This page has been archived and commenting is disabled.

Guest Post: Temporary Backwardation: The Path Forward From 2008

Tyler Durden's picture




 

Submitted by Keith Weiner of Keith Weiner's Posterous blog,

The March silver futures contract first entered backwardation on Mar 9 and with a few zigs and zags has not only remained there but has gone deeper and deeper in. The April gold future just entered backwardation today. See the graph below (backwardation is when (Spot(bid) - Future(offer) > 0).

 

We shall see what the coming days bring for the April gold future, but the fact that backwardation has occurred at all is significant. The fact that it is now a “normal” occurrence since fall 2008 indicates a deep pathology.

I have written in the past about gold and silver backwardation (http://keithweiner.posterous.com/debunking-gold-manipulation and http://keithweiner.posterous.com/the-decline-and-fall-of-silver-backwardation and http://keithweiner.posterous.com/when-gold-backwardation-becomes-permanent). The gist is that one can look at the spread between the price of a future vs. the price in the spot market of the same commodity.

We define the basis as the Future(bid) – Spot(ask) and the cobasis is, as mentioned above, Spot(bid) – Future(offer). In a normal world, the basis is positive and it is basically given by the rate of interest. The cobasis should be negative unless there is a shortage. A shortage of gold or silver is meaningless as people have accumulated enormous inventories of the stuff over thousands of years.

But in the “new normal”, post 2008, the expiring gold or silver future often flirts with or even slips into backwardation for a period before expiry. This is anything but normal. It’s not a sign of imminent financial Armageddon, but it is a sign that beneath the surface there is a growing rot in the core of the system. Why?

The short answer is that no actionable opportunity to make free money should last more than a millisecond (or less, due to High Frequency Trading). If one can see a “risk free profit” sitting on the screen day after day, let alone if this profit is growing, this is a sign that All Is Not Well even if one doesn’t know why or what specifically is happening. Backwardation means that anyone who has gold or silver could simultaneously sell the metal and buy futures contracts to recover their position, and make a profit. And, given the enormous stocks of gold and silver, many people have lots of gold and silver.

The backwardations that are “normal” today are too small for the retail trader to profit from, given that he must pay commissions. But they are easily large enough for many institutions that make a market in gold (especially compared to their alternatives for short-term capital). The following question remains unanswered:

Why do institutions not take the risk-free profit offered to them in gold and silver?

I don’t believe it’s because they are afraid of the risk. I make this statement in light of two facts: (1) the near-month future expires very soon (about 5 weeks for April gold or a week for March silver) and (2) the farther-out futures are not in backwardation. The financial system is not going to collapse in 5 weeks, and if it were then the farther futures would fall further into backwardation. Trust in delivery 5 months from now would be less than trust in delivery 5 weeks or 5 days from now.

As a reminder, to profit from contango, one must buy physical and sell a future against it to end with the same net position plus a small profit. To profit from contango, one carries the metal. Think of carrying as like warehousing it for a small fee. The only prerequisite is that one needs cash (or more typically credit). Carrying will push up the ask in physical and push down the bid in the future, thus reducing the basis.

In contrast, to profit from backwardation, one decarries by selling physical and buying a future. The prerequisite is that one needs the metal. One could either sell one’s own metal, or if one had previously carried metal one could unwind the carry. Either way, this would push down on the spot bid and up on the future ask until the cobasis was zero or negative.

For whatever reason(s), this is either not occurring or despite it, the ask on the future is falling relative to the bid on spot.

For now, let’s just say that the market is tight. The metal is out there, but obviously those who have it in an unencumbered form are not able (retail) or willing (others?) to take this backwardation bait.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 03/22/2012 - 12:33 | 2280682 Badabing
Badabing's picture

BACKWARDATIONREHIPOTHEACATION

Thu, 03/22/2012 - 12:41 | 2280698 A Nanny Moose
A Nanny Moose's picture

SUPERCALIFRAGILISTICEXPIALIDOCIOUS

Thu, 03/22/2012 - 12:46 | 2280719 Sophist Economicus
Sophist Economicus's picture

ANTIDISESTABLISHMENTARIANISM

Thu, 03/22/2012 - 12:51 | 2280738 Manthong
Manthong's picture

"Backwardation means that anyone who has gold or silver could simultaneously sell the metal and buy futures contracts to recover their position, and make a profit. "

Um... MF Global.. CAC.. GM Bonds.. JPM silvir short positions..

Does counter-party risk, solvency, confidence in the trustworthiness or fiduciary responsibility of the government or banks play any part in this trade?

Thu, 03/22/2012 - 12:51 | 2280747 johnQpublic
johnQpublic's picture

sell the present

buy the future

rent the past?

Thu, 03/22/2012 - 13:12 | 2280849 Ahmeexnal
Ahmeexnal's picture

the coastline is receding, thus enabling the casual observer to find out who was swimming naked. however, those in the know prefer to run to the hills, as experience dictates a tsunami will soon follow.

Thu, 03/22/2012 - 13:33 | 2280962 DoChenRollingBearing
DoChenRollingBearing's picture

Yes!  Buffet, correct?

We will soon see who the jerks are.  We may soon see a tsunami...

Thu, 03/22/2012 - 12:51 | 2280748 Sophist Economicus
Sophist Economicus's picture

That's the point!

Thu, 03/22/2012 - 12:58 | 2280795 SheepDog-One
SheepDog-One's picture

50X leveraged to boot!

Thu, 03/22/2012 - 13:59 | 2281084 Ratscam
Ratscam's picture

Brent oil Dez. 13 is USD 12 in backwardation!
Free storage and interest!

Thu, 03/22/2012 - 23:01 | 2282493 StychoKiller
StychoKiller's picture

In contrast, to profit from backwardation, one decarries by selling physical and buying a future.  The prerequisite is that one needs the metal.  One could either sell one’s own metal, or if one had previously carried metal one could unwind the carry.  Either way, this would push down on the spot bid and up on the future ask until the cobasis was zero or negative.

 

Check out the sentence I highlighted -- "They" don't gots the metal!

Thu, 03/22/2012 - 13:07 | 2280831 F22
F22's picture

PNEUMONOULTRAMICROSCOPICSILICOVOLCANICONIOSIS

Thu, 03/22/2012 - 12:45 | 2280717 tocointhephrase
tocointhephrase's picture

and then some!

Thu, 03/22/2012 - 13:10 | 2280844 exi1ed0ne
exi1ed0ne's picture

ILOVELAMP

Thu, 03/22/2012 - 13:11 | 2280845 exi1ed0ne
exi1ed0ne's picture

.

Fri, 03/23/2012 - 09:24 | 2283088 Imminent Crucible
Imminent Crucible's picture

"Why do institutions not take the risk-free profit offered to them in gold and silver?"

That's a remarkably ignorant/dense question from someone who opines on commodity futures markets. The answer is simple: It's NOT risk-free, and there are NO "enormous stocks" of silver on hand. The signs of shortage are everywhere.

You risk selling your physical silver only to find that when delivery day arrives, you don't get your silver back at a cheaper price. Instead, you get a cash settlement. Comex is forcing cash settlements all the time now. There is strong evidence that even GLD and SLV are being settled in cash.

Right now, the silver chart is carving out the right shoulder of a multi-month inverted H&S pattern. The right shoulder low should develop over the next few sessions near $30. After that, get out the way.


Thu, 03/22/2012 - 12:41 | 2280702 SHEEPFUKKER
SHEEPFUKKER's picture

More bankster dumbfuckery. 

Thu, 03/22/2012 - 12:44 | 2280713 Schmuck Raker
Schmuck Raker's picture

" to profit from backwardation, one decarries by selling physical and buying a future."

No one willing to take their eyes off their gold sounds like "Smartfuckery" to me.

Thu, 03/22/2012 - 12:51 | 2280743 SheepDog-One
SheepDog-One's picture

Sell your gold to us, and buy a FUTURE instead! Its really a good deal, we promise!

Signed- Trickfuckery FED

Thu, 03/22/2012 - 13:05 | 2280820 Alea Iactaest
Alea Iactaest's picture

Right. But why buy a BUNCH of gold right now and then promise to sell it back later? What would someone do with a BUNCH of gold right now? Is this connected to the recent sell-off in PMs? Getting a bunch of gold now could let someone meet delivery, possibly due to a short position. Maybe the guy standing for delivery can't be bought off, like what's-his-name in Venezuela.

 

Might be possible to dry up some unencumbered gold supply to make things more difficult for anyone trying to set up an alternate (e.g., non-USD) payment system or operating outside the SWIFT system. Not that I can think of any countries fit that description at the moment.

 

On a related topic, why is Turkey trying to get more gold into its banks right now?

Thu, 03/22/2012 - 13:05 | 2280821 1100-TACTICAL-12
1100-TACTICAL-12's picture

"dumbfuckery" indeed.

Thu, 03/22/2012 - 13:16 | 2280861 Lmo Mutton
Lmo Mutton's picture

+1 for the flag and the 1100WIN

Thu, 03/22/2012 - 12:41 | 2280704 blunderdog
blunderdog's picture

Gold backwardation?  Head for the hills!

Thu, 03/22/2012 - 12:42 | 2280706 DoChenRollingBearing
DoChenRollingBearing's picture

If gold stays in backwardation for more than a few days, it may be over, bitchez!

(source, but not his words: Fekete)

Thu, 03/22/2012 - 12:42 | 2280708 Zero Debt
Zero Debt's picture

Refresher on Gold Backwardation from FOFOA: http://fofoa.blogspot.com/2010/07/red-alert-gold-backwardation.html

 

Thu, 03/22/2012 - 12:54 | 2280769 DoChenRollingBearing
DoChenRollingBearing's picture

+ $55,000

Off to read the link now.

Thu, 03/22/2012 - 12:43 | 2280709 Sophist Economicus
Sophist Economicus's picture

I have a weekly buy program for gold bullion coins (trigger just gets pulled, regardless of price - stops me from out-smarting myself).   Money is wired, so there are no postal delays.    Delivery has been getting longer, the 2012 Eagles have stopped coming and I'm getting the Roman date series now.

 

Might just be coincidence.   Now, Tulving always has what I want, but they are bulk players.   

 

Didin't really run into this issue last year.   SOmething may be up.   I'm all for these dopes driving the price down, but I hope they know what game they're playing....

 

 

Thu, 03/22/2012 - 14:05 | 2281127 XitSam
XitSam's picture

Similar experience but in silver.

Thu, 03/22/2012 - 12:45 | 2280714 EL INDIO
EL INDIO's picture

Gold is below the 200 DMA, now is the time to accumulate. This is a no brainer.

Nowadays information cannot be trusted, too many lies, too much disinformation, too much speculation, too many assumptions too much bias.

Don’t let the tree mask the forest from your view.

Thu, 03/22/2012 - 12:46 | 2280720 RoadKill
RoadKill's picture

Guys - hold PAT.  I will tell you when it is time to buy with both fists.  Hell when gold < SPX I will buy with leverage - but not yet.  HOLD!!!  HOLD!!!  Wait till you see the whites of their eyes..

Thu, 03/22/2012 - 12:48 | 2280729 Sophist Economicus
Sophist Economicus's picture

Who is Pat?   I hope it's short for Patricia...

Thu, 03/22/2012 - 14:10 | 2281154 oddjob
oddjob's picture

That's his last name. First and initial is Stan D.

Fri, 03/23/2012 - 01:09 | 2282673 MeelionDollerBogus
MeelionDollerBogus's picture

BUY GOLD NOW.

If you're concerned about not getting the best deal on a future dip that's very very near then buy gld PUTs or edge into the purchase in 2 or 3 stages (keeping in mind the premiums paid, shipping, whatever, each time). Gold's insurance goes beyond short-term paper price you can get if you want to unload it. In fact if you want paper profits so badly then just get a GLD strangle & forget about bullion. Just remember that if paper vaporizes & counter-party risk is MF Globalled you'll be left with NOTHING.

Thu, 03/22/2012 - 12:46 | 2280723 Zola
Zola's picture

MF global...

Thu, 03/22/2012 - 12:48 | 2280732 SheepDog-One
SheepDog-One's picture

Its just a barbaric relic anyway, except to the worlds banks who continue to hoard gold and try to get it from private hands into govt hands like Turkey, for whatever barbaric reason.

Thu, 03/22/2012 - 12:54 | 2280765 mark mchugh
mark mchugh's picture

Soon to be deposed dictators always try to abscond their crumbling nations with it too, for whatever barbaric reasons.

Thu, 03/22/2012 - 12:57 | 2280789 SheepDog-One
SheepDog-One's picture

I know, its so heavy and cumbersome and all....and like Buffet says gold is just dug up in one place, only to be re-buried in someones back yard anyway..such barbarism. 

Thu, 03/22/2012 - 13:13 | 2280854 Vince Clortho
Vince Clortho's picture

I take it this "Buffet" you speak of is some kind of Seer?

Thu, 03/22/2012 - 12:49 | 2280734 mark mchugh
mark mchugh's picture

"A shortage of gold or silver is meaningless as people have accumulated enormous inventories of the stuff over thousands of years."

Ummmm there are no enormous inventories of silver anymore, unless you consider a less-than 1year supply enormous.  The only problem with precious metal prices is for every person taking physical delivery, there's a hundred nimrods willing to bet on the price action.  So the object of "price action" becomes to seperate as many of said nimrods as possible from their fiat.

Shark boy and Lava girl understand this, maybe you should too.

Fri, 03/23/2012 - 03:24 | 2282756 UnpatrioticHoarder
UnpatrioticHoarder's picture

Prof Fekete speculates that China may have a large silver hoard against which they sell options to earn an income.

Thu, 03/22/2012 - 12:52 | 2280754 carbonmutant
carbonmutant's picture

Metal vs. paper....

Thu, 03/22/2012 - 12:54 | 2280764 johnQpublic
johnQpublic's picture

bought eleven silver eagles off guy on craigslist yesterday for 300 dollars

but i lost 'em when my kayak sank

Thu, 03/22/2012 - 13:21 | 2280888 ParkAveFlasher
ParkAveFlasher's picture

I traded mine to a 70-year-old Turkish hooker for a gumjob.  And let me tell you, she didn't wait long for me to mature - OHHHH

Thu, 03/22/2012 - 16:43 | 2281775 Likstane
Likstane's picture

I'm sorry dude. Tough way to lose your stash.  My shitty green Coleman 12 footer couldn't muster it when a rogue wave took me down off Washington's coast real close to where the ferry leaves out of Edmunds. 

Fri, 03/23/2012 - 09:12 | 2283050 Vlad Tepid
Vlad Tepid's picture

You haven't been around much have you?  We ZHers PMers take LOTS of over water trips in small craft and we aren't very skilled at watercraft.  Hell, we've tipped in so many lakes and oceans that we don't even remember their names.

Thu, 03/22/2012 - 12:54 | 2280768 SheepDog-One
SheepDog-One's picture

'Sell your physical, and buy some of these here paper future bet markers instead'!

Uh, thanks but no thanks.

Thu, 03/22/2012 - 12:59 | 2280798 Bam_Man
Bam_Man's picture

Lots of people holding (the same, re-hypothecated) "paper" gold.

More and more physical is going into hiding. Why wouldn't it after the MF Global fiasco?

I'm surprised the backwardation isn't even more severe.

Thu, 03/22/2012 - 13:01 | 2280807 LawsofPhysics
LawsofPhysics's picture

"Why do institutions not take the risk-free profit offered to them in gold and silver?"

What?  Wake the fuck up, many institutions have, in fact, been taking physical delivery.  Paper is otherwise irrelevant.

Thu, 03/22/2012 - 13:17 | 2280865 sitenine
sitenine's picture

'risk free' - yeah, that's a good one. Apparently, the author missed that little MF Global incident.

Thu, 03/22/2012 - 16:06 | 2281620 mick_richfield
mick_richfield's picture

No, you don't understand.

By "risk free" he did not mean "no risk".

He meant "you get the risk without paying extra for it."

Thu, 03/22/2012 - 13:01 | 2280809 east paris trader
east paris trader's picture

Could also mean that paper "markets" are losing their meaning --- no players except the shorts.  To accept this trade, you need faith in the comex.  There's the rub...

Thu, 03/22/2012 - 15:32 | 2281473 rosiescenario
rosiescenario's picture

Exactly....and another poster pointed out Brent is also in backwardation....if so, more loss of confidence.

 

I do not track other commodities, but I wonder if backwardation is being seen elsewhere? This could well spread to the point that the futures market disappears??

Thu, 03/22/2012 - 15:48 | 2281543 rosiescenario
rosiescenario's picture

Currently there is also backwardation in platinum. Gold's appears to have gone, but silver still has a few contractsin backwardation.

Thu, 03/22/2012 - 13:03 | 2280814 apberusdisvet
apberusdisvet's picture

There's no backward Asians; in fact they are pretty fucking smart since all the gold is moving East.

Thu, 03/22/2012 - 13:23 | 2280903 ParkAveFlasher
ParkAveFlasher's picture

"all the gold is moving BACK East."

 

fixed

Thu, 03/22/2012 - 13:15 | 2280851 cowdiddly
cowdiddly's picture

Ron Paul waved a coin in front of Berskankes face and they instantly and relentlessly started to pulverize the price of gold.

China knows about this manipulation, but quietly agreed to close down Page ask yourself why?

They are playing along and love the lower prices. In 2007-8 China announced that it had doubled its gold reserves to about 1033 tons and everyones jaw dropped. The next year China quits exporting any gold and starts importing more. Everyone forgets that China is currently the number one producer of gold producing about 350 tons a year domestically. Now a quick back of the napkin calculation

China's last announced gold holdings 1033 tons. plus 2009,10,11 1nd 12 internal production, 350 per year times 4= 1400 tons + 450 tons bought this year on the Hong Kong exchange. and a known 50 tons bought on the comex recently. Add this up and probably more that has not been reported its over 3000 tons. CHINA is the number TWO HOLDER IN THE WORLD NOW. The current supposedly number two holder Germany at 3000 tons of melted down teeth that they will never get back is irrelevant.So dont act suprized YOU stupid fucks at the FED when china next annonces how much gold it has. YOU keep suppressing prices and you better have a lot of gold paint for those tunsten bars Nixon screwed you out of.

THe dollar is a goner and the next reserve currency is already ready in ASIA> Congratulations FINE JOB> LETS SINK THE PRICE SOME MORE> Idiots.  

 

 

Thu, 03/22/2012 - 13:25 | 2280913 fuu
fuu's picture

The Bloomberg clock on this clip shows Ron asking his shopping question at 10:47 ET. http://www.youtube.com/watch?v=H4uL6CSiGrU&feature=youtu.be&t=50s

Here's a rough image of the timing. http://i44.tinypic.com/21o66bm.png

Thu, 03/22/2012 - 13:20 | 2280879 NotApplicable
NotApplicable's picture

How could someone write an article like this and NOT mention MFG?

Thu, 03/22/2012 - 13:22 | 2280890 ClevelandJanelle6
ClevelandJanelle6's picture

my neighbor's aunt makes $67 hourly on the laptop. She has been fired from work for ten months but last month her check was $20142 just working on the laptop for a few hours. Here's the site to read more ....  http://lazycash9.com

Thu, 03/22/2012 - 13:25 | 2280914 Sophist Economicus
Sophist Economicus's picture

Hey Tyler, ya got another one....Time to deep-six a handle

Thu, 03/22/2012 - 13:27 | 2280927 fuu
fuu's picture

That other dude's neighbor's mom makes $87/hr.

Thu, 03/22/2012 - 13:27 | 2280936 Sophist Economicus
Sophist Economicus's picture

LMAO!

Thu, 03/22/2012 - 13:27 | 2280932 Sophist Economicus
Sophist Economicus's picture

BTW, spam-bot, how does your aunt work 'on a laptop'?    Is she a microbe?

Thu, 03/22/2012 - 15:04 | 2281347 slyhill
slyhill's picture

laptop dances, duh.

Thu, 03/22/2012 - 14:00 | 2281085 downrodeo
downrodeo's picture

...I can't belive nobody has ever told me about this job before. golly thanks, here i am working for $12/hr like a sucker. your neighbor's aunt makes like, at least 2 times that doesn't she? I'm putting in my two week notice right now, those bastard white collar partygoers can piss in their own soup for all i care; i'm gonna be making bank!

Thu, 03/22/2012 - 14:29 | 2281234 Debeachesand Je...
Debeachesand Jerseyshores's picture

Go the FUCK away and retreat back to MW and CNBC.

Thu, 03/22/2012 - 13:25 | 2280910 Sutton
Sutton's picture

"I can make gold go from backwardization to contango in 15 minutes."

BS Bernanke

Thu, 03/22/2012 - 13:28 | 2280928 Quinvarius
Quinvarius's picture

It is impossible to make any sense of lease rates, contango, backwardation, or TA in the gold/silver market.  Every bullish signal is a signal to CBs to intervene.  Every bear move gets stuffed by the physical market which knows gold is worth many multiples more than the current price.  It is just too manipulated in the short term.

Global Foreign reserves in dollars = 10 trillion.  True US M3 = 15 trillion.  Add Global Foreign reserves in dollars to M3 to get 25 trillion. Gold supply to back that money = 270 million ounces.  Do the math.  Ignore everything else.  Trust the numbers.

Thu, 03/22/2012 - 13:29 | 2280944 fuu
fuu's picture

$92,592.59/oz?!?

Thu, 03/22/2012 - 13:36 | 2280971 Quinvarius
Quinvarius's picture

And all the countries in the world will suddenly be solvent when it gets there.  Amazing how Gold does that.

Thu, 03/22/2012 - 13:42 | 2280998 DoChenRollingBearing
DoChenRollingBearing's picture

FOFOA has kind-of upped his new number to $100,000 / oz, so yes, your math is good!

Thu, 03/22/2012 - 13:49 | 2281028 youALREADYknow
youALREADYknow's picture

Gold isn't the ONLY asset that can/could be used to back a currency which makes that number misleading at best. The only way any of us see $100k gold in our lifetimes is via hyperinflation and that $25T number would probably be 100x higher in the case of true hyperinflation.

If you just added silver and land resources to gold then that $100,000/oz number probably goes down to $20,000/oz. That's a more realistic estimate of the "value" of gold in today's world sans fiat.

Thu, 03/22/2012 - 13:57 | 2281067 DoChenRollingBearing
DoChenRollingBearing's picture

FOFOA has a very different take than most gold observers.

fofoa.blogspot.com

 

1)  His numbers are based on NON-hyperinflated 2009 dollars.

2)  The central banks and other ¨Giants¨ have already chosen gold as their preserver of wealth, not silver.

3)  Land can be taxed or otherwise encumbered by the government.

Fri, 03/23/2012 - 01:01 | 2282669 MeelionDollerBogus
MeelionDollerBogus's picture

How does such a number come about? There's only so much gold, copper, steel & aluminum in the world. Energy's another story as it's constantly decreasing in supply. Are you actually assuming dollars or other fiat currencies will still exist? Are you talking about "equivalent purchasing power" of 1 troy oz gold vs today's dollars-value of gold, even if there's no such thing as dollars in the year this price-event happens? Are you considering how many dollars copper/pound and oil/barrel and uranium/pound will go for with gold over $92,000 ?

Fri, 03/23/2012 - 09:21 | 2283066 fuu
fuu's picture

Well I took 25,000,000,000,000 and divided it by 270,000,000. I had to use a spreadsheet though since my calculator doesn't do 2.513/2.78.

Thu, 03/22/2012 - 13:29 | 2280949 JustObserving
JustObserving's picture

Central banksters are deathly scared that their Ponzi paper will be seen for what it is - supported by nothing.  So gold and silver must be attacked to make citizens leery of holding real wealth.  US debt and unfunded liabilities growth everyday can buy the annual production of silver (700 to 800 million ounces).  World growth of debt and unfunded liabilities is about 3 times that - so one can buy the world's annual silver production every 8 hours.

These numbers are so stunning that few grasp them.  Besides, there is an unlimited supply of paper silver to sell to keep the Ponzi scheme going - it will work until it doesn't.

 

Thu, 03/22/2012 - 13:31 | 2280953 GoldenGal
GoldenGal's picture

So what is one to do? When will the true price of gold shine?...In the meantime   all we have are some barbarous relics!

Maybe we should invest our gold into the chinese yuan!

Thu, 03/22/2012 - 13:33 | 2280959 GoldenGal
GoldenGal's picture

But the dollar seems to be staging a comeback....and Benny looks like such a nice Italian boy

Thu, 03/22/2012 - 13:33 | 2280961 peruchocanuck
Thu, 03/22/2012 - 13:38 | 2280978 devo
devo's picture

Miners look very attractive. 52 week lows. I guess on fear production costs eat into profits? That just means higher gold prices. Picked up some NEM today. ABX looks solid, too.

Thu, 03/22/2012 - 13:51 | 2281043 swissaustrian
swissaustrian's picture

GORO didn't make new lows, but they're still on sale. The first company to pay physical dividends (in actual coins)!

Thu, 03/22/2012 - 14:04 | 2281070 devo
devo's picture

That is awesome. Wish I knew that; I might have went with them instead of NEM. The HUI index is so low. 500 is the bottom of its range, and it was at like...460 this morning. There's a disconnect between spot and miner valuations, and the mining companies aren't happy about it. I think this breaks upward because underneath the paper gld instruments, there are real people producing real gold, and they demand a certain profit margin to do so.

ps. What type and size of gold coin do they pay out?

Fri, 03/23/2012 - 00:26 | 2282630 MeelionDollerBogus
MeelionDollerBogus's picture

How do you feel about GDX or GDXJ?

Thu, 03/22/2012 - 13:51 | 2281047 tony bonn
tony bonn's picture

it has been several months since i have made by pronouncement about severe and permanent backwardation of gold....but that state is not divined by the paper prices of gold....i assure you that the paper prices are fake, fraudulent, manipulated horse crap....

the dancing bears, birds, and clowns on every street corner in most major cities are proof of our backwardation

Thu, 03/22/2012 - 14:02 | 2281104 debtor of last ...
debtor of last resort's picture

Oliver confiscated my gold & silver. Said something about 'new currency' and gave me some eggs and nuts.

Thu, 03/22/2012 - 14:42 | 2281264 Monedas
Monedas's picture

BackWIMPYdation:   If you give me some silver today.....I will gladly pay you in hamburgers on Tuesday !  Monedas  2012   Backwardation means face in the pillow, tits on the bed, ass high in the air !

Thu, 03/22/2012 - 23:47 | 2282571 xela2200
xela2200's picture

I love your prediction of October 17, 3011.

Fri, 03/23/2012 - 00:22 | 2282627 MeelionDollerBogus
MeelionDollerBogus's picture

I am trying to get you to reply back.. wondering if you'll share your math.

I've got this short-term: http://flic.kr/p/bpJpXX

and this long-term: http://flic.kr/p/aVrgu6

my math is reversing the calculation for rate-of-change & having seen the boundaries established that contain a line or curve, plotting the low & high boundaries (red, green) accordingly around the price action, then rolling it forward into the future. The short-term one is 277 weeks looking back, the longer-term one is 52-weeks looking back. The 52-week adheres to the common 20-30% annual gains at any given time. The 277 week is a very tight fit but this year-long trend may be over-fit & ready to expire.

Thoughts?

Sat, 03/24/2012 - 03:40 | 2286164 sherryw
sherryw's picture

You might find him over at Sapo's Joint.

Thu, 03/22/2012 - 16:17 | 2281687 Canadian Dirtlump
Canadian Dirtlump's picture

great to see silver BLOWTORCHED again.. I need to reload my wishing well ammunition.

 

backwardation mental retardation..

Thu, 03/22/2012 - 16:33 | 2281750 gwar5
gwar5's picture

It is pretty obvious to me that institutions are being told by TPTB not to buy gold, or, they just simply have so many paper assets in their portfolios that they cannot risk crashing their paper by switching even a small % of it into physical gold. Gold is an anti-hedge for them.  I hope we can start to see a trickle of defectors.

Seems like there is the real WWIII going on right now and we are in it. This is what Rothschild called the co-opting of the knowledgeable, vested money elite into the fiat system against us hapless muppets through their own self interest.   

In financial repression banks are coerced to buy Bonds to support the fiat currency and government spending when no one else can, or will. So they can't buy gold. They're still to busy digging trenches. They're going to try to starve us out.

 

 

 

 

 

Thu, 03/22/2012 - 16:45 | 2281783 falga
falga's picture

Backwardation in precious metals is a aka "the Armagedon" signal or financial markets...

Thu, 03/22/2012 - 17:56 | 2281950 Fedaykinx
Fedaykinx's picture

can't or won't?  won't.  strong hands, bitchez.

Thu, 03/22/2012 - 20:16 | 2282178 SimpleSimon
SimpleSimon's picture

Hush.  Deflation.  Gold will cost less in the future.

Thu, 03/22/2012 - 22:34 | 2282436 CapitalistRock
CapitalistRock's picture

This would seem to indicate the market is expecting slight deflation, or a strengthening of the US dollar against real money. That just means people are eating what Bernanke is selling. There's not much new here. The market will be proven wrong and those who hold real money will be just fine. It's happened for thousands of years with fiat currencies.

Fri, 03/23/2012 - 07:05 | 2282826 Peter Pan
Peter Pan's picture

I just bought a big stash of silver coins and paid spot price for the silver content. That's what you call money. My friends and I use silver bullion as security for lending. If I or they want to borrow fiat from each other, then an equivalent amount of silver is handed over as security until the fiat is repaid. No pressure on the friendship and no disappointments if someone goes broke.

Do NOT follow this link or you will be banned from the site!