Monetary Metals Supply and Demand Report: August 11, 2013

“Gold and silver went up this week.” Do you think of it this way? Do you think this is good news? We encourage you to think of it as an incremental move of our national currency downwards, towards zero. That is definitely not good, not even for those who own gold. The dollar should be [...]

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4 replies
  1. stevegri says:

    You have probably answered this question before, what would be the “tell” of temporary backwardation becoming permanent backwardation?
    I would assume it would be a matter of $ difference between cash and futures $ price of gold accelerating higher and higher, but I am probably incorrect in my logic.
    Look forward to your reply.

  2. stevegri says:

    Read it but didn’t fully comprehend it.

    To summarize, permanent backwardation will occur most likely gradually from the furtherest delivery months towards the nearer delivery months?

    Is it likely somehow this temporary backwardation (along with negative GOFO) will simply disappear and things will go back to normal?

    Regarding the oil chart from the article you referenced, will we wake up one day and the gold chart will look the same, or will it take months of grinding it out for that to happen (your answer might be speculative in nature, I still would like to know your opinion)

    I am just trying to ascertain what might alert me to the fact it is time to make my last gold purchase while I still can.

    I enjoy your insights.

    • Keith Weiner says:

      stevegri: Temporary backwardation is my word for what has been occurring recently: each contract goes into a (small) backwardation as it heads into expiry. Permanent backwardation is when all contracts (and I think from the longest-dated inwards) go into backwardation and do not recover. As the price rises (probably exponentially) backwardation rises. It will pull all other commodities into a backwardation of the same shape and magnitude through arbitrage. It is the prelude to no more availability of gold.

      The purpose of this letter–whose full name is the Last Contango Basis Report is to display and chronicle this progression.

      I do not think we are so close to permanent backwardation. Yet.

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