lardoon

So now we have 3 definitions for gold backwardation: cg: LBMA GOFO rate is negative (as happened in late November) http://www.lbma.org.uk/?area=stats&page=gofo/2008gofo Antal Fekete: spot price > front month futures price Trader Dan (and most common definition as I understand it): front month futures price > farther month futures price I guess these all point towards the same things but that just makes thing a bit complicated to understand when gold actually IS in backwardation...

Try this: http://www.oanda.com/convert/fxhistory They have prices going back to 1990 - you need to get the raw dataa as CSV and paste it in Excel and do the chart yourself though...

The problem is that I really dont understand how you draw your channels... Its always a bit of guess work but the main descending channel you drew is violated both on the upper and lower bands and dont really seem to fit makes me a bit skeptical of basing one's analysis on this...

I agree with you - I was just trying to "cheekily" point out that there might be other factors to the retail shortage. But I am only playing devil's advocate here as I am bullish on gold - just wary of the downside

Why can you buy 1,000,000 and above tons of wheat on the futures market (and take delivery) but you cant buy 10ks worth of flour packets without hunting them down? I dont necessarily see the issue as being too different.. Have you tried taking delivery of 1,000,000 on the LME or COMEX? James Turk has (I am assuming he deals with these numbers in GM) and he did not have to hunt them down...

But what price is he talking about? (as in "the price would double in a very short amount of time") I am assuming this is the paper price also? If so investing in paper also makes sense??? The 1980 price of 850 was in the paper market also wasnt it?

They can hedge their stock via the futures market. This is the PRIMARY purpose of any Futures market (which was invented by the Chinese or Japanese for Rice I believe - and I speculate there was not much market manipulation by PPT teams there ). Lets say I am a dealer, today I buy all my stock of 100,000oz in the Cash market at $12. At the same time I would sell the same amount in the Futures market (which should more or less track the spot price) so Short 100,000oz at ~$12 Tomorrow the spot price is $11: my stock has lost $100,000 but my futures contract has gained $100,000 - I havent lost anything. I sell 10,000oz at a 5% premium and this is my profit - no profit or loss on the silver itself as it is hedged. As my stock is now 90,000oz I can reduce my short Futures position by 10,000oz and so on until the stock is finished... I recommend this article from Antal ekete which contains a part on the silver basis which also covers agricultural futures explained as a hedge: http://www.gold-eagle.com/gold_digest_04/fekete050404.html

I dont know why but I get bad vibes from Jason Hommel. It makes me think of a lunatic! I think his plan his rubbish and his analysis stupid... I believe it is just the plain old law of supply and demand applied to 100oz silver bars. Most retail investors do not have the funds and account to take delivery of a futures contract at COMEX or LBMA (which Hommel does not mention at all although I believe this is a very large trading place for Silver). Therefore they are mostly stuck with buying 100oz bars (or under). Because of the Credit crunch and resulting financial crisis, people (ie retail "investors") are panicking and taking their money out of banks and some are putting them into PM, including silver. Because this is done on a large scale, this creates a huge demand for this form of silver to which the supply side, being inelastic, can not reply, creating a shortage of 100oz bars. As for any supply/demand imbalance, price goes up. This translates in a much higher premium to spot because the spot market has a MUCH larger volume which makes it able to absorb increased demand in an easier way and its participants trade all year round (ie no tidal wave of new participants like I anticipate there is in the retail market). This means that the real Silver market (Spot) does not suffer from the same imbalance. Actually I think his plan is not so rubbish. He has just spotted a supply/demand imbalance and will set up a venture to address and profit from it. However how long is this extremely increased demand going to last? One can assume long enough with the USD crisis. But by "flooding" the market the imbalance will be reduced and the premium (and hence potential profit) would be reduced. Assuming there are large naked short positions in the futures market (and that is definitely not sure - see post http://www.greenenergyinvestors.com/index....st&p=64492) and that the retail demand represents a large enough proportion of the physical silver market this could create a short squeeze driving the price up. But then again there are limits on amounts of physical delivery you can take from COMEX (implemented post Hunter Bros cornering attempt)

Here is David Morgan's take on Futures position reports: I also recommend a read of Fekete's articles where he dismisses Ted Butler's claims of naked shorting by the "big 4". Not sure if true but that makes for a balanced view... http://oikonomikablog.wordpress.com/2008/0...naked-bogeyman/ http://www.kitco.com/ind/fekete/sep252007.html http://www.financialsense.com/editorials/f.../2004/0503.html

This might not be... because they have other positions which are not reported, so you cant assume their overall net position

where do you see it going now? Its breaking out of the BB20 on the downside on the 1hr chart and broke the MM20 on the daily chart... sorry I am crap at screenshots..

As contradictory as it may seem I think this bill will be beneficial to the dollar in the short-term as it makes the US financial system "appear" safer (ie more backing from the govt) on top of the deflationary bust which will make the senior world currency (dollar) appreciate. Not sure what the impact this will have on gold... I think this bill wil remove some short-term fear from the market

gosh a bit sloppy from my part... well I was wrong gold is not tanking... yet lets see what happens now..

well I put my money where my mouth is also (sold at 840) and I am saying that if the bill is passed (which I would be very surprised it does not) Gold will dip below 820. What time is the result of the vote btw?

Does anybody think the 2 are related/correlated? ie is the high TED spread not translating itself "mechanically" in a higher gold lease rate - and in that instance high gold lease rates would not imply short covers activity? It just means lending anything (or any sort of money, USD or Gold) becomes more expensive).

Yep it could go a lot lower... Remember that day of August 14 when silver went from 15 to 12 with 1 dollar drop during the day and 2 dollars during the night? I get the same bad feeling here... I shall be watching the open of Globex with interest...

Seconded! Not sure if it'll stop there though! How do you see a retest of the lows?

Thanks but... bummer I cant read it! (already read my quota of 30 articles a month...)

I was wondering similar question... I know that the PPT has probably managed to deflate a lot of the speculative pressure in commodities from the hedge funds and that has affected PoG. However, with the real fear (cpty risk) that is currently priced in the market (cf. Libor-OIS spread) I find it bizarre that we are still $150 (and even more in real terms ) below the high from March. On the other hand, there could well be a very strong interest and effort from the PPT to avoid price run and a rush to gold (and a run from the banks accentuating the problem...)

Do you have stats on that?

You make valid points and that is confusing me even more!! especially the volume of transactions reported by ATS - $200,000 starts to be serious money.. (well only when converted to metal obviously )

Well, one of my possible theories for this is that the 1000oz bars is what the insiders (ie industrial users, professional investors etc.) use as this is the COMEX and LBMA delivery format. So insiders are selling (falling price) while small investors are buying (shortage of coins and increased premiums). And from a contrarian point of view that surely would not be the best time to buy... ...but that is discounting any potential PPT bashing of the Paper silver price...

Dont you think it might drop further when the bailout workout plan is approved (which I am pretty sure it will some way or another)?... I get the impression that this would temporarily deflate the risk-aversion premium built in the gold price

This is the Cash price for delivery of physical bars also as far as I know. There is nothing stopping you buying at that price if you are buying 1000oz bars, is it? The kitco comment only applies to coins.

That is really something that has me intrigued. I remember Mish Shedlock saying that it could be a contrarian Sell indicator (ie sell when the small investors are buying in) on CWR interview not so long ago.. Now I know that sounds crazy in the current times but who knows... Does anybody know if this sort disconnect between physical coins and physical bars (ie it does not only apply to COMEX bars, even on bairds the premium was roughly 3% only for a 1 kilo bar) has existed before (in this bull market or more specifically in the 1970s) and if this was a good price indicator?