Risk is a function of market participants having a perception of lower risks while governments increase their intervention of market prices.–Chicago Slim
One Sign of Increasing Risk: GOFO
The lack of liquidity in the leasing market for gold has pushed the gold forward rates (“GOFO”) into negative territory, meaning that gold for forward delivery is trading at a discount to the physical spot market price–a rare situation that has only occurred a few times in the past twenty years–the last time in Nov. 2008 when a scramble for physical spurred a sharp rally in the dollar price of gold.
This week the GOFO rate did something it has only done a handful of times in its long history–it went negative out to three months which means somebody was willing to pay to have gold instead of dollars right now.
Be careful out there!