Mish says backwardation of gold is irrelevant

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  • Mon, Dec 08, 2008 - 11:54pm



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    Re: Mish says backwardation of gold is irrelevant

Easy there jdownie.

You might not agree with Mish’s analysis, but he’s hardly an idiot.  He actually writes some of the most clear-headed analysis of the economic situation I’ve seen.

Maybe you should read his posts a bit more carefully before you go calling him names on a public forum.  Mish would probably agree with your statement about the dollar, and here’s what he recently had to say about gold in another article:

[quote]"Finally, gold itself is now free to rise in deflation given its true
role as money, even as those in gold for the wrong reason (as an
inflation hedge), bail."[/quote]


  • Mon, Dec 08, 2008 - 11:57pm



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    Re: Mish says backwardation of gold is irrelevant

What many "gurus" are saying and "implying" about he extremely small fabricated coin and small oz

market is disinformation at its best, lies, self-interest and  fraud at its worst.

There really is not a "business model" that would allow the few mints to hire the people, buy the added

equipment, add the space to supply the current ramp-up in demand. The demand can change in a heartbeat

and all that ramp-up could look silly.


If any one is interested in taking that bet, buy yourself  1000 OZ to 50,000,000 oz and have fun (some are)

The investment retail fabricated market is about 8% of the TOTAL market. I have not heard any JEWERY fabricaters

complaining about lack of TONNAGE for their needs!

Gold could rise but to base an investment decision on the small "retail market" supply could be a major mistake! 


  • Tue, Dec 09, 2008 - 12:27am



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    Re: Mish says backwardation of gold is irrelevant

No switters, I’ll stick by my assertion that Mish is in fact, an idiot.

In one article he claims that gold in backwardation is no big deal because many commodities can be in backwardation i.e.gold is just a commodity like any other.

But then in another he claims that gold will rise in deflation because it is money i.e. gold is different to any other commodity.

He clearly does not know what he is talking about.

And ras777, while it is true that the mints are working at full capacity and literally cannot produce any more than they are currently, I have heard it straight from the horses mouth so to speak, from someone at the Perth Mint, that supply of gold into the mint is lower than it has ever been, from retail investors at least.

Maybe Central Banks are making up the difference? the same Central Banks who hold gold to back back their currency liabilities?

  • Wed, Dec 10, 2008 - 08:35pm



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    Today’s update on Backwardation

There’s no fever like Gold Fever .. Antal E. Fekete


Mish Shedlock published a disdainful criticism of my theory on
the worsening backwardation in gold, calling it “nonsense” (see
References below). A friend of his owns a seat on Nymex
(a branch of Comex) who had this to say:

have seen countless commodities go into backwardation for numerous reasons,
the most frequent being a radical temporary divergence between immediate and
overall demand. I have seen backwardations that have lasted years. The
article is based on the assumption that a backwardation will necessarily lead
to a breakdown of the delivery mechanism. But for every breakdown of the

mechanism there have been thousands of
backwardations without a breakdown. Only if and when an actual breakdown
occurred would the conclusions that the author drew make sense.


  • Thu, Dec 11, 2008 - 04:43pm



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    Re: Mish says backwardation of gold is irrelevant

Antal E. Fekete, a professor at Intermountain Institute of Science and Applied Mathematics, and frequent writer on precious metals, answers a timely question:

Q: 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.

A: 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.

Silver price hike

Thank you professor! This is really an extension of the argument on this website dating back to before the summer rout of precious metal prices.

Physical stocks are low and the futures price has been distorted by big hedge fund forced-sales – now we are coming to the day of reckoning when the physical shortage starts to determine the spot price, and not the futures market.

The upside – which should have been there all along – will now come back with a vengeance and smash the few remaining shorts. This is likely to be spectacular – but after the culling of bulls recently not all precious metal fans will be there to benefit.


  • Mon, Dec 15, 2008 - 03:24am



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    Re: Mish says backwardation of gold is irrelevant

Backwardation That Shook The World

Antal Fekete – Today


I warn the world
again that the futures market would not go to backwardation in gold if the
house of paper money were not on fire. There is just no prima facie
reason for a shortage in physical gold. A very large part of all the gold
produced throughout history still exists in monetary form, sitting in vaults
doing nothing. (Under the gold standard it used to be doing heavy-duty work
in financing production and world trade.) Unlike all other commodities with
the exception of silver, for gold the stocks-to-flows ratio is a high
multiple (by contrast, the stocks-to-flows ratio of copper is a small
fraction). And, on the top of privately held gold, there is central bank gold
amounting to one quarter of all the gold ever produced since the dawn of
history. Why are central banks unwilling to take advantage of risk-free
profits by releasing gold? Could it be that, in possession of inside
information, they have reason to be afraid that the regime of irredeemable
currency may soon collapse and, with their gold gone, they don’t want to be
left holding the bag? Could it be that the Babeldom
of the debt tower is already crumbling, but the fact is being covered up?

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