- The Golden Backwardation Rabbit Hole Gets Deeper: Subzero GOFO Slide Accelerates!
by Tyler Durden, www.zerohedge.com
Yesterday we described the historic inversion in the Gold Forward Offered Rate, where the 1 and 3 Month GOFO rates sliding into negative territory for the first time since 2008 and 1999 respectively. Today, using the latest LBMA rate update, we observe that the gold backwardation is accelerating, and now the 6 Month GOFO has also joined the complex into sub-zero territory.
This is how we summarized the disturbing observation in the chart above, which as we said yesterday may be one of many things:
– An ETF-induced repricing of paper and physical gold
– Ongoing deliverable concerns and/or shortages involving one (JPM) or more Comex gold members.
– Liquidations in the paper gold market
– A shortage of physical gold for a non-bullion bank market participant
– A major fund unwinding a futures pair trade involving at least one gold leasing leg
– An ongoing bullion bank failure with or without an associated allocated gold bank “run”
– All of the above
The answer for now is unknown. What is known is that something very abnormal, and even historic, is afoot at the nexus of the gold fractional reserve lending market.
Today, the golden backwardation story goes mainstream, with the FT catching up: