Negative Gold Forward rates imply tight supply of physical Gold: ETFS

The London Bullion Market Association (LBMA) Gold Forward Interest Rate (GOFO) has turned negative since July 2013 before returning back to positive territory recently, according to ETF Securites Ltd (ETFS). GOFO is the interest investor has to pay for his gold-collaterised US dollar loans and normally it is positive as an investor has to pay interest on the US dollar loan. But when GOFO turns negative, the investor gets paid for the gold he has mortgaged which in effect means there is a tightness in physical gold supplies.

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