Monetary Metals Supply and Demand Report: 7 Sep, 2014

The gold price dropped by $19, and the silver price by $0.26 this week. There was a bit of a rally on Friday, following a bad payroll report. We suppose the logic is that job creation is anemic, therefore the Fed will have to print more, therefore the money supply will increase, therefore gold and [...]



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3 replies
    • Keith Weiner says:

      Mark,

      Very good question.

      GOFO is a continuous 30-day (and they have longer maturities as well) quote. By contrast, futures contracts have discrete expiration dates. As we get close to the expiration date of a particular contract, there is selling pressure on that contract. Those who are long the contract to speculate on the price must sell (they can buy a farther-out contract if they wish to remain long).

      This is the force that drives what I call “temporary backwardation”.

  1. miamonaco says:

    Keith,

    Thanks. The thing that doesn’t make sense to me is that as the price of gold has fallen the past 4 days, all GOFO periods have gone more positive. It would appear from that either gold is no longer in backwardation or the LBMA data on GOFO is wrong. Any thoughts?

    Thanks,

    Mark

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