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Morning Gold Fix: July 30 And Contango Crush
Submitted by www.fmxconnect.com
Contango Crush?
Yesterdays’
activity showed the Q/V spread coming in while the market gyrated a
little higher as this time it was Q longs who were the aggressive
liquidators. Rumors however still abound about delivery issues.
Observably, the majority of spreads continue to come in as the market
rallies. It can’t be emphasized enough. The cost of carry should not
come in on a financial spread as the underlying rallies, as evidenced
in the Contango Crush here.
For gold: Cost of carry = risk free interest rate + storage costs for the time period.
When
a market rallies eight dollars, and bonds are essentially unchanged
spreads should move out slightly or remain unchanged. Settlement noise
can be forgiven in less liquid markets, but really…..when M12-Z13 comes
in by 2.00 I gotta say something is off.
For the last year
spreads have behaved appropriately: rallying when the market rallies or
bonds collapse, decreasing when the market drops or bonds rally. But
for the last month the term structure has over performed to the
downside significantly more with less volatility than normal. I think
the issue may be real or at least it is being managed like it is.
Word
to the wise though. Even if a gold squeeze is coming , the market is
far too easy to “manage” by the big guys, so if the risk is real and a
squeeze is coming, don’t expect a spectacular move, expect government
involvement BEFORE it happens in the back end. Call it Eminent Domain.
Like in LTCM, to keep things calmer they might just roll it back and
keep deferring the issue out the curve hoping the cyclical nature of
the economy solves the problem. Why not, Mark- to-Myth accounting and
ZIRP policy give them infinite balance sheets. It’s what their policy
is for the whole credit crisis anyway. If that fails, bet on fiscal
changes to make owning gold difficult, probably though higher taxes on
bullion or something we aren’t thinking of yet.
-Elizabeth Thawne
Summary
Gold
opened Thursday’s trading at $1163.8 per 100 troy ounces. Once again,
the metal held relatively steady, with minimal volatility in pricing,
moving over a range of just over $10. It closed out the day with modest
gains at 1168.4.
August gold was up
4.2 to $1172.6 per 100 troy ounces as of 8:46 AM EST, this morning. The
September U.S. dollar index was down .059 to 81.695. October platinum
was up 0.6 to $1564.0 per 50 troy ounces. Silver was up 25.8 cents to
17.875.
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CON"Tango"n Crash bitchez.
Then buy treasuries if that makes you feel better. They have only been in a 30 year bull market and yields have been hitting all time lows as of today.
Not Gold "Crash".You interpreted my cryptic post incorrectly.
I think my chosen name would have indicated my mindset by now.
Nevermind.
So,"buy treasuries" ya say....you wish. I'll be wiping my ass with those more like.
My apologies bro, I didn't take note of your name.
!
"...bet on fiscal changes to make owning gold difficult, probably though higher taxes on bullion or something we aren’t thinking of yet..."
From the ground gold/silver comes and underground gold/silver shall return.
Right o.
Uhmmmm....
You know nobody trades the Octs in gold, right? They go right to Dec. (Z).
Or I guess you don't know.
yes. known. butthat doesnt mean it isnt relevant
The Mania will start soon,then there will be the frenzy ......................
"Yesterdays’ activity showed the Q/V spread coming in while the market gyrated a little higher as this time it was Q longs who were the aggressive liquidators."
it takes two to contango.
also, the last paragraph exactly states what i have reluctantly also come to understand and believe in the past months. to quote the great james hetfield, it's "sad but true."
wow they sure put a bitchslap on the POG at Crimex open...
Elizabeth, how do you make such big conclusions when the volume on the Dec 13 contract was only 10 yesterday?
because ive been watching the spread market for a year waiting for this behavior. Trading volume in comex back months is irrelevant unfortunately. The settlement is based on implicit values from interest rates adn spot price ABSENT an outside fundamental force.
if for example, we found out that Z13 gold was the cure for cancer while Q10 gold caused it, then that spread woudld have a fundamental reason for rallying. But absent forces outside carry cost, everything settles based on something else that traded. quotes determine settlements in illiquid markets as well. lay settlements over the bond curve adn you will see thesimilarity. they are beginningto diverge, but you can see the similar term structure never the less.
Thanks for the response, and your coverage of this. Very interesting.
"if for example, we found out that Z13 gold was the cure for cancer while Q10 gold caused it"
Be careful playing with gold ions. You'll get burnt.
http://www.digitaljournal.com/article/287638
It's weird but everyone knew this was coming. I just refuse to watch it. It's taking too long.
The question is how long the paper gold market can continue to run as a fractional reserve system without a decent backing of physical metal. Lehman had 11% Tier 1 capital five days before crashing and gold stands at 2.2% physical backing. We may have to wait until Basel VI or VII for that though as governments are already busy preparing to avoid the last crisis that already happened.
http://www.mi2g.com/cgi/mi2g/frameset.php?pageid=http%3A//www.mi2g.com/c...
http://www.gata.org/files/AdrianDouglasProofOfGoldPriceSuppression-07-20...
They should change to basil.
http://en.wikipedia.org/wiki/Basil
The problem is that the gold market has already crashed. The Fed and Treasury are on the hook for 8,000 tons of gold that they simply "borrowed". So the US government be it congress or fed/banking portion can't in fact "make good" on anything without completely destroying all currencys everywhere with still no chance to get enough gold.
Already happening, isn't it? With the new 1099 requirement, you won't be able to sell a one ounce Eagle without incurring taxes. Next up, a 10% added tax on gold gains. Ha, ha, it will never end.
There are 5 flea markets within 15 miles of my home and there is no large city within 60 miles of my home.
The smallest flea market has 4 coin/bullion dealers and they are the busiest booths, second only to the vegetable sellers. Of course the coin/bullion dealers are first in total purchases and sales. The coin/bullion dealers back up to their booths in vans and the rear doors are left open...If state or federal tax inspectors show up the word spreads through the flea mkt like wild fire, the dealer's tables are cleared in less than a minute and the coin/bullion dealers are long gone down the highway.
I have not seen any of the flea mkt dealers collect any taxes or fill out any tax forms and doubt seriously if they will do so in the future.
When taxation becomes too ornerous business is driven underground and given the lable 'black market'. At the same time smuggling will spring up for arbitrage of cross border prices. We are witnessing here what happened in the latter days of the Western Roman Empire...except the Roman Empire did not have any Federal deficits nor did the Roman population have any private debt. If you think I am trying to say we are screwed you are right.
Black market, Bitchez.
It's the best colored market. It's like mexico. It' has 2 economies. A black market economy and a TV show, pepsi, corporate sponsored economy.
Snidley, I don't have any problems with black markets either. They keep raising the taxes on Au, I'll be at the flea markets too.
Tax inspectors showing up... At some point it will not just be the word that spreads like lightning through the flea markets.
Some excellent points raised here about what may happen if they try to control our gold.
Anybody in the gold price fixing business aught to be very concerned that the lease rate has now turned positive:
http://www.kitco.com/charts/popup/au0030lr.html
Looking at the Contago in the futures markets, there are very few if any anomalous backwardations. The Contango says we can anticipate a rise in gold prices for the forseeable future:
http://finance.yahoo.com/q/fc?s=GCQ10.CMX
Gold is in a bear market.
Since no one has replied,here watch these while your waiting.
A repeat show now on air:
Season 2, Episode 24: The Rip Van Winkle Caper
Original Air Date—21 April 1961
After successfully stealing a gold shipment, a group of criminals and their scientist accomplice put themselves in suspended animation in a remote desert cave. When they awaken decades later, complications ensue when their truck is destroyed.
Part 1
http://www.youtube.com/watch?v=DccS7qWi2e0
Part 2
http://www.youtube.com/watch?v=xFeGr5cA7d8&feature=related
Part 3
http://www.youtube.com/watch?v=YrEgOOuCuK0&feature=related
........happy now.Ya can't get more bearish than this.
I watched it, but don't believe the ending will ever come true.
I hope not.LOL!
"A 63 year old California man only got 2900 dollars for coins that he paid over 5000 dollars for months earlier..."
http://www.dailyfinance.com/story/investing/gold-prices-may-suffer-amid-complaints-about-coin-scams/19573905/
That's because he wasn't smart enough to buy 99.99% proof bullion coins, and bought from a disreputable dealer. A swindle, pure and simple.
Yes, following that one coin swindle story and the subsequent premise, I heard of someone who got swindled on a used car - DON'T BUY USED CARS!!
<sarcasm on>
But the new car will kill me. Because people will screw with the computers on them just to play "hardball" and I'll be caught in the Government Motors Toy-oto mafia wars.
Because he was a MORON................
Substitute for Gold Coins here, a new auto, jewlery,and loss by percentage would be same, buy a new car, and drive it off the lot, would be commensurate.
This was just PUT into the Spotlight, by WEINER, to drag down Goldline, and Dealers in general.
DUE diligence as we know is required on any items we purchase.
Now Beck may be called beofre Congress...............take that gestapo crap we are in for major caca storm.
The CZAR's, are End arounding Congress to stop deporataion of illegals.
Look for more and more of this.............
That said, to say this..............GOT GOLD?
Better have a damn good place to hide it, or outside the country.
NO doubt these assclowns will be coming for it.
Yeah, that 63 year old guy should have day traded the HFT stock markets...He missed an opportunity to lose much more.
@ Bravo re bear market in gold.
Doesn't matter. All that matters is how many ounces you have. Your comment below (about the guy who lost money on his physical when he sold his coins) is a perfect example of weak hands, someone who (probably, as I do not know his circumstances) who should not have bought so much gold if he had a probable need for cash.
My gold isn't going anywhere but to the hands of those I choose (my daughter mainly). Gold comes down, some money comes in, I get it cheaper.
QED!
Do,
+1000
Gold is in a bear market."
Jonny, wht's this? I told you to use subtley disengeniuos arguments and half truths to confuse these idiot gold bugs, didn't I ? not easily refutable statements like gold is in a bear market.
Get with the program boy or I will replace you with Americanpatriot from Marketwatch
All right that's it! Jon and Johnny I have had it! I'm calling you out!
Both these guys work for JPM. Sorry I had to use the big sticks, fellas, but the time has come.
Damn. I trade this stuff, and it's still hard to parse her jargon.
This happens all the time in grains. Low volume plus inexperienced/unsophisticated traders get trades bunched up in odd months and places. No big deal. That's one way arbs make money, when we do.
To her larger point of how easy it is to manipulate the gold price, I have my doubts. PMs are liquid and global markets; lots of deep pockets involved. The main problem, as many here keep citing, is less confidence that some of the derivatives have any backing. That equals mucho volatility as small traders back off.
Mucha volatilidad!
Stay with the physical, avoid getting crushed by paper pros.
I think that once gold bucks its current downtrend, we can expect to see prices north of 50k an ounce.
54000 is my target, since I'm a rational man and all....
Finally the rational man joins the right team!
:>)
/
You're a rational man when others say that you are. Not when you lable yourself as such.
This much misinformation in one post pisses me off. Many here own gold or silver with little knowledge of the futures market. Maybe this will help.
Contango equals interest costs, storage, and insurance. In "normal" markets, futures price should be higher than cash (current price) by the amount of the contango. Insurance is an often forgotten cost, especially high on gold. Go figure. Now it gets interesting.
There is a hidden assumption that one is indifferent as between possession now or in the future. Would you gladly give up the shiny metal you have, for a promise from da boyz that they will replace it later? Contango is screwed as a measure of future value because the relationship between physical assets and paper assets is screwed. Enough said.
GBPUSD upside continues, since daily and weekly charts remain bullish.
http://stockmarket618.wordpress.com/about