They could still invest it at LIBOR though - which I think this article misses.
Loaning money to banks is now totally risk free as banks have been gauranteed the world over.
With gold in backwardation (sorry to harp) - this is more attractive now than ever. Which is what makes the bacwardation so interesting. It should by all rights almost instantly correct - because the more attractive spread between the GOFO and the LIBOR should cause traders to borrow gold and dump it on the spot market. A negative GOFO is almost as though the banks are saying: 'We'll PAY you to borrow our gold!'
If it doesn't self correct - it's because traders don't believe they'll be able to source the gold later on to cover their shorts. Hence - it means they believe in a comex default.
