Zero Hedge: GOFO Signals Growing Shortage Of Physical Gold

TND Guest Contributor:  Chris Powell |

Zero Hedge reports today that the gold forward offered interest rate has sunk to the lowest level in history, signifying that market participants are paying to borrow gold and that there is a great shortage of metal among commercial and central banks.

Zero Hedge writes: “But how, the skeptics will ask, is it possible that there is a shortage of gold when gold prices keep tumbling day after day? Simple: The shortage involves gold ‘available’ in the repo market — that is, gold that already has been rehypothecated one or more times. Keep in mind that central banks rarely if ever purchase gold outright in the open market, unlike Russia, of course (and perhaps China), which has been engaging in an unprecedented gold-buying spree over the past year. The rest of the commercial and central banks merely rely on shadow banking conduits and other repo channels to satisfy their gold needs, all of which merely demand the ‘presence’ of synthetic if not actual physical gold. …

“Then there is of course the wild card of the Swiss gold referendum on Sunday, where a yes vote would lead to the immediate collapse of the gold price suppression mechanism as the swap-based gold shortage breaks through merely shadow conduits and finally makes its way to the real market. Which, of course, is why it will never be allowed to happen.”

Indeed, one has to wonder if the attack on gold in the futures markets this week has been engineered to encourage Swiss voters to keep trusting their central bank.

Zero Hedge’s commentary is headlined “Gold Shortage, Worst In 21st Century, Sends 1-Year GOFO To Lowest Ever … and India Just Made It Worse” and it’s posted here:

http://www.zerohedge.com/news/2014-11-28/gold-shortage-worst-21st-centur…

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About Chris Powell:

Mr. Powell has been managing editor of the Journal Inquirer, a daily newspaper in Manchester, Connecticut, since 1974. He serves as the secretary/treasurer and a director of the Gold Anti-Trust Action Committee (GATA). Mr. Powell publishes GATA “dispatches” on stories relevant to the precious metals community: click here to access them and the GATA website. For additional information about precious metals, financial markets and the economy a 2 week free trial to GATA chairman Bill Murphy’s subscription service is available by clicking here.   This article is reprinted on The News Doctors with permission.