GOFO

Bitcoin Hits All Time High

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Just to remind you that the bitcoin price has hit new all time highs at $35.

Chart 1: Bitcoin Price

With the high correlation between bitcoin and gold, there is no way that gold won’t go higher.

Chart 2: Gold Price

As a matter of fact, Shanghai silver premiums hit a high of 4.36% today.

Chart 3: Shanghai Silver Premium

And even better, lease rates are hitting new highs.

Chart 4: Gold Lease Rate
While stress is still building up with record low GOFO rates.
Chart 5: Gold Forward Rate
People say I try to time the market, I say knowledge is power.

Tightness Continues in the Precious Metals Market

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There are several indicators of a tight gold market right now and I want to show you this in the following analysis. I will talk about the GOFO rate, premiums, supply and demand, CFTC report.
Investors shouldn’t worry about the gold price declining, this is a healthy consolidation phase we are entering in now. Of course, we hear about George Soros lightening up his gold positions, Jim Rogers starting to hedge the gold price and Dennis Gartman shorting gold, but I see that more as a contrarian indicator. In the long term, fundamentals will win the battle.

LIBOR scandal and the Significance of it on gold & silver lease rates

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Following the LIBOR scandal we need to take a look at gold and silver lease rates, because lease rates are calculated as LIBOR – GOFO (London Interbank Offered Rate – Gold Forward Offered rate).

The London Interbank Offered Rate is the average interest rate estimated by leading banks in London that they would be charged if borrowing from other banks. GOFO is the interest we need to pay if we swap gold for U.S. dollars. Whenever GOFO goes down (or gold lease rates go up), it means people are craving to get their hands on gold. At the same time, when LIBOR goes up (or gold lease rates go up), it basically means the same: higher gold prices to come.

To read the effect of LIBOR on the gold lease rate in more detail, go to: LIBOR scandal and its effects on gold and silver lease rates.