Futures Markets Signal Gold Ready To Erupt - By Dickson Buchanan (8/8/13) PDF Print E-mail
Dickson Buchanan   
Wednesday, 07 August 2013 20:33

Euro Pacific Precious Metals

With gold recouping some losses in its most recent trading sessions, many are asking whether or not the bottom has finally formed for the yellow metal. Most of these gains have been simply chalked up to short-covering and dovish remarks by Bernanke during the recent Federal Open Market Committee meetings; however, there are some key indicators for gold which are overshadowed by the media hubbub. Two of them in particular are important to understand, because they reveal a renewed investment demand for physical gold over paper gold or fiat currencies.

Gold Backwardation


The first indicator to note is called "gold backwardation," which occurs "when the price of a futures contract is lower than the price in the spot market."1 This means that traders are willing to pay more for gold that is available for delivery today, rather than lock in a futures contract at a discount for gold that is delivered months later.

Taking this one step further, if gold stays in backwardation for some time, it means that no one is taking advantage of a risk-free arbitrage opportunity by simultaneously selling physical gold at spot and buying a futures contract. In such a scenario, traders can keep not only the spread between the spot rate and the futures rate, but also their original position in gold. This is known as "de-carrying gold." Now, if enough traders were to take advantage of this risk-free profit, gold would be pushed out of backwardation into its normal trading state (i.e., "contango," when the price of a futures contract is higher than the physical spot price). The fact that this is not occurring, and that gold remains in backwardation, implies that gold is more and more decoupling from the dollar - a trend that, if continued, could raise the dollar price of gold and other assets significantly.1



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Wells Fargo: Your Neighborhood Mega-Money Laundering, Drug War Profiteering, Prison-Industry Enlarging Bank - By Andrew Gavin Marshall (8/8/13) PDF Print E-mail
Andrew Gavin Marshall   
Wednesday, 07 August 2013 20:31

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What Doesn't Kill Gold Makes It Stronger - By Peter Schiff (8/8/13) PDF Print E-mail
Peter Schiff   
Wednesday, 07 August 2013 20:29

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Trying To Stay Sane In An Insane World – 2 Parts - By Jim Quinn (7/8/13) PDF Print E-mail
Jim Quinn   
Wednesday, 07 August 2013 08:39

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The Detroit Bail-In Template: Fleecing Pensioners To Save The Banks - By Ellen Brown (7/8/13) PDF Print E-mail
Ellen Brown   
Wednesday, 07 August 2013 08:35

Web of Debt

The Detroit bankruptcy is looking suspiciously like the bail-in template originated by the G20’s Financial Stability Board in 2011, which exploded on the scene in Cyprus in 2013 and is now becoming the model globally. In Cyprus, the depositors were “bailed in” (stripped of a major portion of their deposits) to re-capitalize the banks. In Detroit, it is the municipal workers who are being bailed in, stripped of a major portion of their pensions to save the banks.

Bank of America Corp. and UBS AG have been given priority over other bankruptcy claimants, meaning chiefly the pensioners, for payments due on interest rate swaps they entered into with the city. Interest rate swaps – the exchange of interest rate payments between counterparties – are sold by Wall Street banks as a form of insurance, something municipal governments “should” do to protect their loans from an unanticipated increase in rates. Unlike ordinary insurance, however, swaps are actually just bets; and if the municipality loses the bet, it can owe the house, and owe big. The swap casino is almost entirely unregulated, and it is a rigged game that the house virtually always wins. Interest rate swaps are based on the LIBOR rate, which has now been proven to be manipulated by the rate-setting banks; and they were a major contributor to Detroit’s bankruptcy.

Derivative claims are considered “secured” because the players must post collateral to play. They get not just priority but “super-priority” in bankruptcy, meaning they go first before all others, a deal pushed through by Wall Street in the Bankruptcy Reform Act of 2005. Meanwhile, the municipal workers, whose pensions are theoretically protected under the Michigan Constitution, are classified as “unsecured” claimants who will get the scraps after the secured creditors put in their claims. The banking casino, it seems, trumps even the state constitution. The banks win and the workers lose once again.



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