Minyan Mailbag: Mother of All Short Squeezes for Gold? Lance Lewis Nov 05, 2008 3:45 pm |
![]() |
![]() |
|
||||||||||||
|
Along those same lines, some of the gold "inside-baseball" indicators are in fact finally beginning to reflect the tight physical market. Gold lease rates spiked back in September and October, but part of that move was in LIBOR (Lease rates are calculated by subtracting the 3M Gold Forward Offerred Rate (GOFO) from LIBOR).
However, the move in lease rates wasn't all the pop in LIBOR. As we can see in the chart of 3-month lease rates, lease rates remain elevated and near an 8-year high, even as 3-month LIBOR has collapsed back to below where it was in June, thanks to the Fed's print-a-thon. ![]()
Click to enlarge
That's because the GOFO continues to collapse. As GOFO moves closer to going negative, we get closer to seeing gold move into backwardation, which is fairly rare and uber bullish. Is the physical market tightening simply due to the continued high rate of physical demand and European central banks pulling in their leased gold/not rolling over leases? Is it related to the market sniffing out what you are implying might happen on the COMEX? Or is this related to the gold market sniffing out a potential dollar negative at the coming G20? Or is it all of the above?
I have no idea, but the last time we saw GOFO collapse like this (see the chart below), it was in the days leading up the Washington Agreement (and gold's ensuing 40% upside explosion on the news). ![]()
Click to enlarge
And this happened even though gold didn't seem to give any indication in the way it was trading until literally 4 days before the G7 meeting at which the Washington Agreement was announced that weekend. I'm not sure exactly what's going on, but clearly there something bullish afoot in gold.
Best regards,
Prof. Lewis
|
|||||||
|
|||||||
|
|||||||
|
|||||||
|
|||||||
discuss this article and more on the mv exchange |
|
Get real-time options trading ideas from Steve Smith, veteran options trader and newsletter author, plus let him show you the way to cut risk and boost your returns through the strategic use of options. Click here for a free 14 day trial to OptionSmith by Steve Smith.
Lance Lewis is the principal of Lewis Capital, a Registered Investment Advisor (RIA) in Dallas, Texas. He is responsible for portfolio management and investment research for all of the company's managed assets.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any article or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2009 Minyanville Publishing and Multimedia, LLC. All Rights Reserved.
What's Popular in the 'Ville
Minyanville Local Guides
Business Services
Career
Cars
Computer Hardware
Construction
Education
Entertainment
Environmental
Family
Fashion
Financial Services
Food & Beverage
Franchise
Health
Holidays
Home Appliances
Home Electronics
Home Services
Industrial Goods & Services
Insurance
Internet
Legal
Miscellaneous
Nightlife
Online Database
Pets
Real Estate Resources
Retail & Consumer Services
Software
Technology
Telecommunications
Trade Shows
Travel
Weddings
World History
| add rss feed | free article alerts |









