Something big has just happened. In the obscure market called LOFO, which stands for “Gold Forward Offered Rate”, Gold just became money and cash just became collateral.
This is what happened: In this market people with gold who needed to borrow money would go to a bank and offer their gold as collateral for a loan. They would hand over the gold, get the cash and pay interest. Sounds normal.
But, as another sign that the supply of physical gold is really really tight, this market has just gone into reverse two weeks ago. Now, instead of paying interest for the cash, the banks are paying interest for the gold. Banks are now offering interest to get the gold, and this interest rate is rising sharply!!!! It is still only 0.1% but this is a very very rare event. It signals the arrival of gold as the new REAL money and is another sign that the big boys are telling us that the paper gold machine is spluttering to a halt.
Have a great day.