Gold in backwardation--again

I noticed gold went into backwardation against late Friday, signalling another run up in price in Asian trading this morning (it's Sunday night in the US right now). I've written several blogs on backwardation (please do a search for details), and what it infers. In normally functioning commodities markets, a contango exists where the spot price is lower than forward contracts, to account for storage, insurance, and security costs. This is normal in assets like crude oil or precious metals.

But when there is a physical shortage, and when buyers of forward delivery contracts demand physical delivery, in lieu of cash settlement, sellers have to scramble to find said inventory. This causes prices on the physical market to be bid up, which signals price bullishness.

Sure enough, gold and silver prices are trading up in Asian markets this morning. The huge short positions by the bullion banks will either cause a sharp pullback, or they are about to be stampeded by the long speculative funds and central bank gold buyers.