The Phaserl


Permanent gold backwardation = global meltdown ahead

by Lawrence Williams,

This article discusses the meaning of gold backwardation and its relationship with the global economy.

Antal Fekete {1} warned many years ago that a “permanent gold backwardation” would act as a financial black hole that would consume the entire global financial system. Subsequent “scholars” [2} found (minor) flaws in his argument. However (I believe) Fekete was right and that his warning is particularly pertinent today – as gold now enters its fourth year in (or near) backwardation.

First – some definitions. The GOFO (gold forward rate) measures the difference between the spot gold price and the forward (futures) price, measured as a percentage, quoted individually over 1, 2, 3, 6 and 12 months. GOFO is (a swap rate) paid by the gold owner, who puts up his gold as collateral to borrow dollars. If GOFO is positive (negative) respectively, then he will pay (receive) interest to get dollars and have his gold stored. Now if the owner of the gold immediately invested those dollars at the risk free rate LIBOR, he would have a total return of GLR = (LIBOR – GOFO) at the end of the lease period. The (implied) GLR stands for the Gold Lease Rate, which is the theoretical risk free return paid to the owner of physical gold for leasing it into the market. For later reference, I write this simple formula here in all its variations:

Read More @

Help us spread the ANTIDOTE to corporate propaganda.

Please follow SGT Report on Twitter & help share the message.

2 comments to Permanent gold backwardation = global meltdown ahead

  • Frank Zak

    My belief is gold will bring a system collapse of all fiat.
    60 billion $ trades every day on Comex or 15 trillion $ a year.
    This is only one exchange

    Futures markets keep precious metals prices depressed

    “Daily trading in paper futures often exceeds a full year of physical mine supply and so, by sheer volume of trading, the futures market dominates the physical market, rather than vice versa. Furthermore, the futures markets act as an additional source of supply, because they can create ‘out of thin air’ and sell into the market commodity futures contracts to satisfy demand. This enables the futures market to set any price that it likes, almost regardless of supply and demand fundamentals.”

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>