TSX:LSG.DB - Post by User
Comment by
HARJAYon Jul 10, 2013 7:13am
208 Views
Post# 21598178
RE:Gold Forward Offered Rate ?
RE:Gold Forward Offered Rate ?
GOFO- according to the London Bullion Metal Association, the GOFO is the
Gold Forward Offered Rate. These are rates at which contributors are prepared to lend gold on a swap against US dollars. Quotes are made for 1-, 2-, 3-, 6- and 12-month periods.
GOFO is basically the interest rate for borrowing money using gold as collateral. For example, a central bank will enter a swap position with a bank by swapping its gold for US dollars with the bank. At the end of the period, the swap has to be reversed with the central bank paying an additional certain percentage above the original amount of US dollars. That “certain percentage” is the GOFO rate. The GOFO rate is related to the gold futures price. This is because if the GOFO rate is too much higher than the gold futures price, then the central bank will be better off selling the gold in the spot market and simultaneously buy gold futures.