Tuesday, December 1, 2020

Tag: Permanent Gold Backwardation- Keith Weiner (01/10/2018)

Permanent Gold Backwardation- Keith Weiner (01/10/2018)

by Keith Weiner, Sprott Money:

Sometimes, one just needs to look in the right place. And often in those cases, it just takes a conversation to alert one where to look. We had a call with a Swiss company this week, to discuss gold financing for their business. They reminded us that there is a negative interest rate on Swiss francs. And then they said that a swap of francs for gold has a cost. That is, the CHF GOFO rate is negative (the dollar based 12-month MM GOFO ™ is +2.4%).

Let’s review what GOFO means. The London Bullion Market Association described it:

“The rate at which contributors were prepared to lend gold to each other on a swap basis against US dollars.”