Posted on 12/07/2008 11:27:38 AM PST by slnk_rules
December 2, 2008, was a landmark in the saga of the collapsing international monetary system, yet it did not deserve to be reported in the press: gold went to backwardation for the first time ever in history. The facts are as follows: on December 2nd, at the Comex in New York, December gold futures (last delivery: December 31) were quoted at 1.98% discount to spot, while February gold futures (last delivery: February 27, 2009) were quoted at 0.14% discount to spot. (All percentages annualized.) The condition got worse on December 3rd, when the corresponding figures were 2% and 0.29%. This means that the gold basis has turned negative, and the condition of backwardation persisted for at least 48 hours.
“Government Nipple” would be a great name for a rock band (apologies to Dave Barry)
Or it means that the folks you mention, Goldman, Credit Suisse, BOJ, China Development etc etc are all still deleveraging and know they will have to sell their gold to stay alive in this market as they unwind their leverage.
Part of the underlying assumption is the "full faith & credit" clause. On the judicial front this has been undermined by politically motivated judicial decisions. On the economic front, the government may be running out of the ability to enforce taxation at the level needed.
So how come your description of his article made sense and mine just sounded like I got of the “uncle Ned’s trading floor?”
Thanks for doing a better job than I could in explaining this. Would you believe I thought about being a teacher once?
Guess that is a calling I am glad I missed.
Break the COMEX? They don’t take positions in commodities. Its like calling for NYSE bust.
- The history and financial textbooks of the future are likely to include this chart above, or some variant thereof. The Baltic Dry Shipping Index is a composite index of bulk shipping rates for various types of cargo, mostly commodity-type cargo such as iron ore, crude oil and grains. It is considered a reliable leading economic indicator without speculative elements involved, since nobody books space on a large cargo ship if they don't have anything to ship.
Hence, the over 90% drop in this index means that the demand for shipping bulk cargo has fallen off the cliff. And the sudden drop in demand for shipping these raw materials like iron, copper and so on is signalling that the global economy is heading for collapse. It's a horrendous scenario depicted in this chart. You can imagine what the GDP figures for 2009 are going to look like.
[snip]
Is this a good time to sell hard silver?
2008-11-12 18:50:00
NEW DELHI: As if the global meltdown and soaring food prices are not enough, now brace up for food shortage in the coming two years.
Even as the world is struggling to fight global market meltdown with companies sacking employees and Industries scaling down production, the world will also have to tackle food shortage and soaring prices in the coming days.
According to United Nations Food and Agriculture Organization, the current financial crisis will adversely affect agricultural sectors in many countries, including India and other developing countries.
[snip]
—scary—noted that on Mineweb.com a few weeks ago—
First, spot p.m. mkts have for years -- decades even, going back to the old Zurich-London fixing arb (the 'cash-and-carry' arb, remember that one? if you didn't mind carrying the gold to London (or Zurich, whichever appropriate on a given date), you could make some cash (hahahaha, rimshot...) -- been subject to local distortions, esp. within the last week of a futures contract's life. Not unlike the old ''triple-witching'' Fridays in SP in the 1980s and 1990s.
Second, aberrations in spot vs near futures simply signal that someone wants a lot of gold (or silver, or whatever) or that someone wants to deliver a lot of gold (or silver, or whatever). This situation obviously changes back and forth from time to time. Ho hum.
Third, why are you looking at Feb COMEX? Dec goes off the board this month, and would be the ''normal'' (haha) contract to examine regarding deliveries.
Fourth, do you have any idea just HOW MANY times a story of COMEX default (usually on silver, btw) has made the rounds? About every 3-4 years since 1980, that's how often.
Fifth, on the radio stations I listen to, bullion dealers are (and have been for weeks now) raving about offering bullion coins at NY spot price. The usual suspects, Blanchard and the boys. Gordon Liddy is all over TV touting gold, and he wants you to buy hard metal (I forget which company he shills for). Why is this important, you ask?
Because, as Mark Twain said, history doesn't repeat itself, but it rhymes. In 1974, gold had rushed over $180/T.oz., and the ''thinking'' (haha) of all the boffins was that, with legal US gold ownership about to be restored that year, there was ''huge pent-up demand'' from the public that would drive it over $200 immediately upon US ownership of gold being re-legitimised on 1974-12-31. What happened?
April 1975 Gold opened at 195.40 on the 31st... and tanked 21 dollars/T.oz. in 3 days' time. In those days, this was a simply gigantic move for a 'new' market, and a whole bunch of retail traders got absolutely smoked and choked by it.
The moral of this part of the story is clear: when they're offering product X bigtime to little fish, either steer clear of X, or get short.
Now, as to why Goldman, MS, Barclay's, Societe Generale, Sumi and the big boys aren't doing the obvious arb here, I can't say (they don't seem to like me hanging around their trading desks...wonder why? heh heh). Most likely guess: they're still ungearing from their enormous physicals positions, and, I daresay, from their (some of them, at least) huge index swap possys too. Not sure why that would stop them from picking cherries in a good straight arb, but there are doubtless internal conditions for them of which I have no clue.
It wasn't your statements of fact with which I had a problem (other than that odd comment about backwardation), it was the conclusion you drew from them, to wit, that some sort of apolcalyptic event was coming down the pike. That's a conclusion that might be drawn, maybe, on alternate St. Swithen's Days, but there are at least a half dozen others -- a couple of them far more plausible -- that can be drawn, too.
When the whole of a precious metal market starts trading in backwardation -- not just spot vs futures, because there are too many games that are played with spot -- then I'll start listening to Tales Of The Apocalypse.
Not before.
FReegards!
Is this a good time to sell hard silver?
Seriously, yes, and you can sell it to a reliable trader like tulving.com
http://www.tulving.com/New%20Pages/buying_bullion_coins.html
YOU can get 25% above spot price for pre-1964 junk (90%) silver coins, for instance.
If you’re not frightened by the above, you can put all that money into SLV (ETF for silver) and own 25% more silver, if you believe that the spot and the physical market will return to normal, as they were until earlier this year.
If you’re interested in whether Silver will be rising or falling, I’d bet heavily on the rise, especially if you are looking out more than a few years We may deflate some more, but inflation is potentially big, within a few short years. My advice is to keep buying whether it rises or falls. The least likely scenario is for it to drop and stay down.
I just have a silver pitcher, sugar bowl, and tray I was going to sell.
It was given to me and I have no worldly use for it.
It is quite heavy.
I’d sell it on eBay. If you have no experience at that, and/or are a poor photographer, find a friend who will post and sell it, and give them 10-25% of the proceeds. Or find a local shop that provides the service, and give them about 1/3 of the proceeds.
You’ll want to be sure the auction includes dimensions, GOOD photos (with good lighting), weights, and close-ups of hall marks.
I do think the moon and stars are lined up right for what the gold bugs have been predicting for some time, which is a deflationary landing which will spark hyperinflation. I don't look for solid lines of demarcation between them.
Thanks for your patience in responding, though. I learn from many people here.
You got that right!
bookmark
I had read of that. Autos are down thirty percent. Food is production too.
Suck away, suck away.....
http://www.cnbc.com/id/15840232?video=880574352&play=1
Even I know that. It's fear that COMEX cannot deliver because their gold warehouse is about to be raided of all its physical gold (most of which isn't there in the first place) This raid is done by demanding delivery upon the contracts expatriation and is being done by people who want physical gold without the current outrageous markup
Most of these raiders also have an ideological motivation to break open the paper gold myth. They say powerful forces are using the paper gold market to suppress the gold price. So they also benefit financially if the paper gold markets are shown to be largely bogus and their paper trades are not backed up one to one by physical gold. If they are successful there will be a worldwide scramble to find physical gold to deliver to these people.... And physical gold's price doubles (virtually) overnight
In other words today's paper gold is like a fiat currency. Today we have paper gold that is not 100% backed up by physical gold
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