Current News, Analysis & Price Forecasts
One reason, perhaps the chief reason for this exercise is that the managers of the global fiat money system are preparing for the coming showdown, the final curtain on what some years ago I dubbed The Last Contango in Washington. In other words, policymakers are preparing for (or trying to fend off) permanent backwardation in the world’s gold futures markets that is threatening to rip apart the present shabby make-belief payments system of the world.
Contango is the normal condition of the gold futures markets when the spot price of gold is at a discount relative to the price of futures contracts. It demonstrates that plenty of gold is available to satisfy present demand. People are confident that promises to deliver gold will be honored. The condition opposite to contango is called backwardation that obtains when the futures price loses its premium relative to the spot price and goes to a discount. In the gold market this condition is highly anomalous because, on the face of it, it allows traders to earn risk free profits. They sell spot gold at a premium, and buy it back at a discount for future delivery. However, risk free profits are ephemeral since the very action of traders will instantaneously eliminate them. What this suggests is that permanent backwardation in gold could never happen by the very nature of the case.
Yet unknown to the general public a very great danger is looming, the like of which has not threatened the world since the collapse of the Western half of the Roman Empire more than fifteen hundred years ago. This danger, should it materialize, would mark the end of our civilization and the beginning of a new Dark Age. I am talking about a threat of the sudden and complete collapse of world trade. It would be heralded by permanent gold backwardation, something that allegedly could never happen. Hard on its heels would follow the collapse of the dollar payments system. Barter, of course, would take place between neighboring countries, but world trade as we know it would disappear altogether. Read more