by Turd Ferguson, TF Metals Report:
Twice in the past six weeks, we’ve watched the spread between spot and front month futures blow out to curiously high levels. The accepted narrative for the cause of these unusual occurrences is that possible Trump tariffs are leading to concerns over metal availability in New York. OK, maybe. But what if the spreads widen again next month? Could there be something more significant at play?
For a comprehensive discussion of all this, I turned to our old friend Andrew Maguire. If there truly are supply concerns emanating from London, Andy will know about it…which makes him the perfect guest for today.
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So over the course of this call, Andy and I attempt to unravel the puzzle, keeping in mind of course that the London-NY gold pool is, in the words of Winston Churchill, a riddle wrapped in a mystery inside an enigma.
Spreads collapsed to less than $10 on Thursday as Spec long selling of the Feb25 ahead of next week’s “contract expiration” drove the futures price down farther than the spot price. This was to be expected as I tried to explain last week:
The key now is what happens next. Will spreads blow out again in February. If they do, what will that tell us about the “Trump tariff” explanation? More importantly, what would another blowout signify regarding overall physical tightness, trust and confidence in the pricing system?
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