|
|
Yesterday, Lemetropolecafe.com explained gold's $50 up move as follows:
From Lance Lewis
this am:
8:50 EST: Gold
Officially Goes Into Backwardation
This morning, gold officially went into backwardation for the first time
since the announcement of the Washington Agreement in 1999, which sent gold
shorts scrambling to find physical metal after the world's major central
banks agreed to limit sales of gold going forward and ended the one-way trade
to the downside in gold that had been in place in the late 1990s.
We know gold is now in backwardation because the gold forward offerred rate
(GOFO) has now gone negative.
The 3M GOFO has fallen 12 bps to -0.07%, and the 1M GOFO has fallen 20 bps to
-0.1167%.
Unlike other commodities, gold
very rarely goes into backwardation, and only when 1) the market fears a
collapse in the currency, and/or 2) the market is worried about
counterparties making good on their promise to deliver gold
(which was briefly the case in 1999, when the Washington Agreement was
announced and shorts were squeezed).
Translation: Gold is about to meltup, and the dollar is about to have an
accident.
Buckle up, gold bulls. Gold is set to blow its top soon in my humble opinion.
From Wikipedia:
Backwardation is a
futures market term: the situation in which, and the amount by which, the
price of a commodity for future delivery is lower than the spot price, or a
far future delivery price lower than a nearer future delivery.
The opposite market condition to backwardation is known as contango, in
which the spot price is lower than the futures price. Different from
contango, backwardation ... is unlimited.
On June 3, 2006, Antal E.
Fekete wrote:
People from
around the world keep asking me what advance warning for the collapse of our international
monetary system, based as it is on irredeemable promises
to pay, they should be looking for. My answer invariably is: "watch for the last
contango in silver".
It takes a little bit of explaining what this cryptic message means. Contango is
that condition whereby more distant futures prices are at a premium over the
nearby. The
opposite is called backwardation which obtains when the
nearby futures sell at a premium and the more distant futures are at a
discount. When contango gives way to backwardation in all contract spreads,
never again to return, it
is a foolproof indication that no deliverable monetary silver exists. People
with inside information have snapped it up in anticipation of an imminent
monetary crisis.
More from Wikipedia:
Some argue that
backwardation is abnormal, and suggests supply insufficiencies in the
corresponding (physical) spot market. [FOFOA: This argument refers to
monetary metal] This is empirically false: many commodities markets are
frequently in backwardation, specially when the seasonal aspect is taken into
consideration, e.g., perishable and/or soft commodities. [FOFOA: Gold is not
a perishable or soft commodity. In fact, I would argue that gold is not a
commodity at all. And that backwardation in gold is akin to negative interest
rates in Treasuries. It doesn't make much sense, and therefore it is a signal
that something deep is happening. Comments anyone?]
Backwardation
very seldom, if ever, arises in money commodities like gold or silver,
except one situation in the early 1980's when there was a one day
backwardation in silver while some metal was physically moved from COMEX to
CBOT warehouses. [FOFOA: I believe this refers to the Hunt Brothers.
Comments?]
Then on August 30, 2008, A.E. Fekete touched on this again in a new
article. Here's a snip:
That will be the
most dramatic event in the entire history of money, an
event that I have, tongue in cheek, called "The Last Contango in
Washington". The basis will give you an early warning signal...
...The basis will tell you well in advance when all the offers to sell real
gold or silver are about to be withdrawn in all the markets of the world. Once that happens, infinite demand
will confront zero supply. Don't say it can't happen
here. It has happened locally in France in 1796, in Germany in 1923, in China
in 1947, to mention but three episodes. This time it will happen globally.
So I ask again, is this it? Is this the beginning of the end for the dollar,
and the opening round of Freegold? We will have to watch the COMEX action for
the next four weeks to know. Will there be a default in a large delivery of
physical metal? Will a buyer ask for physical gold and get only paper fiat
money in settlement? If this happens, I would expect the future price of gold
on the COMEX to head down toward $0/ounce, the intrinsic value of paper,
while face to face exchanges of paper for physical gold become difficult to
make happen, and very expensive when they do happen.
I expect the COMEX price of gold to continue rising for a while. Perhaps
"the Cartel" will allow it to rise in hopes that the longs will be
tempted to take their paper profits or roll over their long positions into
the future. But if the basis is saying what I think it is, some of those
longs will say "screw your paper, gimme my GOLD!" Let's hope enough
of them do this to "break the bank" at the COMEX warehouse and the
"warehouses" of the naked short sellers like JPMorgan.
As ANOTHER said, "We watch this new gold market together, yes?"
I
say yes!
FOFOA
FOFOA is A Tribute to the Thoughts of Another
and his Friend
Donations are most appreciated, just click
here
Also
by Fofoa
| |
