is gold really still in backwardation, page-6

Well - since the GOFO is what banks use to determine how to charge for borrowing their gold... a low GOFO is very good for the gold carry trade...

Libor has started dropping too.. but is still very high... So I see no reason why the carry trade still wouldn't be on... Since you could make a profit investing it at libor rates.

It's not a huge spread - nothing like what you would have gotten investing overseas. Look at the beginning of 2008 with the GOFO at 4 percent or so... Selling borrowed gold and investing at libor at that time would have lost you money - but you probably would have bought AUD or something like that for the high yield. AUD yield has dropped considerably - but so has the GOFO - so the spread looks approximately the same.

Probably what is dampening the gold carry trade - like everything else - is just the current risk inherent in investing in high yield currencies and assets.

But in terms of opportunities to run a carry trade - there are more of them now than there were in early 2008 since it is now profitable to invest it at libor rate when it wasn't before. The drop in interest rates around the world has been offset by a drop in the GOFO rate.

Which makes me wonder... perhaps the near backwardation is being orchestrated by the banks who want to continue to see some small return on their gold holdings - (a really tiny amount right now given the GOFO rate).

If you believe in the manipulation argument - you might think that the backwardation was caused by the banks who are trying desperately to keep the carry trade profitable so that they can encourage people to borrow gold and sell it on the market - depressing the price. This is why the backwardation is a sign that they are getting squeezed. they can't pay people to borrow their gold... they may as well just sell it themselves which i doubt they want to do.