gold bottomThe GOFO rate has been negative now for a historically unprecedented 30 days.
The only conclusion that can be drawn from this situation is that the bullion banks in London are scrambling to find physical gold that can be delivered into the massive demand coming from Asia, specifically China.  I also believe that the duration and severity of the negative GOFO will translate directly into a commensurate move higher in gold that will shock everyone.
Unfortunately, the best we can hope for is that the next move in gold does not culminate with the cataclysmic currency reset that we all know is coming – i.e. the dollar is replaced as the world’s reserve currency, which will render the U.S. largely destitute:
I’m not worried about how high in price gold is going, I’m worried about what the world around us will look like when it gets there.

buff sale(2)

 

From Truth in Gold:

It is important to note that while gold backwardation lasted a few days in 1999 and again in 2008 — both of which marked major bottoms and key turning points in the price of gold — we now have 31 trading days of backwardation and a gold price that has already risen $135 from when the backwardation began. What we are seeing today is truly unprecedented and historic. – James Turk, from King World News interview -

Just for reference, after 13 years of researching, studying, trading and investing in the precious metals markets, James Turk is one of the very few analysts who I still consider worth reading for insight and facts. “Backwardation” is when the spot price of gold is higher than the next month futures’ price. It means that the market is assigning a higher value to physical gold that can be delivered immediately than to cash.

About a month ago I wrote an article that discussed the significance of the negative gold forward interest rate (GOFO) that was being observed in London and is published by the London Bullion Market Association (LBMA). The GOFO is the interest rate charged for a dollar/gold swap, which is when someone who owns gold needs a short term dollar loan and he collateralizes the loan with his gold. When the rate is negative, it means that someone wants his gold more than he wants to borrow dollars and it signifies an extreme shortage in physical gold that can be immediately delivered to large buyers who are forcing the issue of delivery and it is another form of “backwardation.”

I wrote an update for Seeking Alpha because the GOFO rate has been negative now for a historically unprecedented 28 days. You can read the article here:Update On The Negative GOFO: Gold Has Bottomed

The only conclusion that can be drawn from this situation is that the bullion banks in London are scrambling to find physical gold that can be delivered into the massive demand coming from Asia, specifically China. I also believe that the duration and severity of the negative GOFO will translate directly into a commensurate move higher in gold that will shock everyone.

Unfortunately, the best we can hope for is that the next move in gold does not culminate with the cataclysmic currency reset that we all know is coming – i.e. the dollar is replaced as the world’s reserve currency, which will render the U.S. largely destitute:

I’m not worried about how high in price gold is going, I’m worried about what the world around us will look like when it gets there.


2013 Gold Buffalo As Low As $51.99 Over Spot At SDBullion!

  1. Was just thinking last night…. If gold currently is worth 1300.00 and there are 50 times the claims for gold than there is gold, then would it be crazy to perceive that gold would have to increase 50 fold in order to put what little remains into the hands of the waiting buyers? ….what is that, like 65,000.00/oz? 
    Totally mind warping!

  2. Of course there is the possibility that buyers may decide to not follow up on owning a rapidly high valued metal, and decide to hold on to their rapidly crashing fiat currency? …There would likely be a shortage of toilet paper when the credit market crash.

  3. “I’m not worried about how high in price gold is going, I’m worried about what the world around us will look like when it gets there.”

    Exactly!

    War/China buying USA for pennies/global governtment/global digital currency

    Pick your theory.

  4. Keep your eye on Saudi Arabia.  What keeps the dollar the world reserve currency beside our military muscle is the petro-dollar arrangement we have with OPEC thanks to one Henry Kissinger.  Saudia Arabia is OPEC and Saudi Arabia could be subject to a change in political leadership.  News is sketchy, but apparently King Abdullah is clinically dead following a recent surgery gone wrong.  Should OPEC start selling their oil for Euros or Yen or Yuan that would be a game changer highly detrimental to the dollar’s hegemonic status. A lot is riding on the health of just one man.

    • “News is sketchy, but apparently King Abdullah is clinically dead following a recent surgery gone wrong.”
       
      I have read that as well but have not read anything that confirms it.  Even if true, there is no shortage of Saudi princes lining up for the job.  We can safely assume that the most vicious and skulduggerous of them will become the new Saudi king.  As they used to say in Euroland:  “The King is dead!  Long live the King!”.
       

  5. Ugly Dog and Casper. Good points about Saudi king, Abdullah I think.  Jim Willie says his demise with prove the death of the petro dollar system and Saudi Arabia will be lost to the more radical ele
    ments including Muslim Brotherhood and AlQueda.  Willie’s moles seem certain of that.  I am not sure, but the dots do seem to connect  USA is not well liked even in SA since they have been forced fed FIAT in exchange for gold.  That has corrupted the country and diminished the  people to petro vassals.

  6. whosyourmahdi   that is a thought provoking question.  Iran, 4th largest gold producer, is selling billions in oil for gold to China, Japan and India since the western world/USA denied them access to the SWIFT system. The US is also going after the Iranian Banks to prevent them from conducting banking business.   This is a fearsome attack in response to Iran’s attack on the petro dollar. They want to survive and being able to sell oil.  I dont fault them  if survival is at stake.
    I’ve never read FOA and FOFOA but if they are suggesting the the Saudis are trading oil for gold it would stand to reason they are sick of the petro gold system that has created when I call petro dependence.  The social structure of the Saudi economy is highly dependent on western FIAT purchase of oil that is used to sustain the saudi economy and social programs. The Saudis get to buy US Bonds.  Oh, that’s going to end well. Paper for oil. 
     The Saudis sould clearly be interested in trading oil for gold.
     I wrote a  piece about silver shortage mid 2012 that proposed that  ME sovereign wealth funds would be buying silver (I didn’t mention gold) but this frantic buying would help exacerbate silver shortages. That post was a total miss on anything that might be a price guess.
     Those wealth funds are on the order of a trillion or more.  Looking for investments, gold and silver are close at hand in Dubai and long term wealth would be crafted from a decent investment in precious metals
    If the Saudis are hedging their bets and I expect they are, their confabs with the Middle eastern powers, Russia and China, with the US conspicuously absent, they are planning both a gold hedge to oil and a particpation with the China and the BRICS to have both the cross currency trading of respective  countries that are allied with the Chinese Yuan, along with the BRICs bank and potentially a new or parallel reserve currency
    Saudi Arabia is still oil rich but that will run out eventually.  Having some alternates to income and wealth preservation that does not rely fully on the US petro dollar paradigm seems a reasonalbe assumption. I think it will take 5 years to see this roll out if the Saudis are even willing to tip their hands then.   

    • If I may, another thought to inject into this… We see so many scandals these days that involve people, companies, and even countries doing things “off the books” that it would be statistically impossible if this is not occurring in the ME as a whole and not just in sanctioned Iran.  The Saudis could very well be selling beaucoup oil for gold and even other things like food, electronics, autos, airplanes, just about anything imaginable.  Exchanging one real good for another seems wise in this day and age of paper “wealth” schemes, currency manipulation, and other forms of financial terrorism.  If they were doing this, who would know?  One thing to watch for would be the presence of Chinese and / or Russian “guest” troops in SA, protecting the oil fields.

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