“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


To continue following Trader Dan, please sign up for Trader Dan's World at the link on the sidebar to receive a 1 month, no obligation, trial membership



Thursday, July 25, 2013

Gold Backwardation Misinformation

Let me preface this short missive by stating that this is pretty much a rehash of a comment I posted in the comments section below one of my recent articles in response to some erroneous information being supplied by a particular reader.

I also wish to state that this is in no ways meant to be singling him out for any sort of ridicule or mockery in any fashion. We have enough of that stuff that goes around these days. He is however, symptomatic of those who continue to greatly err on the subject of backwardation and thus I thought it best to put these comments up as a general post in the hopes of a more widespread dissemination.

I am also glad to see that my pal Jesse over at his website, (which is listed here as one of my favorites ) has also done the gold community a great service by attempting to also define this term and dispel some myths surrounding it. I would urge my readers to check that out when you can.

http://jessescrossroadscafe.blogspot.com/2013/07/gold-backwardation-when-good-people.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JessesCafeAmericain+%28Jesse%27s+Caf%C3%A9+Am%C3%A9ricain%29


Here are the comments I posted earlier today repeated in their entirety with some fresh additions.

Thanks as always for your comments. What I am actually saying however is that backwardation is not happening at all on the Comex, not even for a few minutes. I was using absurdity to illustrate the absurd.

For example - here is the latest series of bids for the August, December, February and June gold comex contracts in order as of this snapshot.

August  2013           $1324.2
December 2013       $1325.1
February 2014         $1326.1
June 2014               $1328.4

As usual I am sitting here and have been watching this all morning as well as a goodly portion of last evening's trade and not once has any nearby contract had a bid higher than a back month.

There is no backwardation occurring on the Comex at this present time for any time interval whatsoever.

I am attempting to teach folks about this so as to prevent the spreading of more disinformation that so frequently afflicts the gold bug community. This is the reason why more often than not, many of them get discredited and end up doing disservice to their cause.

The reason why some contracts occasionally have a last trade price higher than a more distant month is because the more distant months are not trading as frequently because there is no liquidity in those months.

when you have a volume of trade of 182,000 in a nearby versus 2,085 in a more distant February for example - there are going to be times when the last trade price of a more distant month might be at a discount to a nearby. That is merely a function of low liquidity. If you want to see where the contract might trade IF AN ACTUAL TRADE OCCURRED, you have to look at the Bids and Offers and see where those are currently sitting.

In the time it took me to type the above comments, here is now the latest series of bids...

August 2013            $1325.3
December 2013       $1326.3
February 2014         $1327.4
June   2014              $1329.7

Again, notice the market is in contango at all times. There is not a single instance of backwardation.

This might help dispel any confusion about this current misinformation going around but in all honesty, I doubt it. Most gold buys are pretty closed mind about this stuff having made up their minds beforehand, truth be damned.

Here we are now in the Asian session this evening as I post these new set of comments and here is a new set of bids for those same contract months at this moment:

August 2013          $1334.70
December 2013    $1335.30
February 2014       $1336.20
June 2014             $1338.20

Once again, NO BACKWARDATION....

Why am I making a big thing out of this? Perhaps because I try to be a stickler for truth. I have been in this industry now as a private trader for more than 2 decades. In that span, I have seen enough charlatans, quacks, con artists, flim flam mans, and what have you. I have also seen a proliferation of misinformation abounding now that anyone with a keyboard and an internet connection can suddenly dub themselves an "expert analyst".

The gold community in particular seems to be plagued with this sort of thing, far more than any other commodity complex. Yes, we have them in the grains as well with the constant spreading of misinformation, falsehood and assorted 'rumors' that just so happen to line up with the position that those who are propagating have taken in the market that they are attempting to either talk up or talk down.

When it comes to the topic of backwardation, I explained the significance of that last evening in a response that I wrote in the comments section.

here are the key highlights from that post:

It  (BACKWARDATION)  that that the commodity is in a serious short supply which is not able to keep up with current demand levels. What the futures board then does is to move into backwardation to entice sellers to part with the metal RIGHT THEN AND NOW instead of holding onto it later in hopes of a better price in the future.

That is done by pushing the price higher  ( in the nearby months) ABOVE The back months and taking away the incentive to hold or store the particular commodity.
...

A market with a true supply shortage will REMAIN THAT WAY all the way into the closing bell and will maintain that structure for as long as is necessary for the current shortage to be alleviated.
Based on this fact - gold is not in backwardation and has not been at any time whatsoever on the Comex during the entire time this backwardation talk commenced and picked up some gullible followers.

Look, I get it - those who are advocating for honest money ( as I am ) and who are generally bullish gold all the time ( I am not) , without exception, even as it is plunging, will latch hold of any sort of story that can be construed as strongly bullish because it CONFIRMS THEIR BIAS TOWARDS THE LONG SIDE of the metal. That is not hard to understand as it is human nature. However, to try to present something as factual when it is in fact, incorrect, is what causes me to take a stand against it.

Gold does not need a campaign of misinformation to define it is honest money. What too many seem to forget is that outside of the gold community, many other investors/traders do not share their view of the metal.

Let's be blunt, for those in that group, gold is an asset that throws off no yield whatsoever. Thus, they had better have a good reason to take investment capital and allocate it into the metal. If they are getting decent returns on their investments elsewhere, and have no concern whatsoever about inflationary issues, they are not going to buy gold. It really is that simple. We who favor honest money must come to terms with the fact that an extremely large portion of the global investment community does not share our views about the value of the metal.

As far as any "Panic" to buy gold (this is how some are now defining the current state of the gold market as they peddle the backwardation nonsense), the futures board simply does not confirm that by its present contango structure. We just came off what I would describe as a near "panic" in the corn market back when the March contract expired and when the May contract expired. That was a true case of backwardation.

I put far more credence in the withdrawals of the Comex warehouse inventories and the GOFO rates. By the way, Dave, my buddy in Denver, whose website is also linked to here at my site, has done good work on this topic. But, as I have written before and will do so again - without a true backwardation structure in the gold futures market, those things alone are not a sufficient reason for me as a trader to rush in an take a long position in gold. I need market price confirmation and chart pattern confirmation.

One last thing - too many people are erroneously defining the word "backwardation" by confusing it with the term "basis".

As I have already defined it, backwardation is a structure or condition of the futures market that occurs when the price of the nearby contract is trading above the more distant month contracts. It is a signal of a tightness in supply at current demand levels.

BASIS is an entirely different matter. Some are claiming that because the SPOT MARKET CASH PRICE of gold may be, at some times, higher than the nearby futures contract, that the market is in backwardation. AGAIN, It IS NOT.

What a strong basis means, ( when the cash market price is above the futures market price ) is that demand for that commodity, be it gold or soybeans or wheat or whatever, is STRONGER THAN AVAILABLE SUPPLY at THAT PARTICULAR LOCATION.

We see this all the time in the grain markets. I also see it occur at times in the various direct markets for hogs as well as some of the individual packers buying cattle in Nebraska or Kansas or Texas.

There are times in the grain markets that one elevator will be paying higher prices for grains than the nearby on the board because of logistical issues such as a flooded river, etc., which is making it difficult for the grain to get to their location. They will then have to offer incentives to get it there. That does not necessarily mean that there is a world-wide shortage of that grain; it does mean that as far as that location goes, there is a shortage. The strong price being offered is the incentive to give sellers every reason to try to get their product to that elevator operator.

My friend John Brimelow publishes an excellent "Gold Jottings" report where he is perhaps the best in sourcing the cash market prices for gold in India and elsewhere in the Far East. John will report on whether the spot price for gold is at a premium or at a discount. That is a good gauge to demand IN THAT LOCATION OR AREA however and it does not necessarily translate to the same thing here in the US or elsewhere in Europe for example. Heck, there are times when buyers in India are paying huge premiums over the world price of gold elsewhere. That does not mean gold is in backwardation. PERIOD!

When we do however see a STRONG BASIS PLUS a BACKWARDATION STRUCTURE ON THE FUTURES BOARD, then we have the real deal.

I also want to echo something that Jesse mentioned in his nice piece on this; those who keep crying up backwardation in gold had better damned well be careful that they do not get what they are wishing for. As one of the posters here has said, gold at $50,000 or silver at $500 means that I do not want to be living anywhere near civilization. The sheer chaos, fear, breakdown in society, etc. are not the things that I wish for no matter whether gold goes up or not.

I am already fearful enough about the state of our nation, its gargantuan level of indebtedness, its moral decay, its hedonism and lack of work ethic, its dumbing down, and its corrupt monetary system without having to worry about MAD MAX BEYOND THE THUNDERDOME coming to a city or town near me!

Gold owners and buyers - just lighten up a bit... life consists of far more than the last price of gold, or silver for that matter. Family, Friends, Faith - these are far more important... do not let the means to an end become your reason for existence or happiness.




47 comments:

  1. Outstanding Letter, Dan; steve in sparks

    ReplyDelete
  2. Yes this seems true and truth is what matters.

    But what about the Shanghai exchange?

    Granted, SGE does a fraction of the volume of Comex. However, in fact this year the SGE has been delivering 10X more real gold than Comex.

    What we need is a trustworthy Gold exchange, with adequate gold backing, that offers transparency in a free market environment.

    The comex price is simply unreliable because it is increasingly diverging from the price of real gold and silver paid by wholesalers around the world.

    ReplyDelete
  3. Also... accusations from some impeccable sources, including several sovereign wealth funds, that the Comex is paper-settling do not help the credibility of Comex prices and data.

    ReplyDelete
  4. Perfect Dan!. Baby Eli agrees too. I find it interesting that those talking heads call gold "honest money" while spreading "dishonest rumors" of backwardation. I think it does a real disservice to the gold community and hurts our fundamental cause (REAL, HONEST, MONEY), directing truth seekers to pull away from PM. People seeking the truth could be tempted to sell their PM because of those that "cry wolf". When it is really here (impending financial disaster), those good people will be screwed.

    Friends, family, Christian faith, is definitely where it is at, AND a little gold, silver, brass, and lead don't hurt either...

    I would like to leave the board with a quote from George Orwell's 1984:

    "The economy of many countries was allowed to stagnate, land went out of cultivation, capital equipment was not added to, great blocks of the population were prevented from working and kept half alive by State charity. But this, too, entailed military weakness, and since the privations it inflicted were obviously unnecessary, it made opposition inevitable. The problem was how to keep the wheels of industry turning without increasing the real wealth of the world. Goods must be produced, but they must not be distributed. And in practice the only way of achieving this was by continuous warfare."

    We have this loon in office that keeps talking about getting the economy going while simultaneously over-regulating/taxing where they shouldn't, no regulation where needed (banks), and insider trading, algos, etc... Welfare/food stamps at all time highs with the debt level ABOVE $17T leads to the above scenario almost perfectly. I guess we are just 30 years late of Orwell's prediction of 1984!

    ReplyDelete
  5. This might help some of you:

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

    From: http://goldtradercommentsaugust2010.blogspot.com/

    ReplyDelete
  6. Thank you Dan, I recently shook myself out of a PM-bug phase and am seeing more of the forest instead of the trees. I feel like this needed to be said and may have taken a bit of guts on your part to do so. Please continue to voice your reasonable thoughts, they are a boon to those of us that look to more experienced and connected people for insights into the market.

    ReplyDelete
  7. This comment has been removed by the author.

    ReplyDelete
  8. Hi Dan, I really enjoy reading your unbiased market analysis. As a not very experienced trader/investor I really appreciate you taking the time and sharing what you stated below:
    "However, to try to present something as factual when it is in fact, incorrect, is what causes me to take a stand against it."

    You posted a link to Jesse’s site in which he stated, which I would like to note he does not provide any facts or even arguments to back up which is a pretty substantial claim. If I accept this as fact the most logical conclusion is that a COMEX failure is imminent:
    "The COMEX is a locus of the supply problems, being a paper market with record leverage or claims to available supply. Why would you go to the source of the scarcity in order to relieve it? You would try to get the bullion from someplace else. Do you go to the desert to find water to relieve a drought? No, you go to where the water is likely to be found."

    Also today I read this article, which after presenting a very detailed run down of how COMEX works concludes:
    “As you can see, there's little urgency or importance in the 2013 plunge in Comex warehouse gold stocks. Gross quantities are lower, but they are greater than any period prior to 2005. Just looking at the level of warehouse stocks, it is difficult and presumptuous to extrapolate market fundamentals from the holdings of eligible or registered gold at any one time. There is still plenty of metal, and there are hundreds of millions of dollars of gold traded every day off of the Comex, for hundreds of different reasons. So this aspect of the market is only a part of a very much larger puzzle.”
    http://goldnews.bullionvault.com/comex-gold-stocks-072420136

    I’m inclined to trust article with numerous details of what I assume to be facts over the one with no facts, just a couple sensational statements. Does this not also deserve us to take a stand against? Also the purpose of the article is very similar to the intentions of this article.
    “There are lots of good reasons to buy gold today, I believe. But misunderstanding the basics of what is in truth a simple aspect of the global market shouldn’t be one of them.”

    Anyway, thanks work you put in writing this blog, it’s appreciated.

    ReplyDelete
    Replies
    1. rtabit;

      thanks for a very well thought out and cogent set of comments.

      The drawdown in the Comex stocks is significant to me as a trader IF and ONLY if it is accompanied by a change in the structure of the futures market from one of contango as it currently is into one of backwardation.

      That would tell us that those who wish to take physical delivery of any gold, are having trouble getting it at the current price and are willing to pay up for it.

      Again, just like the GOFO developments, the fact that the stocks are being drawn down is interesting and worth observing but it MUST BE ACCOMPANIED by a corresponding chart pattern that tells us that the shorts are running and the bulls are in control. So far that is not happening.

      We will have to wait and see how the dust settles. The big key to me, more so than these other things, which as I stated are noteworthy, is the action of the US Dollar. If traders start getting back to seeing the Dollar as a whipping boy to beat up on, gold is going to go higher regardless of backwardation or no backwardation, Comex warehouse drawdowns or no Comex warehouse drawdowns and the gold forward leasing rates.

      Just call me an old fashioned guy who believes it is in the charts that tell us what the current mindset of players is.

      Delete
    2. Trader Dan,

      I am curious to see at what level the Gold Price will have to be before you conclude that the movement in the past Three weeks is the beginning of a Channel Trade advance with $1180 and $1200 forming the Double Bottom.

      Will the breach, test and hold of $1340 Resistance/Support be the confirmation of a new advance? Or does Gold need to breach, test and hold $1375?

      Tall Tom
      I Cor 13

      Delete
  9. Impressive piece of explanation, thanks!

    "However, to try to present something as factual when it is in fact, incorrect, is what causes me to take a stand against it."

    Which is why I hope you'll keep helping KWN readers with saturdays interviews and posts, as I think you are one of the rare guests there who keeps a neutral and objective stance at the situation. I wish this blog to gain momentum in the number of visitors, especially as you let people interact instead of reading passively without the right to answer. :)

    ReplyDelete
  10. This comment has been removed by the author.

    ReplyDelete
  11. Dan, I agree with the view that there is no "significant" backwardation for now, but the camel's nose IS under the tent. For at least the previous week, Comex settled the July gold contract higher than the August, and at a price that is close to the December. The July silver settlement has been consistently below the August, but Comex settled the July slightly higher than the August for 7/25. Time will tell if that is an anomaly, or if it is the beginning of a clear trend.

    You can see the Comex settlement data for the last week at:

    Possible beginnings of Metals Backwardation

    ReplyDelete
  12. something feels really wrong in here; plat and silver should be leading the metals, but are stalling vs. gold; bonds are not falling apart and the yen is up 100 pts; end of week hosing or bearish geopolitical weekend? confused steve in sparks

    ReplyDelete
  13. yeah good explanation, and this site is snowballing in popularity due to your neutral/objective expertise, etc...but i have one totally random question...what is the significance of a gap (up or down) during trading...i know this is normal on market opens but sometimes im watching the 1 minute chart zoomed in to make quick day/swing trades and then sometimes it just gaps up or down,...is it relevant to anything? anyone?

    ReplyDelete
  14. Thanks for the objective Analysis, Dan.
    Reading your analysis one could get the imprssion, that everything is normal in the gold market right now, which is not IMO.
    I don't want to support the backwardation claims, but why do you not also put two IMO very important developments more into your focus:

    1. Negative GOFO. IMO a big thing and it shows, that someone wants to get his hands on the gold instead on dollars.

    2. The draining of GLD. Which for itself would not be exciting, but following also SLV things become even more interesting.
    Although silver has been CRUSHED, SLV has gained tonnage.
    And while the SLV becomes bigger, the GLD is smelting like snow in the sun.
    No matter if gold rises or falls.

    3. Backwardation: your example with cattle or commodities about the amount of backwardation could be misleading. I'm no expert, but because gold is an eternal commodity, there is no reason for backwardation at all. It is here today and it will be here in 1000 years. Arbitrage should deny backwardation in the goldmarket, while in other commodity markets local supply shortages have a much stronger impact: the oil, grain, cattle is needed at a certain loction at a certain time.
    But gold?
    There is no reason to pay a higher price to get it today, if i can get it in three or six months cheaper.

    I think it's the combination of the three factors (and a few others, like ABN-Amro or Rabobank defaulting on their physical gold accounts and exiting the business) that makes the current situation in the gold market indeed unusual and interesting, while the mainstream media try to suggest, that everything was normal.

    ReplyDelete
  15. something stinks in Denmark; look at Yen action

    ReplyDelete
  16. Technically on paper contracts you may be correct Dan but you cannot explain why JPMorgan has refused to settle out on May's 9.5 tons of gold, June's 30.7 tons of gold and in addition they owe above all that another 113,207 oz of gold. Can you show us any examples of the COMEX refusing to settle out of past months to the tune of well over 43 tons of gold?Please spare the paper explanation I understand the technical aspects of backwardation but that doesn't explain what is current being done in the COMEX by bullion banks that are supposed ot settle on a timely basis and have refused to for the past three months.

    ReplyDelete
    Replies
    1. I would like to see this post answered Mr Dan. You seem to be becoming a CNBC talking head.

      Delete
    2. On what basis do you claim that JPM has refused to settle May and/or June's COMEX gold obligations? Please supply a link to a news story or someone holding a COMEX contract to maturity, to whose contract JPM was assigned, and failed to make the delivery in those months. Thank you.

      Delete
    3. Because as far as I can see, according to all the delivery manifests from May and June, all required deliveries have been made.

      Delete
    4. this "JPMorgan has refused to settle out" meme is grossly false.

      http://kiddynamitesworld.com/precious-metals-charlatans-freaks-of-the-industry/

      Delete
  17. Dan,
    Thanks. I am bullish long term. It is obvious lies and continued govt bs is a sign that we are truly faccing armageddon. Can you tell me who would sell that much gold today at approx. 7:45 your time to drop the price over $25 and counting. Seems very manipulated to me. Thanks Dan.

    ReplyDelete
  18. Thanks Dan. It is both helpful and refreshing to read relatively objective and well-supported material like this. I also don't doubt the veracity of your analysis, as far as it goes.

    The problem that I see is that in spite of your efforts to remain objective, your view is largely confined to technical analysis. I see that as being a problem given the distortions that have been increasingly created in the markets by Government (e.g. the Fed, BOJ, etc.) actions in recent years.

    It is a mystery to me how you can be so confident in technical analyses when prices and markets have been badly distorted as a result of loose money policies., HFT, etc.

    I am willing to accept that technical signals are still valuable in the context of near-tearm trading, but many of us who own gold are looking at a longer game, and from a broader perspective. Even if there hasn't yet been true backwardation in the gold market, can there really be any doubt that there will be sooner rather than later? Given that the U.S. insists on repatriating Germany's gold over seven years, rather than the fraction of time that is should take to fill the request, can there be any doubt that there is already a very serious demand/supply problem?
    Given that several banks have already defaulted on delivery promises, and have insisted that their customers accept cash instead, can there be any doubt that there is already a very serious demand/supply problem?

    Perhaps you will prove capable of timing an entry into the long side of gold beautifully, and I'll tip my hat to you under those circumstances. But given the disastrous course that the world's major economies are on, coupled with the interconnectivity and fragility of the Western financial system, I am quite happy to own gold and await what I consider to be a certain, significant appreciation in its value.

    ReplyDelete
    Replies
    1. Paul Warfield;

      Thanks for the comments Paul... I agree with all that you state about the fundamental factors that should support the price of gold moving forward. Long term I think the US Dollar is going to experience a loss of confidence and that will take it lower and gold higher but remember, the Dollar is just one more fiat currency that gets its "value" against the Euro and the Yen or whatever other currency it is trading against. I would have as much confidence in the Yen as I do in a single sheet of toilet paper to "finish the job" and as for the Euro, it is a joke.

      That being said, I have to always tell folks that I have two caps that I wear - one is that of a trader and the other is that of a investor with a long term horizon. They are two totally different things.

      When I write about backwardation and spreads and price levels and charts, etc, I am writing as a trader. A market may or may not be manipulated but it still responds to technical signals. That is how I make my living.

      As an investor, I do not believe anyone should be without some form of physical, not paper gold, given what the Central Banks of the world are doing.

      NO one knows when sentiment will shift in a market and a wholesale reversal of psychology occurs, but one has to wonder how much longer a $17 trillion national debt, not to mention unfunded liabilities exceeding that by multiples can be ignored.

      Delete
    2. Thanks Dan. Glad to hear that we are on the same page.

      Delete
  19. I'm sorry you're not a (permanently long gold) Dan! Anyone that's not - by definition - means that you have some level of faith in its (antithesis: USD).

    When we exist within a (permanently fraudulent) USD paradigm...and worsening by the week...the paradigm itself is vulnerable for immediate reversal (of long USD - potentially to zero). History already shows us this. All-the-more given the speed of modern-day "money".

    All the best.
    jibbs

    ReplyDelete
  20. I am so glad I found you and your site!

    You are far more than a technician. You are a man of principles,
    a rare bird these days.

    ReplyDelete
    Replies
    1. I see lots of new posters.
      As a long time reader of Dan, I'm wondering what has happened that you have found him these days?

      Delete
    2. I'm a long time reader first time poster earlier on this post, I think maybe has to with all the unusual metals related action going on (Comex inventory, GOFO, backwardation). Lots of different causes/results explanations flowing around out in metal blogland. People may be gravitating towards who they feel they can trust.

      Delete
  21. Dan, just today there's an interview with Eric Sprott who says this:

    "...because of it (central planner actions) we have the gold forward rates (for gold) being negative, backwardation, and inventories plunging, all of which have been manifested because there is a shortage of gold."

    Now this is disturbing since there are only two conclusions to take from his reference to backwardation. One, he doesn't understand what it is or two, he's intentionally misleading investors as to its presence. Either choice is disturbing from someone as big in the business as he is.

    By no means is he alone. Others of public stature in this "community" are saying the same things. Frankly, it's time for these folks to get their acts together and publish accurate information as you have done.

    ReplyDelete
    Replies
    1. thamnosma;

      I think I have written enough about this to make my views clear. I have tried my best to be accurate and unbiased in my presentation of the various words out there.

      In regards to Mr. Sprott - he is always bullish gold and silver. How can he not be seeing his main business consists of selling those products? That would be like me owning a peach orchard and going around telling the press and anyone else who wants to listen that apples are much better for you than peaches!

      In other words, he is going to constantly "talk his book". That is not unexpected. All of these guys are going to do that as it is human nature to try to buttress their bullish arguments. Traders have to try to be objective if they are to make a living in the markets. Leverage will dispose of all those who are not very quickly!

      Delete
  22. We all know the Comex is a rigged game, so why does Trader Dan want to trust their numbers? When physical gold and silver is selling for spot pls 4 to 50 we are in actual backward price. In Nebraska silver is spot plus 4 to 10. In Iowa it is spot plus 12 today, or plus 5 and get delivery in 2weeks---maybe

    ReplyDelete
  23. I do believe that those who claim that gold is in extremely short supply are reporting an accurate picture of the gold market, regardless of the backwardation issue. I think that the people who are claiming gold is in backwardation are emphasizing the price you need to pay to obtain immediate physical metal in London, as compared to the COMEX price, rather than the COMEX pricing structure compared internally, month by month.

    I also believe that the basement vault at 33 Liberty Street in lower Manhattan is supplying tons and tons of gold to markets as a part of an overall deal made, on April 11th, when all the casino bankers met with the President's staff, at the White House. The next day, as you know, was the start of the major attack against gold.

    The government and the Federal Reserve are trying to support the dollar, but, even more so, they are helping the casino bankers escape from short positions. The NY Fed's vault, in my opinion, will continue to supply a huge tonnage of gold to COMEX and to London banks in order to offset the shortages, until JP Morgan extricates itself from its unenviable situation in silver. Remember, there is no source for silver other than SLV, and if that ETF has only a fraction of the silver it claims to have, there is really no source of physical metal.

    By glutting the gold market with paper gold, while supplying a necessary lesser amount of physical gold necessary to make deliveries, the cross-trading habits of short term traders insures that the paper price of silver can also be controlled. If gold prices were allowed to soar, however, no amount of paper-silver glutting would be sufficient to control silver prices. The key is that 70% of all silver is produced as a byproduct of base metal mining. Thus, miners will continue to provide metal, as it is a secondary profit source, without any supply reduction, even while silver prices tank, and in the midst of serious shortages.

    Once JPM closes its silver shorts, the NY Fed will cut off the supply of gold, and, in fact, will have the casino bankers start buying back what it leased. The price of gold (and silver) will soar to the stratosphere at that time, but not before then. COMEX will not go to cash settlement next month, contrary to the view of Jim Sinclair, because, the moment it does that, the casino bankers and the US government, will lose control of the gold price.

    ReplyDelete
  24. on Twitter, @goldminerpulse says: "There is no shortage of COMEX gold. COMEX gold although 100% backed by physical is still paper since there is ~0 delivery. LBMA GOFO rate is clearly negative for 15 straight days proving LBMA gold is in backwardation. Conclusion...there is no shortage of PAPER gold but there is a shortage of LBMA physical gold suggesting COMEX price decoupling from LBMA."

    ReplyDelete
  25. Thx Dan for standing up for truth and trying to educate the rest of us and we work to understand the truth from lies. Thanks for your efforts.

    Roxie60

    ReplyDelete
  26. The Comex settled (mid) price of the cash month has been in backwardation to the prompt for a couple months now. First 10c then moved up to 40. Now back down to 20. To see, change the url number in the links below to move to previous trading days. I've been watching this for years and have never seen it this much for this long.

    Ex. for 25Jul13
    JUL13 1329.00
    AUG13 1328.80

    25Jul13
    http://www.cmegroup.com/daily_bulletin/Section62_Metals_Futures_Products_2013142.pdf
    24Jul13
    http://www.cmegroup.com/daily_bulletin/Section62_Metals_Futures_Products_2013141.pdf
    23Jul13
    http://www.cmegroup.com/daily_bulletin/Section62_Metals_Futures_Products_2013140.pdf

    ReplyDelete
  27. Can Trader Dan reply to Ed?

    ReplyDelete
  28. I have great respect for you Dan but I also have great respect for Sandeep Jaitly, one of the great Austrian economists today and he completely disagrees with you. He has spoken and written extensively about why gold has been in backwardation for some time. Would love to hear you address his arguments. Thanks

    ReplyDelete
  29. Your blog is nice. Your sharing tips are all awesome. All information is relevant. Your tips are relevant for visitors. Your blog provide the accurate and update information to the clients.

    Regards: Comex Tips

    ReplyDelete
  30. Andrew Maguire disagrees

    http://www.tfmetalsreport.com/blog/4888/guest-post-andrew-maguire-discusses-gofo-and-gold-backwardation

    ReplyDelete
  31. Excellent tips. Really useful stuff .Never had an idea about this, will look for more of such informative posts from your side.. Good job...Keep it up
    comex Tips

    ReplyDelete
  32. I really thankful to you for this great read!! You did a very great job, keep it up.Wholesale Military Catalog

    ReplyDelete
  33. it’s really great tips.. how can you get ideas to write the most useful tips to avoid annoying comments.
    comex Tips

    ReplyDelete
  34. Lols and Gags, Lol Pictures, Funny Pictures, Lol is the Laugh out of Laugh where you can Fun Unlimited and Laughing Unlimited. Visit the Best Lol Network Ever, where you can every thing is lol and Funny, Troll Images, Funny Vidoes, Prank Peoples, Funny Peoples, Prank Images, Fail Pictures, Epic Pictures and Much More Fun and Entertainment
    lolsgag.com

    ReplyDelete
  35. very clean and great style and design, not to mention the content. You are an expert in this area! I have subscribed to your RSS feed which may do the trick? Have a nice day!
    Commodity Market Tips

    ReplyDelete

Note: Only a member of this blog may post a comment.