TFMR Podcast #41 - Andrew Maguire Discusses Gold Backwardation and Current Gold Price Trends

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Today, we conclude our analysis of the current backwardation in gold by visiting with legendary trader, Andrew Maguire.

A couple of things before we get started:

  • If you haven't yet, I strongly encourage you to listen to yesterday's podcast with Sandeep Jaitly before you listen to this one with Andy. I posted Sandeep first for a reason...you need as clear an understanding of backwardation as possible so that you can give this your full consideration.
  • There are good people, like Trader Dan, who have looked at this issue and concluded that there is no current backwardation in gold. Perhaps it all depends on what you're measuring. All I know is that Sandeep and Professor Fekete are global authorities on this stuff and I tend to side with them. Reasonable people can disagree, however, and it is disagreement that helps to make a "market", whether it's gold, silver, stocks, whatever.
  • Andy will have more to say in March and he's promised to come back soon for another podcast. This particular podcast primarily deals with the current backwardation and the implications for price in the short, intermediate and longer terms.

And keep in mind as you listen...Andy is "boots on the ground" in London, the center of the gold trading world for the past 200+ years. The Comex in New York controls paper price but, as you know, the underlying fundamental going forward is global, physical demand and this takes place in London. Where Comex may physically settle 1,000,000 troy ounces (30 metric tonnes) once every two months, London allocates and settles that much physical metal nearly every single day. Therefore, spot vs futures backwardation is a big, big deal. It drives allocation and purchase decisions for many of the central banks and other sovereigns currently racing to convert dollars into hard assets. Therefore, you must fully consider the ramifications of what is happening and I'm confident you'll find that this podcast will promote your understanding of the situation.

TF

p.s. Once again, I urge you to consider a subscription to Coghlan Capital, perhaps only for Andy's detailed and extensive, weekly commentary. He provides the reader with background and information you simply cannot and will not find anywhere else. Along with the commentary, you also get real-time access so you can follow along with Andy's daily trading activity as well as unbiased and objective technical analysis from Paul Coghlan. Yes, it's expensive but what service of real value isn't? At this critical time, it might be the smartest investment you could make. http://www.coghlancapital.com/daytrades-application?ak=turd_army


135 Comments

pbfurn's picture

First?!!?

Hard to believe! 

Patrancus's picture

2nd maybe

don't watch or listen to it any longer than I have to, Spring is right around the corner, the earth is calling.

foxenburg's picture

thurd?

Must be a slow day. We are snowed in here in the Gredos mountains in Extremadura. Just sitting here tippety-tapping, as my wife disapprovingly calls it, on my laptop. She thinks I ought to be out there doing chores.

achmachat's picture

huh?

Turd, you're not supposed to put up pictures of AM.

How is Rawdoglet going to continue saying that AM doesn't really exist?!

koan's picture

oil, eur, ag, au all around

oil, eur, ag, au all around the bottom of their short term ranges - moment of truth time. I venture they hold (though only putting my non-existent reputation on the line!).

dgstage's picture

Bill Murphy

Nice guy, but rattles easily. He is hard for me to listen to.

Mad5Hatter's picture

FED Bank Chair Bernake is a Charlatan

In the Russian language (Parusski) there is a word "Monae", that is Money, and its translate into English (Paengliski) simply as "coinage". The Russians are on to something here, from way back to the days of Ivan the Terrible. USA Founding fathers used the term money, in terms of coinage as well, and that is, particularly gold and silver money, which I suspect dear old Ivan, would have been in complete agreement. Its reflected in our constitution as well. Gold and Silver, the monetary metals are precious, cant be printed as paper that is "not worth a continental", and are divisible in two units, literally, as in the American west, where silver dollars where cut into pie shape wedges, 1-8th, call bits, and the cowboy could get a shot of whisky for two bits, you bet!

Just after the turn of the 20th century, the banksters wanted to control the money the supply, and Woodrow Wilson caved, creating FED BANK, its FEDERAL RESERVE NOTE, the paper dollar, and of course, the IRS thuggery, and hence the starting gun of the great kensysian experiment in paper money. But they could not just start printing gold-unbacked paper, as the Americana mentality back then was that only gold and silver are money, and would not buy into a "naked" fiat dollar. So, first there was the gold/silver certificate, to get the people first using paper money, to get into the peoples hands, and that was trick and easy, for as long as the Federal Reserve Note was 100% backed by monetary mental, it was accepted, and used, while the banksters, in their smoke filled back room started screaming, HOOK UP!! HOOK UP!! HOOK UP!!

The license to steal fatacompli, and out comes the paper, not fully backed, based upon reserves requirements, the printing presses fired up, and off to the races of UNLIMITED MONEY PRINTING. Then come the boom or the roaring 20s, and of course, the bust of the depression. But no crises by the totalitarians should go unexploited, and Raw-Deal FRD took it a bit further, effectively confiscating the people's gold, and the poor saps about the country, not know any better, worship FDR, the court-packer dictator. Co-victors of the great patriotic war, the US was riding high and mighty, with a gold reserve second to none, and a paper dollar, everyone around the world could trust, and thus, the dollar became the world reserve currency. They knew we Americans were on all four, and that our printing money was literal backed by gold to any foreigner (but not US citizens) that COULD REDEEM THE FEDERAL NOTE in gold coinage. The US kept the printing paper money. But the rest of world had no problem with the US printing paper currency, as they were subjected to the US gimmickry, and wanted gold for US paper money, until of course, the drain of the US gold stock was a torrent, and Nixon, in a effort to preserve the last of the US gold hoard, closed the gold window, and thus, the GRAND global experiment in fiat paper money.

Simple truths are at times hard to fine, but not here. A "note" is a promise to pay. Foreigners KNEW WHAT THAT MEANT. A currency note is by definition, a PROMISE TO PAY. The Federal Reserve Note could be REDEEMED in gold specie. A "note" is a promise to PAY. PAY? you ask, what do you mean pay. People still to this day understand what "pay" mean. You work, you get paid. You buy goods, you pay up. YOU PAY MONEY. Now most people are not so sophisticated to distinguish the subtle difference, whether you "Pay" or "GET PAID" in monetized metal (gold and silver) or in monetized debt, the paper FEDERAL RESERVE NOTE.

The federal reserve note is a promise pay. The promise to pay was a promise to pay in real money, gold and silver coinage. The federal reserve note is modernly an irredeemable note, as THEY WONT PAY on their note, they wont redeem in specie. Do to the WW FDR LBJ BHO, mostly, the federal budgets have ballooned to fund their vision of THE GREAT SOCIETY, where all are reduced as humans, and enslaved as tax mules or dependents. In order to fund OUR GREAT SOCIETY, with deficits and effectively no-debt limit, the Federal Reserve must monazite government debt, and thereby print money, in continuing exponentiating amount, to where all should see the Federal Reserve Note, as an irredeemable ponzi coupon. You bet!!

The US purportedly, (but don’t count on it) has 8K tons of gold, which is claimed by many to have been encumbered, leased, swapped, and loaned out, (to maintain an image of a sound dollar), to where we have actually, no real gold left, but perhaps some PROMISE TO "PAY" it back, a paper promise. This makes absolute sense. They refuse to audit the US gold reserves, for if the truth be know that the US government has squandered the people gold, the last treasure of the US, and uprising and chaos would immediately ensure. It should only take 1 month for Germany to get ALL their gold back, not over 20 freaking years, in dribbles. Charles Degaul, of France, merely sent over a couple of battleships, to pick up their gold up, for the US, in one go, way back when. No big deal then, but today, with bullion manipulated to support the fiat money, with depletion of on-time US gold, Germany can only get over decades.

Ben Bernake knows economic history, and is not stupid. He knows what we know. The Federal Reserve Note is now suspect, it must be printed in exponentiating amounts to fund the totalitarians in DC, and that IT WILL COLLAPSE as we have long gone past the point of no return for the fiat paper dollar. The only option left, is exponential printing, until it does. He knows what all the other central bankers know, gold IS THE ultimate extinguisher debt, that is, it can be used to PAY off any obligation, ANY WHERE, ANY TIME, ANY PLACE. Why? Because its real money, accepted by all as PAYment, for 5000 years. Central banks around the world ARE BUYING GOLD, for they see the irredeemable ponzi scheme for what it truly is, the lightening rod of the collapse of the global fiat complex.

Bernake claims gold is not money. What it really means is that he will lie to keep the ponzi scheme going, he only wants monetized notes, that is paper currency, to remain as the medium of exchange. The congressional bafoons should ask been some simple questions, such as, is a note a promise to pay. well well stammer stammer, yes. Is the federal reserve note, a note? well well stammer stammer, yes. Can you pay off a note with money? well well stammer stammer, yes.
Is gold money?  NO.

Bernake is a fraud and charlatan, trying to maintain the paper fiat regime, the irredeemable ponzie coupon, and will lie and perjure himself, WITH IMPUNITY, before congress and the people, to maintain that totalitarian socialistic fascist racist cesspool that is DC.   

Kcap's picture

47,000,000 oz. standing for FDN per Harvey

Kcap

billwilson's picture

watch

Watch the miners on this next push down in PMs (coming very soon). If they hold and move up we could have a bottom. 

The move Tuesday was obviously phony as the miners did not follow. Miners always need to lead higher.

Turd Ferguson's picture

Ummm...the only problem is...

MODERATOR

First Day Notice for March silver is today, not yesterday.

SilverTree's picture

Can someone post a chart of

Can someone post a chart of current Comex inventories? 

Thanks

DXY soaring...

http://www.marketwatch.com/investing/index/dxy

BagOfGold's picture

Billwilson...I agree with you 100%!...

"Watch the miners on this next push down in PMs (coming very soon). If they hold and move up we could have a bottom. 

The move Tuesday was obviously phony as the miners did not follow. Miners always need to lead higher."

When it happens...it will be a beautiful sight to see!!!...

Bag Of Gold

dropout's picture

@SilverSurfers

I'm afraid you are preaching to the choir here! Good for the newb's.

One must remember, that out of total amount of dollars sloshing about, only about 5% is in the form of actual paper notes. The rest is all in the form of digits in computers! Easy come. Easy go. One key stroke.

Ircsum's picture

Great podcast, Turd!

I've been looking forward to this podcast since you flagged it up as coming soon. Wow! I certainly wasn't disappointed. Andy comes across as an extremely knowledgeable guy & he's always well worth listening to. Can't wait until you get him for another session. wink

Turd Ferguson's picture

Thanks

MODERATOR

Our intention for the next podcast is a discussion of the entire London process of orders and allocation. How it works. Plus a bunch of other stuff. Hopefully next week.

SIlverbee's picture

Is it a bunch of other stuff

that happens next week?

I noticed Santa has changed his timings slightly in that he said by his Bday the dip would be distant history, but now it is up to then for the bottom to complete.

As another would state; just sayin!

dropout's picture

Interesting Charts

Kevin Wides out of Switzerland has 4 gold charts up at KWN that are worth a look.  

¤'s picture

very cool

Nice job again with another PM community standout. yes

This podcast comes at a good time and right on the heels of the KWN hype/popularity surrounding Mr. Maguire's recent comments there. Striking while the iron is hot is never a bad idea.

achmachat's picture

here's to...

...hoping that the wife doesn't look at the charts today.

or... that there's a massive FUBM and she looks after that :-p

Mad5Hatter's picture

Good for the Newbs

Well aint that what its all about, to share, and help educate others to another point of view. I got back auto-replies this morning, so I know my missive is being received. I just get an absolute kick out of getting auto-replies from the NY Times and the Whitehouse, it just feel so so good, to poop in their mess kits.

copy what DPH just said

side bar:

"My best life-long pal, is a darkie", Derrick that is so wrong, but funny, but so wrong! Do people really use darkie when referring to people of color?

WTF you talking about. Heads up, my skin is not transparent. It gots a mozaic of tan like colors, pot marked, with old age brown spots, and such like. I AM a person of color also.

tyberious's picture

SS

So you are darkie?

Mad5Hatter's picture

na

no, Im a whitie. But one could argue, Im a darkie, standing next buxsum swedish blond bomb shell. we are all god's children, with a glorious mix of colors. Its a blessing actually. It teaches us all we are all innately the same, coming out of the shut.

my lineage, is PA dutch, rafting the OH river in the 1690s ..... yeah baby.

tyberious's picture

LOL

Good enough!

Kcap's picture

@Turd...LOL, yup...Harvey's language is all over the place.

Thanks for pointing that out.

Lets see what tomorrow brings. (damn, now I sound like Harv)

Kcap

tmosley's picture

Great interview.  New

Great interview.  New insights are rare, and the commentary about China's relentless purchase of gold in the spot market causing the backwardation is one of them.  I had previously thought the backwardation was simply a symptom of people not wanting to close the arbitrage.  I hadn't thought of the actual source of the arbitrage.

Backwardation, it seems, is a symptom of the divergence between the paper and metal markets.  Now I see the source of Turd's faith in the markets.  I was US-centric, as Andy said.

That said, I fear that Andy and Turd are "London-centric".  Now that I recognize my own bias, I see it in others as well.  Andy being "London-centric" means that he places more faith in the markets than really should be the case, as he sees physical metal moving, but the price is being set in the US.  What happens when the demand in London is so great, while the price is so low, that the metal for sale in London dries up?  It's hard predicting how the paper price will react to the final breaking of the market.  I guess it all depends on London.  If the LBMA severs ties with the COMEX, and forms its own separate pricing mechanism, then the paper price will persist, and readjust higher in a not-totally disorderly manner.  If they don't, then markets around the world all break at once, and we get the industrial panic I have been calling for.  The question is, what impact will the former scenario have on the paper markets.  Will SLV and GLD go bankrupt/revalue to zero?  What about other paper and semi-paper instruments?

I just don't know.

Road_Scholar's picture

Sequestration noise

it's just one distraction after another and denial of the real problem.  The US can't pay for all the free stuff it wants...Keep stacking, the re-set will come!

EC_130211_ramirez2425x283.jpg

CaribSurfKing's picture

Uh oh the Turd eating his hat/underpants is getting closer...

$26 may get tested again and then its down to you know what, at $22

Turd, will you be using salt and pepper?

Orange's picture

Turd

Have a look at what Trader Dan has to say. Can you clarify this for us?

By the way, for the last time, gold is NOT IN BACKWARDATION. Those who keep pushing this nonsense are going to end up hurting many of you who blindly jump into the gold market to buy the futures only to have your rear ends handed to you as the market is doing today.

http://traderdannorcini.blogspot.com/

koan's picture

Anyone else watch the charts

Anyone else watch the charts and, as they move up through a level, take a moment to make a mental note as they may be the last time we ever see that particular price e.g. 28.50 and 1580? *

* maybe poor examples as I'd be surprised never to see those particular values again!

Swift Boat Vet's picture

Side note on coinage

You say a cowboy could get a shot for 2-bits, which I'm sure is true, relates to my tool & die apprenticeship time.  On friday paydays,  most of the shop would trek up to the Tip-Top,  a true working man's bar of the post war 40s still around in the early/mid 60s.   You could cash your paycheck, have the best cheeseburger on the west coast for 4-bits along with a shot AND a beer for another 4-bits.  By the time I could 'legally' have that shot and beer in 1967 before heading off to Vietnam, the price was raised to 60 cents.  It was about this time I learned where the term 'bits' came from and understood coinage of the constitution.

Swifty

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