Also GOFO = LIBOR - GLR, so IF GOFO < 0, GLR > LIBOR, meaning that it costs more to borrow gold than dollars.
James Turk, blogging on KNW (http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/11_Turk_-_We_Are_Witnessing_Historic_%26_Shocking_Events_In_Gold.html), says that the LMBA website is now showing gold in backwardation because of the negative GOFO.
Is that a necessary relationship? Dear old Prof. Fekete taught me that Backwardation is the situation in which the spot price is higher than futures prices (but to be meaningful it should extend out more than a month or so and be consistently proportional along the price curve), the cause being that arbitragers will no longer sell for present (or near) delivery and buy for later delivery because they won't accept the risk of not getting eventual delivery (as Turk also points out).
Turk goes on to say that SIFO (the Silver Forward Rate), which has not been reported for the last several months, was in Contango (futures prices being higher than spot prices) BUT no one could trade at those rates, implying that silver might have actually been in backwardation since around that time.
So, does this make the drawdown in gold from both the COMEX and GLD but not silver from the COMEX and SLV all the more mysterious?
Here's gold's current spread
You can also find GOFO rates here
Although the two phenomena are clearly linked to some degree, I am wondering if negative GOFO invariably also means backwardation in the futures/forwards exchanges/markets, and vice versa?
I think that the answer is 'not necessarily’, and that there could be one or the other alone without the necessity of the corresponding one also being evident.
GOFO is like a secured forward and as such is a similar financial instrument to a futures contract. Futures are "secured" by the requirement to deposit margin. That can result in different economics (profit) than a forward or gold swap. The "basis" is more just the revenue part of the transaction and does not take into account the funding/opportunity cost of the futures margin or other costs, so the basis percent may come down to be closer to GOFO.
1) I think you have been right in saying that what is going on is related to financialisation of gold, as K implies (as I understand, or may misunderstand, what she is saying).
2) I had real difficulty understanding some of it, even after I followed all of the links and then reread the piece. For instance, she says:
"To entice cash lending against gold, either lease rates had to go negative or the GOFO lending rate had to take the slack by turning negative."
Since GLR is a reciprocal of GOFO through their inverse relationship to LIBOR, negative GLR and negative GOFO are opposites. So why/how do those two opposite situations have the SAME effect on willingness to lend against gold?
With regards the GOFO rates - they have not inverted at all - their time/premium is still normal. What they have done is gone into negative territory.
In a comment posted below dated Sun July 21, I reported that there was increased and prolonged backwardation on the July 19 chart (now shown at the top, above) in comparison with the one originally posted for July 8 (shown below), but I could not get the Jul-19 chart to display in that comment).
GOFO rates for July 23are still negative for the first three months in about the middle of the range since July 8.