Attentive (and possibly deranged) readers will note the stylistic similarity of our current backwardation obsession to the work of an early Climateer Line of the Day award winner:
-the Washington Post's Joel Achenbach reprised in our "Risk: "Under the world's greatest cities, deadly plates" post.Dead zones are all the rage! Here's my latest dead zone story.That's all I do now: I've got the dead zone beat....
"Backwardation, it's all the rage! That's all I do now..."
Okay, maybe not.
From Mish's Global Economic Trend Analysis
Business Insider says "Traders Are Talking About A Gold Conspiracy Theory And There's Evidence To Back It Up"On the other hand the massive WTI backwardation....
No discussion about gold is complete without a good conspiracy theory. While most theories are easily dismissed, some stay around for a while due to a confluence of circumstantial evidence surrounding it. Wall Street veteran Art Cashin addresses one such theory in this morning’s Cashin’s Comments.Email is on the Way
From Cashin:
All That Glitters Is Not Arbitrage – Monday, spot gold spiked up $45 and the media pundits pointed to things from China to the FOMC. While all the cited may have been factors, veteran traders saw the bulk of the move resting in a conspiracy story.
In my mid-day email to friends I had noted this:
Gold soars as NYT story on metal warehouses fans flames of conspiracy theorists that gold warehouse stores have been “lent” out. That theory also aided by backwardation (spot price far above near future).....
Unfortunately, we are not sophisticated enough to answer these questions. But email us at moneygame@businessinsider.com if you can.
Consider what follows as my email to Business Insider and Cashen.
People like conspiracy theories for two reasons:
Simply put, if gold goes up, it's because it should (and the traders are brilliant for understanding that). If gold gold down, it must be a conspiracy (because the traders cannot possibly be wrong).
- Conspiracy theories are sexy and fun to discuss
- Traders want to blame someone else for their poor trades.
Investigating Backwardation
My friend Nick at Sharelynx Gold emailed me earlier today regarding the alleged backwardation in gold.
Nick writes....
Hello MishGold Futures Spread
The attached chart shows gold's current spread band of all the active futures vs the spot price of gold. Shown in the top window are the active futures. Shown in the bottom window is the Last/Near Future spread. (this needs to go below zero for a full inversion)
click on any chart for sharper image
Gold Chat
Byron at Gold Chat posts the following amusing set of charts that may be easier to understand....MORE
