The GOFO or "Gold Forward Offered Rate" is the rate applied to Gold/USD swap operations, occurring very frequently in London and other markets.
The GOFO is determined by the LBMA's market makers and is fixed daily at 5:00 pm EST, for different periods from one month to one year.
In normal conditions, the GOFO is always in contango: the lengthier the loan period, the higher the rate.
A gold owner needing cash on the short term will put down gold as collateral in order to obtain a better rate on a loan.
On rare occasions, the GOFO turns negative: gold is then in backwardation. This means that someone is willing to pay interest and place dollars as collateral to obtain gold on the short term.
This means that: