by Bill Holter, Miles Franklin:
Is There Anything Else Necessary to create a short squeeze of epic proportions in the gold market? Yesterday we saw that Gold went into backwardation on the LBMA for the first time since Nov 2008 when the world feared a complete meltdown of the financial system. Today, the sentiment is far different than it was back in 2008 as no one wants to miss the “next” rally in equities, greed abounds and fear doesn’t seem to be present.
It is important to understand that gold should never ever go into backwardation unless something is really wrong. Gold is money and future money should ALWAYS carry interest with it. When gold for delivery today costs more than gold for delivery in the future, it carries with it “negative interest.” These phenomena can happen in other commodities if there is a shortage, since gold has been mined for 5,000 years and vaulted, no shortage can occur…unless the price is too low to coax it out onto the market. I have written many times that this was the case, the price of gold is too low which creates excess demand and inhibits supply. The current backwardation may be validating this view.
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