8:30 ET Initial jobless claims
7/9 10:00 ET Wholesale inventories
7/10 8:30 ET PPI for June

Key Economic Events Week of 6/29

6/30 9:00 ET Case-Shiller home prices
6/30 9:45 ET Chicago PMI
6/30 10:00 ET Consumer Confidence
6/30 12:30 ET CGP and SSHW to Capitol Hill
7/1 8:15 ET ADP Employment
7/1 9:45 ET Markit Manu PMI
7/1 10:00 ET ISM Manu PMI
7/1 2:00 ET June FOMC minutes
7/2 8:30 ET BLSBS
7/2 10:00 ET Factory Orders

Key Economic Events Week of 6/22

6/22 8:30 ET Chicago Fed
6/22 10:00 ET Existing home sales
6/23 9:45 ET Markit flash PMIs for June
6/23 10:00 ET New home sales
6/25 8:30 ET Q1 GDP final guess
6/25 8:30 ET Durable Goods
6/26 8:30 ET Pers Inc and Spending
6/26 8:30 ET Core inflation

Key Economic Events Week of 6/15

6/16 8:30 ET Retail Sales
6/16 8:30 ET Cap Ute and Ind Prod
6/16 10:00 ET Chief Goon Powell US Senate
6/16 4:00 pm ET Goon Chlamydia speech
6/17 8:30 ET Housing Starts
6/17 12:00 ET Chief Goon Powell US House
6/18 8:30 ET Initial Jobless Claims
6/18 8:30 ET Philly Fed
6/19 8:30 ET Current Account Deficit
6/19 1:00 pm ET CGP and Mester conference

Key Economic Events Week of 6/8

6/9 10:00 ET Job openings
6/9 10:00 ET Wholesale inventories
6/10 8:30 ET CPI for May
6/10 2:00 ET FOMC Fedlines
6/10 2:30 ET CGP presser
6/11 8:30 ET Initial jobless claims
6/11 8:30 ET PPI for May
6/12 8:30 ET Import price index
6/12 10:00 ET Consumer sentiment

Forum Discussion

by Green Lantern, Aug 9, 2020 - 11:08pm
by sierra skier, Aug 9, 2020 - 8:24am
by argentus maximus, Aug 8, 2020 - 2:03pm
by argentus maximus, Aug 8, 2020 - 10:46am
by jack3617, Aug 7, 2020 - 5:51pm
by Titus Andronicus, Aug 7, 2020 - 5:13pm