James Turk - Gold Is Now In Backwardation - What’s Next?

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/8/4_James_Turk_-_Gold_Is_Now_In_Backwardation_-_Whats_Next.html

"To sum up, Eric, we have two powerful forces meeting each other head-on. First, there is the uptrend that began in June 2013. That date marks the low of the correction in the precious metals that began in 2011. Then there is the second force, which is the short-term correction that began a month ago when both gold and silver were stopped in their tracks at $1,340 and $21.35 respectively by a blizzard of paper selling by the price manipulators.

So we are seeing a battle of physical metal versus paper. History shows that physical gold always wins."

Historic Event As Gold Slips Into Backwardation Once Again

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/9/5_Historic_Event_As_Gold_Slips_Into_Backwardation_Once_Again.html

Of bullion, backwardation, and Buffett

http://www.gata.org/files/PollittMarketLetter-08-26-2013.pdf

Trying to Make Sense of the Gold Market

Notice how the interviewer gets "contango" and "backwardation" mixed up.  Freudian slip?  Well, at least Bloomberg allowed a bullish gold trader to be interviewed, even if her line of questioning was slanted on trying to elicit bearish responses.

Even the title infers the "experts" are confused on why gold and silver are rising.

http://www.bloomberg.com/video/trying-to-make-sense-of-the-gold-market-2WL2EiG7T62eesbObxnmRg.html

"For example, in our office we tried to buy physical gold when it got down right around $1200 - $1250.  It's been eight weeks; we still haven't received our order of physical gold.  I think what that means is there's a huge run on physical right now.  You're seeing the prices now rally; you're seeing people want to be involved with the physical."

Keiser Report: No jail for banksters in real world Monopoly

Watch the last 13 minutes of this 26-minute video to get a better feel for gold backwardation, negative GOFO rates, fractional gold reserve banking, a commercial default, and difference between paper gold and physical bullion.


http://www.youtube.com/watch?v=j615aokEA_Y

Gold Backwardation Explained

http://www.fgmr.com/gold-backwardation-explained.html

Gold Backwardation Misinformation

Dan Norcini says gold backwardation has not occurred, although negative GOFO rates do exist.  The reason why backwardation may appear to exist is because front month futures contracts are more liquid, so real-time bids and offers are more indicative of the existence of contango or backwardation than closing prices of futures contracts in more distant months.

http://traderdannorcini.blogspot.com.au/2013/07/gold-backwardation-misinformation.html

Backwardation, negative GOFO and the gold price

I learned about GOFO and backwardation in 2008, prompting methodical purchasing of precious metals.  When the person in the street knows about backwardation, prices will be much higher.

http://therealasset.co.uk/backwardation-gofo-gold/

Gold futures hiccup indicates demand outpacing supply

Mainstream financial media outlet Reuters is going rogue, touting the shortage of physical gold.  lol

http://www.reuters.com/article/2013/07/19/derivatives-gold-idUSL1N0FP1CB20130719

Turk - We Are Witnessing Historic & Shocking Events In Gold

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/11_Turk_-_We_Are_Witnessing_Historic_%26_Shocking_Events_In_Gold.html

Turk - Something Shocking Has Occurred In The Gold Market

I tweeted this back in June 3, 2013:

Anybody else notice 10-year Treasury yields have climbed from 1.7 to 2.1%? Um, that's not supposed to happen with QE. Fed losing control?
— Gregory Nguyen (@dakyne) June 4, 2013

Since then, 10-year Treasury yields have reached as high as 2.74%. 

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/8_Turk_-_Something_Shocking_Has_Occurred_In_The_Gold_Market.html

Yet the Fed continues to purchase more government debt, as its balance sheet last week reaching another new record high with total assets of $3.49 trillion.  The Fed is not tightening monetary policy, so why are interest rates rising even though the economy is weak and the Fed continues to purchase debt for its QE program?

I think there is only one logical answer, Eric:  Interest rates are rising because of QE.  We have reached a tipping point, meaning that QE can no longer keep interest rates from rising.  The market is now focusing on the dark-side of QE, which is the inflationary consequences of all this money printing.

Rising interest rates with QE ongoing means that we have reached the stage where the Fed has now lost control.  This result was inevitable because market forces always beat central planners and its groupies in the end.  Only the timing of this event could not be predicted.

Since the bailout of the financial system in the autumn of 2008, and the launch of QE in March 2009, desperate central planners had been hoping their crazy theories which try to create wealth by printing money would work.  But those theories never had a chance.  All one had to do was read monetary history to see that these schemes have always failed.

The key point is that the market is now responding to this central planning foolishness.  Capital is protecting itself by demanding higher interest rates, and as interest rates climb, the fallout will be immense.  This brings me to the second key event taking place:  Even the LBMA website now shows that gold is in backwardation.  The gold forward rate out to three months is negative.

James Turk - Extraordinary Delays For Physical Gold & Silver

This is great insight by James Turk.  Search for the words "backwardation" or "contango" in this blog to grasp the tightness in the physical markets.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/5/7_James_Turk_-_Extraordinary_Delays_For_Physical_Gold_%26_Silver.html

WHO SAID THE HYDRA W OULD TAKE IT LYING DOWN

http://feketeresearch.com/upload/Who-said-the-hydra-would-take-it-lying-down-Prof-A-E-Fekete.pdf

"In fact, however, a lower gold price is making the problem more intractable, not less. The Fed is diving from the frying pan into the fire. This is the point missed by almost all observers and market analysts. They ignore the underlying flight into physical gold that continues unabated, in spite of (or, better still, because of) the panic in the paper gold market. The Fed’s intervention in bankrolling short interest is going to back-fire, for the following simple reason. The Fed’s strategy is inherently contradictory. A lower price for paper gold makes it easier, not harder, to demand delivery on maturing futures contracts.

The more paper gold Bernanke sells, the lower the cost of acquiring physical gold in exchange for paper gold becomes."

Gold And The Potential Dollar Endgame Part 3: Backwardation And Gold

http://www.zerohedge.com/news/2013-02-22/gold-and-potential-dollar-endgame-part-3-backwardation-and-gold

Turk - The LBMA Is Moving To Cover Up Silver Manipulation

Readers need to differentiate between a contango and backwardation in silver futures prices to better understand this article by James Turk.  It applies to the gold market and crude oil occasionally as well.  Use the search function in this blog--I've entered a few entries on this topic.  To help you, here's the link.  http://gregnguyen.blogspot.com/search?q=backwardation

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/11/27_Turk_-_The_LBMA_Is_Moving_To_Cover_Up_Silver_Manipulation.html

Perfect Storm Sees Gold & Silver Surge – Chavez Gold Action Leads To Backwardation, Short Squeeze And ‘Havoc’ Concerns

Long-time readers of this blog know the concepts of backwardation, contango, a short squeeze, physical delivery vs. cash settlement, paper futures contracts vs. physical bullion, and the ramifications of a default at the COMEX (and at the LBMA).  For those late to the game, listen up.

And don't listen to the foolish Dennis Gartman, despite his huge following from CNBC.  He's been trying to trade in and out of this decade-long gold bull market for the last few years, frequently calling a wrong-headed "top".  His followers would have made more money if they just bought gold and sat on their holdings.

http://www.zerohedge.com/news/perfect-storm-sees-gold-silver-surge-%E2%80%93-chavez-gold-action-leads-backwardation-short-squeeze-and

Silver and the USDollar

Confucious 222 quote in the comments section:

The Fed/Crimex/JPMorgue cartel has only one answer for a 60 year old price suppression scheme that has resulted in silver shortages and backwardation: suppress it some more.

The Fed has only one answer for the destruction of currency value resulting from too much currency printed: print some more.

The US Govt. has only one answer to the economic destruction resulting from too much deficit spending: spend some more.

The MSM has only one plan to explain the disconnects from observable fact and the lies: lie some more.

Backwardation

http://en.wikipedia.org/wiki/Normal_backwardation

Backwardation refers to the market condition wherein the price of a forward or futures contract is trading below the present spot price. The resulting futures or forward curve would typically be downward sloping (i.e. "inverted"), since contracts for farther dates would typically trade at even lower prices. (The curves in question plot market prices for various contracts at different maturities—cf. term structure of interest rates) 

Normal backwardation refers to the market condition wherein the price of a forward or futures contract is less than the expected future spot price (i.e. theoretical forward or futures price form the cost-of-carry model).

The opposite market condition to backwardation is known as contango.

A backwardation starts when the difference between the forward price and the spot price is less than the cost of carry, or when there can be no delivery arbitrage because the asset is not currently available for purchase.

 Hi-ho silver.

Contango in gold vs. backwardation in silver

I've written several blogs on why backwardation indicates physical spot shortage and is bullish for a commodity, so readers can do a search for "backwardation" to find the previous blogs.  Also, previous blogs may have described the contango in oil markets, and how speculators were taking delivery of barrels of crude oil, and storing them in supertankers in order to take advantage of higher prices on later delivery months.  That strategy only made sense if the contango was wide enough to justify the inventory costs (as well as opportunity cost).

But since a picture is worth a thousand words, here are a couple charts on the contango in gold and backwardation in silver.  A contango is normal because it's plausible that futures prices are higher than the spot price, as markets discount in the cost of owning inventory, namely storage, insurance, and security.

By contrast, backwardation indicates an immediate physical shortage, as sellers scramble to find inventory to deliver to buyers, and are forced to bid up prices once they do find supply.  My ad hoc surveys and visits to coin dealers and the US Mint in Denver confirms the tightness in the physical silver market.

Click on images to enlarge.  Credit goes to sharelynx.com for the charts.

Silver rises to 30-year high as mints start to ration coins

http://www.ft.com/cms/s/0/7f316ac4-3acc-11e0-9c1a-00144feabdc0.html#ixzz1EOEHsrc4

Silver jumped to a 30-year high amid record levels of investor buying that has drained mints of silver coins.

The price of the precious metal hit $31.37 a troy ounce on Thursday, up 16 per cent since mid-January and the highest since March 1980. The world’s leading mints have reported record sales of silver coins in January and some, including the Royal Canadian Mint and Austrian Mint, have had to ration sales.

“We have sold everything we can produce in silver and have demand for at least twice that volume,” said David Madge, head of bullion sales at the Royal Canadian Mint, which produces the silver Maple Leaf coin. Silver coin sales at the US Mint and the Austrian Mint also hit record levels in January.

The surge of buying has both boosted silver prices and helped push the market into “backwardation” – an unusual condition in which forward prices are lower than prices for immediate delivery.