Gold Forward Rate GOFO = LIBOR - Gold Lease Rate GLR.
This is stated as a percentage, and is almost always positive, meaning the gold price for future delivery of gold is higher than the current spot price. If the GOFO is negative, this means that it is cheaper to borrow against gold than dollars, and is very unusual. Generally speaking, it should be cheaper to borrow dollars for just dollars, without involving another commodity, however the GOFO has turned negative on several occasions in the past due to periods of high physical demand.
So what is the status today?
Gold Lease Rates are negative -2% and we even had spikes to -4%.
LIBOR rates are close to zero. 3 month LIBOR is at 0.3%.
That makes GOFO = 0.3% - (-2%) = 2.3%
GOFO is now almost in backwardation and that should tell us that there is a looming physical shortage.
This is stated as a percentage, and is almost always positive, meaning the gold price for future delivery of gold is higher than the current spot price. If the GOFO is negative, this means that it is cheaper to borrow against gold than dollars, and is very unusual. Generally speaking, it should be cheaper to borrow dollars for just dollars, without involving another commodity, however the GOFO has turned negative on several occasions in the past due to periods of high physical demand.
So what is the status today?
Gold Lease Rates are negative -2% and we even had spikes to -4%.
LIBOR rates are close to zero. 3 month LIBOR is at 0.3%.
That makes GOFO = 0.3% - (-2%) = 2.3%
GOFO is now almost in backwardation and that should tell us that there is a looming physical shortage.
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