GOFO

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:

  • On the market, a higher value is attributed to available gold than to available cash;
  • Someone needs gold immediately and hopes to give it back before the loan matures;
  • Immediately-available gold is worth more than gold for future delivery;
  • There are significant tensions and risks of scarcity on the market.

GOFO