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Copper Challenge to Gold?

By |2014-03-19T09:47:29-04:00March 19th, 2014|Economy, Federal Reserve/Monetary Policy, Markets|

Gold has seen a healthy run since the first incidence of QE taper, again conforming to the idea that gold is tail risk insurance unrelated to inflation perceptions. That included a January rebuke to the collateral pressure/selloff pattern that we saw too much of in 2013. In the past few days, gold prices have come down a bit and that [...]

Gold Finds Its Bid

By |2014-02-11T16:02:14-05:00February 11th, 2014|Commodities, Currencies, Federal Reserve/Monetary Policy, Markets|

We spend a lot of time and effort decrying the state of conventional wisdom around here, but for good reason. For gold, convention posits a store of value that is demanded greatly in times of inflation, and as such is a reliable alternate measure of it. In terms of exchange, that would mean investors increase their preference for “moneylike” assets [...]

Gold Like Clockwork, As the GOFO Turns

By |2013-12-11T10:57:28-05:00December 11th, 2013|Markets|

As per usual, gold prices followed forward rate movements. GOFO is again negative out to 2-months and is hinting negative for the 3-month rate. The 6-month forward rate is moving uite a bit lower, and even out to 1-year there has been a few bp drop in the rate. Bottom line: collateral issues abate; physical shortage reappears. In truth, the [...]

Apparently Gold Is Not Yet Dead, Swinging Back to Shortage

By |2013-10-18T15:53:19-04:00October 18th, 2013|Markets|

It is exceedingly easy to follow everyone else and assume that gold prices are reacting to some ephemeral change in convoluted perceptions of attitudes for expectations toward a monetary stance, but since the beginning of the year gold has been captured as a means to foster interbank liquidity. Gold prices rise when the physical shortage asserts itself, because it is [...]

Gold Hit With Another Collateral Shortage

By |2013-09-13T15:35:21-04:00September 13th, 2013|Markets|

The sudden upturn in GOFO led me to believe that there were changes in the gold dynamics from the relatively favorable period through mid-August. Given the repo action around the UST auctions this week and last, there can be little doubt the collateral shortage has been renewed. Starting August 27, several tenors of UST bonds went special in repo markets, [...]

Golden Flight

By |2013-08-21T16:15:55-04:00August 21st, 2013|Markets|

We have noted the negative forward rates for gold on several occasions, particularly as they relate to our thesis about gold being used in collateral funding arrangements. The negative forwards have persisted uninterrupted since July 8. That was true for tenors up to three months, with the six-month falling below zero on several occasions now. Six-month GOFO has now been [...]

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