Two charts

 Two charts that go back 15 to 20 years.


40 comments:

S Roche said...

Interesting...and 1 Month GOFO getting closer to zero. Will it go negative in London trading later today? Only done it twice before, both times gold prices rose substantially very shortly thereafter.

GM Jenkins said...

Hmm... that increases incentive to lease, right?

Re: these 2 charts, I really don't want to see either line broken. . .

S Roche said...

I believe so, but I have trouble with inverse relationships.

"Whenever GOFO turns sharply lower or even negative, this indicates stress in the London gold market, i.e. that some of the participants are desperate to get their hands on gold on short notice and are prepared to pay a premium for borrowing gold against US$ collateral"

http://victorthecleaner.wordpress.com/2011/04/21/the-gold-forward-offered-rate-gofo-fever-chart-of-the-lbma/

Some people who know this market well believe that any published information, such as GOFO, can be misleading. I, however, am willing to chase all possible signals and correlations in trading gold...so, I will be trading the numbah from 10.30am UT when the process commences and 11.00am UT when it is published.

S Roche said...

One of the times that GOFO was negative was November 2008, which touched your line...

Tony said...

Well, if trendlines hold, the last few months have been little more than a healthy correction in an otherwise strong bull market. Certainly not unusual.

I'm not normally a Bob Moriarty fan, but I did appreciate this little gem:

"I have read a thousand articles using all the buzzwords, physical vs. paper, fiat, manipulation, conspiracy, J P Morgan, takedown, Comex default but never in a single one of those articles do I read the word correction. Evidently the metals markets are to go up every single day and if by chance a market ever goes down, it’s proof positive of manipulation. And gold/silver markets never correct. How amazing are these markets? Supply and demand means nothing. Manipulation is everything. The greatest reason to own gold or silver is because it’s manipulated. What am I missing?"

http://www.321gold.com/editorials/moriarty/moriarty051313.html

Of course, if the trendline hemorrhages, the bloodbath will be fantastic.

S Roche said...

Breaking News via FT:

CFTC taking action at last, seems on a technicality on London Forwards, calling them Futures which should come under CFTC jurisdiction for US regulated banks.

http://www.ft.com/intl/cms/s/0/cefe05da-b9be-11e2-bc57-00144feabdc0.html?ftcamp=published_links%2Frss%2Fhome_uk%2Ffeed%2F%2Fproduct#axzz2TFC0Kk50

endzeit14 said...

S.R.

1 month GOFO today at 0,003!

Either another raid will come within a few weeks or the bottom is already in.

Judging from the last raid and how physical demand exploded, I tend to believe, that they will not be too keen to repeat it. :)

endzeit14 said...

The backwardation within the two front contracts, the multi-year sentiment low, the COT-structure and the multiyear high insider buying at gold miners fits quite nicely, doesn't it?

endzeit14 said...

Regarding GOFO:
Like for most things in the financial sphere, banks are trying to confuse and try to create the impression of complexity for very easy things. Never let them confuse you, look at the facts behind the labels.

GOFO indicates the interest rate you must to pay, to lend MONEY( not gold!!!) if you offer gold as collateral.

The lower the GOFO, the less money you have to pay to lend money. It's that simple.
If gold is heavily sought, you can lend money cheaply for your gold.

But if the gold was sought for another artificial raid, that is shown only after a few weeks, when they dump the previously lent gold into the market... :p

But since the last time most of this gold disappeared into the east to be never seen again, I have my doubts if they will repeat that. I have the impression, that the collapsing lease rate now is a consequence of the high physical demand.

In a few weeks we should know more.

SugarLover said...

http://www.investing.com/commodities/gold-advanced-chart

Looks like the chart guy at JSMineset was spot on with his 1420 bottom call for today. He's very credible, and seems a nice guy, unlike those that mock him. Onwards & Upwards we hope.

GM Jenkins said...

Great comments guys, thanks.

SL - are you talking about Sinclair? can you provide a link?

When I saw stocks up this morning and gold down, I had to place a bet on the long term trend line of that first chart. So far so good, but gold didn't quite make it back to its overnight high and seems to have reversed for the time being

S Roche said...

I've been studying the 2 minute chart from November 2008...if the next few days (If GOFO 1M goes negative) are anything like that, expect volatility. Chasing it could be dangerous as there were plenty of short term reversals on the way up.

S Roche said...

Here you go, Bo Polny, the Man Of The Hour:

http://www.jsmineset.com/2013/04/19/1300-goldnever-again/

http://www.jsmineset.com/2013/05/10/update-on-gold-from-ciga-bo-polny/

He says he bought yesterday, which was not an "up day"...if today Tuesday, is not and "up day" then Bo is buggered in the predict-to-the-instant business. But if it is, then Bo rocks!



GM Jenkins said...

if today Tuesday, is not and "up day" then Bo is buggered in the predict-to-the-instant business. But if it is, then Bo rocks!


How boring would following PMs be without guys like Polny feigning complete confidence they know where price is headed and exactly when? They're almost certainly frauds, but then Pascal's wager and all.

Reminds me of the time I was new to an office, right before the 2010 Super Bowl, and i went around telling everybody what a joke the Colts were, the worst betting favorite in modern sports history, and just basically popping off like a douche. I really did think the Saints were a much better team, but I'm actually terrible at betting on football. The risk/reward was too good to give up. If I was wrong, a few people might've remember for a few days. But since I was right, I pretty much could've started a betting service Ponzi.

S Roche said...

3M GOFO says Bo might be right, today's (0.0483%) was the third lowest number since the price explosion in 1999.

SugarLover said...

@GM, the PM world is indeed full of Bo Pony types, many of them certain of the monetary events that will play out in the years ahead (or months), and the resulting new paradigm.

The world loves a good Guru doesn't it.

I predict in a few billion years the sun's heat will evaporate all of the water on earth, can I be a guru too? (in honesty, like most good gurus, I just pinched that prediction here)...

http://www.universetoday.com/18847/life-of-the-sun/

Wonder what good TA or indeed gold will do in 3 billion years?

S Roche said...

Bo Po'd!

Let it enter the lexicon.

SugarLover said...

I'm no TA expert at all, but I do think that 2 day sell off in April was the weak hands departing, a capitulation thing.

I see higher prices ahead for gold, in paper, before the big decouple a few years down the road.

Miners to follow suit upwards, and then some.

Well done BoPo, unless there are new lows of course.

Slow Loris Larry said...

Guys:

Are you all sure, starting with S. Roche's first comment right at the top, that you are actually talking about GOFO and not the 'Gold Lease Rate' (GLR), which is what you can find on Kitco and the like?

The GOFO is a 'fixed' figure, like LIBOR, which purports to report what the big guys will pay to enter into 'forward' contracts in the LBM Over-the-Counter system.

The reported 'gold lease rate' is a calculation according to the formula GLR = LIBOR - GOFO. Same for the Silver Lease Rate, SLR = LIBOR - SIFO.

So, when the GRL approaches zero, it only means that GOFO is about the same as LIBOR.

When GLR is negative, it is because GOFO is higher than LIBOR, meaning that it supposedly costs more to borrow gold than it does to borrow dollars.

A very low or negative GLR also indicates some of the same conditions that could produce backwardation in a futures market, hence the prior market actions referred to in some of the earlier comments.

So, shame on you guys! Some of you, anyway, should know better.

And shame on the CFTC, as LBM forwards are not at all the same thing as COMEX futures, and the LBM OtC system is NOT a 'market' (formal exchange), per se, just a whole lot of folks entering into private deals with one another, and so cannot possibly be regulated like a futures exchange supposedly can.

In an earlier thread, I recommended MacLeod's piece on regulating GLD and SLV (http://www.goldmoney.com/gold-research/alasdair-macleod/the-role-of-gld-and-slv.html)not because I think that they are practicing fractional metal operations (after all, Warren has the proof that they are not), but because of what he had to say about how such contracts are cleared by the London Precious Metals Clearing Limited (LPMCL) and what might happen in a situation of extreme shortage of deliverable metal.

S Roche said...

No shame SLL,

We are talking about GoFo, not GLR, which might be about to go negative in the 1M and is the third lowest print going back to WAG announcement of 1999 in the 3M. May 14 2013 1M is 0.00333% and 3M is 0.04833%. 1M went negative on three days around November 20 2008 and here is the historical print from 29 September 1999:

(1M)-4.5300%;
(2M)-3.7800%;
(3M)-3.0600%;
(6M)-1.2300%;
(12M)-0.5300%

and yes, those are "minus" signs and that is GoFo not the Lease Rate.

In relation to the CFTC and London, the US banks are the regulated ones, that covers all their activity and does not leave them free to operate as they wish on unregulated exchanges. HSBC were brought to book for servicing drug dealers on an unregulated exchange. Breaking the law is breaking the law, and if Forwards are de-facto Futures then the CFTC is after them. I think this is likely to poke a hole in the "Naked Short" theories and will be fun to watch.

Tony said...

Bo may know football and baseball, but Bo don't know PMs.

S Roche said...

What was interesting in London trading today was that the gold price popped into the GoFo publication time of 11.00am, then the selling resumed when it was positive, so it appears that it is being watched by traders.

Then, more selling on Comex/GLD, with the price Bo Po'd and presently under $1400. GLD inventory will be interesting to see after this.

Adrian Ash says real interest rates went positive in 2011, has anyone else commented on this?

http://goldnews.bullionvault.com/real-rates-gold-051020139

Tony said...

Nice resumption of the POG freefall. The only thing dropping faster than GLD's inventory now is Bo's credibility.

Sugarlover said:

"I'm no TA expert.....I see higher prices ahead for gold, in paper...."

Perhaps you're more of a TA expert than you thought, SL As of today, your prediction is right in line with the likes of Turk, Sinclair, and our most recent bottom-calling champion, Bo. ;)

S Roche said...

I emailed Bo for a comment, not out of malice but out of interest. Nothing heard. Maybe there is not a lot he can say. It was an unusually forceful prediction. Oh well.

S Roche said...

@Sugarlover

In regard to capitulation in that drop in gold Art Cashin of UBS made a very interesting observation about pension funds having insurance on their gold positions in the form of structured products:

http://au.businessinsider.com/art-cashin-gold-structured-products-2013-4

Note the cap and floor was $1800 and $1530 respectively and note that Dodd/Frank kicked in, in relation to the insurers ability to hold the suddenly acquired asset.

BNP Paribas agreed, calling them reverse convertibles:

http://www.usagold.com/cpmforum/2013/05/03/gold-volatility-fueled-by-structured-note-trades-bnp-says/

and here is where we were all warned in May of 2012 when Izabella Kaminska of FT mentioned Brian Reynolds' concerns:

http://ftalphaville.ft.com/2012/05/08/990211/the-subpriming-of-commodities/

I hope you didn't miss it then. Unfortunately, I did. However, on the way back up we can no doubt expect to see similar volatility.

SugarLover said...

@Tony,

I see I hooked only a tiddler, shame, but I'll throw you back in now ;)

Whilst I would be delighted to see the paper markets collapse this year, your own guru has a long and fine history of premature prediculation, a very frustrating condition, especially when everyone can see through the window!? I stand by my call for one more cycle higher in paper gold, but if I'm wrong, you can send the 'told you so' postcard to St Lucia where I'll be holidaying for at least a few months.

@SR,

I will read those links this evening thanks.

Tony said...

@ SR,

I don't anticipate you'll get much of a response from Bo, but if you do, I'd love to hear what he has to say. With such a ballsy, matter-of-fact-like prediction, you'd hope he'd at least offer an explanation of sorts. I only pity those who based their trades on his boldness. Live and learn, I guess.

@ SL,

Hahaha--fwiw, I suffer from the same condition. Hence I no longer paper trade PMs. I found it wasn't conducive to my financial well being :)

Slow Loris Larry said...

@ S. Roche

My apologies. Shame on me!

S Roche said...

Ha Ha, all good SLL. I think you are pre-conditioned to respond that way because of all the nonsense that gets written about negative lease rates. I'm off to London soon to get paid to borrow gold....by The Cartel!

Tony said...

From Bo Polny in response to my email:

Good morning,

Review the charts...Turn Dates can stretch by a day or two as we have just seen. When I take a position on a turn date, even if it goes against me short term, I still have my next Turn Date and that is when profits appear. Turns are far more important than price.

After a day like yesterday I spend the time to recalculate and understand how the pattern is playing out relative to history. Yesterday was the second to last day down.

Today, Thursday the bottom comes in. You will see by the close of day a nice WICK formed in Gold and silver.

Gold's low WILL HOLD! No worries.

It is my guess that Silver's low at $22 should hold too. If it breaks, again it will pull up into the close as today is the last day down for this drop.

It is VERY IMPORTANT TODAY NOT to sell on fear!

The bottom comes today. One can buy the close today or buy the up close tomorrow, Friday, for confirmation of the move.

Next week Gold goes up into the next Turn Date Friday, May 24/28, 2013. Everyone should be in profits even if you bought before yesterday's drop.

It will be important to sell this next top/turn.

All the best,

Bo Polny

S Roche said...

@Tony,

I got a response from Bo Polny too, it reflects the same message as yours but uses different wording. He is taking the trouble to respond individually. My take, he is still in the prediction business.

Here's a prediction for gold: on the one hour chart the price is being walked up a trend-line from $1370. I have seen this before. It appears when there is not organic buying, (usually during US hours), Mr Walker* makes an appearance to revive the price and lure the bulls back in...my "Turn Date" will be May 22nd with the release of the FOMC minutes. As to which way it will turn, that is for subscribers only.

GOFO showed a rise, 2nd in a row.

SugarLover said...

So Bo gets a 2nd chance, I knew he was a good guru, I can pick 'em! (good of him to reply to your emails too, even if he is business).

Thought this was interesting:

http://ftalphaville.ft.com/2013/05/16/1504642/the-end-of-qe/

Quote from the BIS:

Major central banks should not delay winding in their support programmes, Jaime Caruana, head of the Bank for International Settlements (BIS) said on Thursday. Caruana, whose organisation is an umbrella group for the world’s central banks, said there was now an increasing argument for major central banks to start scaling back the support they have given to the global economy over the last five years.

“It would be better that it (reeling support in) is done sooner rather than later,” he said an event organised by OMFIF. “The balance of risks of prolonged very low interest rates and unconventional policies is shifting. The costs are growing in relation to the benefits.”

I wonder if Bernanke has been taken into a dark room by the BIS boys and given a warning, similar to the one given to Volcker in the 80s? If so, can/will Bernanke comply? I suspect not, and maybe 'bang' goes dollar support on a nod from the BIS. You may have read, the BIS took down the USSR years ago too....

http://www.gold-eagle.com/editorials_98/birch030498.html

I have a feeling we have incredibly interesting times just around the corner, time to buckle up and keep the shiny stuff safe and warm!

Slow Loris Larry said...

@ S. Roche

Thanks for your forgiveness!

By the way, I cannot agree that (except in popular parlance) my comment should be called 'pre-conditioned', as that term, in a technical (academic) sense refers to an unthinking, mechanistic or conditioned response to some recurring stimulus, and I don't accept the theory beloved of behavioral psychologists that attempts to explain human behavior in those terms.

However, I do accept that I should have re-read VtC's post that you referenced, and that it would also have been good had I checked on the current GOFO and GLR rates, before commenting.

Interestingly, the LIBOR and therefore the GLR figures, both from the LMBA and as repeated on Kitco, lag those for GOFO by a week or two for some unstated reason, precluding a direct up-to-date comparison.

In addition, some things to keep in mind concerning those figures are that they are indeed inversely related via LIBOR, so if GLR = LIBOR - GOFO, then algebraically GOFO = LIBOR - GLR. As a corollary, if either are a negative number, then the other must be greater than LIBOR, whereas normally both are positive.

Also, when LIBOR is abnormally low, as has been the case under ZIRP, both GLR and GOFO must be quite low, and therefore it doesn't take much change for one or the other to go negative.

I think that this situation should cast some doubt on comparing low or negative historical GOFO with the current figures.

S Roche said...

@SLL,

I'm re-reading "The Hour Between Dog & Wolf" by John Coates and he would disagree with those who disagree...

Fascinating guy, successful Wall St trader who re-trained as a neuro-scientist to examine a theory developed from observing traders.

Bottom line, we've got several "brains", layered one over the other during evolution and all still working.

I have no doubt that the aspersion I apparently, and so carelessly, cast does not apply to your several, very large, brains.

Cottonbelt said...

@SR

Appreciate sharing your views (esp digging for the facts) and reference re: the Coates book ... of interest, two books by Suarez (Daemon and sequel Freedom) about how a global financial crisis could play out - entertaining and likely life imitating art when the dust settles on this historic moment.

SugarLover said...

Bo is no go, doh.

Tony said...

Yea...I'm guessing a career change is in order for Bozo now. His bottom hasn't held, yet again.

Jovan said...

What's the value in a guy with no proven credibility (Bo) guessing on gold price? I saw no charts and no arguments, just a guess.

He missed, but bottom guessing goes on. There will be another Bo for the next 100% certain bottom call. Eventually a Bo will be right on his call. So what?

Jeanne d'Arc said...

I still haven't revealed my bottom yet...

link - December 2012

Tony said...

Now Jeanne, your bottom is one I'd really like to see.... errr.... uhh... I mean, I'd really be interested in your bottom.... errr... Oh whatever. Can you just reveal your bottom once and for all?

All jokes aside, you're one of the few out there with any credibility left, so I, for one, am anxiously awaiting your call.