TFMR Podcast #45 - Sandeep Jaitly Discusses GOFO and Backwardation

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Back on Wednesday morning, I spoke with Sandeep Jaitly of Fekete Research and The Gold Basis Service newsletter. Sandeep is widely recognized as a global authority on basis and backwardation in the metals. You need to listen to this podcast so I am making it public today.

In this 25-minute podcast, we discuss:

  • Backwardation in general and how this relates to the current negative GOFO rates.
  • The ongoing breakdown in the price relationship between physical and paper metal.
  • Since the LBMA no longer publishes SIFO, can we draw any conclusions regarding silver?

We are very fortunate to have Sandeep share his perspective with us. I know you'll enjoy this podcast.

TF


67 Comments

Turd Ferguson's picture

And if you haven't yet...

MODERATOR

I urge you to listen to this, too. http://www.davejanda.com/audio/TurdFerguson081113.mp3

It's an interview I gave to Dr. Janda last Sunday. Beginning at about the 14:00 mark, I lay out a working theory I have as to what is truly behind all of the shenanigans of the past 10 months. Please check it out.

Turd Ferguson's picture

This is also very important

MODERATOR

I discussed this is yesterday's podcast but it needs to be posted here on Main Street, too: http://www.zerohedge.com/contributed/2013-08-15/physical-gold-demand-surges-53-q2-total-supply-down-6-price-falls-35

Here are the main points. On the demand side we have:

  • Demand from India and China alone in Q2 was 310 tonnes and 276 tonnes or 586 tonnes combined. This demand alone vastly outnumbers the ETF outflows.
  • Globally, jewelry demand was up 37% in Q2 2013 to 576 tonnes (t) from 421t in the same quarter last year, reaching its highest level since Q3 2008. In China, demand was up 54% compared to a year ago; while in India demand increased by 51%.
  • There were also significant increases in demand for gold jewelry in other parts of the world: the Middle East region was up by 33%, and in Turkey demand grew by 38%.
  • Bar and coin investment grew by 78% globally compared to the same quarter last year, topping 500 tonnes in a quarter for the first time.  In China, demand for gold bars and coins surged 157% compared with the same quarter last year, while in India it jumped 116% to a record 122t. Taking jewelry demand and bar and coin investment together, global consumer demand totaled 1,083t in the quarter, 53% higher than a year ago.
  • For the tenth consecutive quarter, central banks were net buyers of gold, purchasing 71t, which reinforces the trend that began in Q1 2011

But on the supply side of the equation, we have this:

  • On the supply side, recycling fell 21% in the quarter while mine production was 4% higher than a year ago, at 732t. In total, supply was 6% lower than a year ago.

So, let's see... Physical demand is up, WAY UP while supply is down. Hmmm. Yet paper prices fell on the Comex while JPM was flipping their position from net short to net long. Hmmm. Just another free and fair market.

sengfarmer's picture

top 0ne?

volatility baby.

So It Goes's picture

Gold backwardation - getting worse again

http://www.lbma.org.uk/pages/index.cfm?page_id=55&show=2013

                              1 mo                2 mo               3 mo               6 mo              12 mo

09-Aug-13 -0.11500 -0.09667 -0.08000 -0.00500 0.12833                    
12-Aug-13 -0.10833 -0.09000 -0.07500 -0.00167 0.13000                    
13-Aug-13 -0.11000 -0.09000 -0.07250 0.00500 0.13250                    
14-Aug-13 -0.11000 -0.09333 -0.07667 0.00167 0.13667                    
15-Aug-13 -0.11000 -0.09500 -0.08000 0.00250 0.13750                    
16-Aug-13 -0.11167 -0.09667 -0.08167 -0.00500

0.13667

 
Turd Ferguson's picture

Thank you for posting that

MODERATOR

Notice what Sandeep says about this. Is it the new normal??

Marblesonac's picture

I don't see the audio link

Is it just me?

nixy's picture

....a favour....

Could someone here ask this guy (DiggerUK) if he knows what the effect on physical AU price would be if it's derivatives were, for some reason, made illegal...... I'd do it but I've been banned.

All he needs to understand is that commodities can be leased out without the owners consent or knowledge ...... or perhaps it's me who doesn't understand?

http://www.housepricecrash.co.uk/forum/index.php?showtopic=166794&st=6450

Turd Ferguson's picture

No, it's there

MODERATOR

Just click the mic.

Zoltan's picture

@Turd I don't see a mic either

Tried refreshing. 

Would love the hear the link.  Doesn't seem to be here.

Z

achmachat's picture

Link to audio

I am also looking very much forward to listening to the podcast, as soon as the link is fixed.

Maybe it's set so that the link only shows up for gold members?

thisismynewname's picture

Trader Dan...

Looks like Trader Dan has finally recognized what we've been saying over here for months: Physical buying (buyers in the East) has put a floor under the paper price.   

http://www.traderdannorcini.blogspot.com/

admin's picture

Hmmm... there does seem to be

Hmmm... there does seem to be an issue with the podcast not displaying correctly in the template.  We'll get that fixed right away.  Sorry about the delay.

Marblesonac's picture

Thanks

Thanks admin....and Turd

I hope the new format is working out for you.  I like the guest postings.

silver_dollar's picture

Access to comments

Hi Turd, do people need to subscribe to view "Turds Vault" comments. I click on "comments" and get the message: Subscribe today to join in the discussion!

corwin's picture

Comiskey Aug 15

JPMorgan versus other COMEX depositories?

4 minutes in..

admin's picture

Ok give it a try now...

Ok give it a try now... hopefully that takes care of the issue.  Thanks for your patience.

Marblesonac's picture

Can't get it on

Firefox or Apple ipad (Safari)

Sorry, still don't see it.

admin's picture

Try it again, Marblesonac.

Try it again, Marblesonac.  May take a minute for it to update the cache.

Marblesonac's picture

Got it!

Thanks!!!

Bugzy's picture

Have they lost control?

US 10 year bond at 2.83%

Head winds already in US data re housing starts etc (see zero hedge today)

Is bond rate going up on thoughts of taper in September?... but this would suggest bad for the precious... yet precious moving higher!

Has physical eventually won out and tight demand brought much needed honesty to gold market?

It ALL looks right now that OUR general thesis is working out: Too much debt, no real growth in economy, inflation coming through and being priced in to bond market, MORE printing needed, Gold in short supply, folk wanting physical breaking fractional Gold fraud, big boys going long.

India banned coin imports...Pakistan SUPPORTS India by not allowing Gold flow - give me a break - Why would Pakistan help India - have they been promised Kashmir or something, I thought they were still kinda at war?

Very bullish for the tiny Silver market. Unintended consequences.

For those who gripe about lack of Gold content on main street; I do notice that you do not try to talk about metals, you just complain that others are not doing it for you. Get creative with your thoughts and see what happens? You are response able for content too.

Turd Ferguson's picture

Yes, the 10-year note is teetering

MODERATOR

But the Long Bond (30-year) has already broken down. It might find support at or just below 130 but, failing there, it looks like it's headed to 125 and/or the 30-year bull trendline. WOW!

Marblesonac's picture

I like that guy.

Informative podcast!

erewenguy's picture

6th Century Gold Female

6th Century Gold Female Figurine

A field on the Danish island of Bornholm has in recent years been the site of many surprising archaeological finds. The most recent one of these was of a golden figurine of a naked woman. The small, heavily arched figurine is only 4.2 cm tall and weighs 3 grams, has many details and bears the mark of quality craftsmanship.

http://tywkiwdbi.blogspot.de/2013/08/6th-century-gold-female-figurine.html

A bit bony for my taste, but she does have a nice complextion.

Turd Ferguson's picture

I suspect that many will enjoy this...

MODERATOR

Bugzy's picture

update

Make that 2.85% US 10 year

So...has the west got itself in such a hole with Gold that it is using its influence to try and stop Gold getting gobbled up by Indians and using its obvious control of Pakistan to help facilitate this.

Rickards just came out and suggested short GBP as Carney was going to print like crazy.

We live in interesting times.

¤'s picture

Rising Rates & Mortgages

Damn....I'm thinking of buying a home in a couple/few months and watching these rates creep up steadily is kind of a sickening feeling.

I've been watching that 10UST creep up from 1.45 since June 2012

Oh well...maybe within the next few  months rates will be so unstable that the Fed and other CB's will have to throw the ZIRP/QE kitchen sink at the situation and drive them lower.

¤'s picture

erewenguy.....Post #7102 @ The News Ticker

I put up a post there last night with 2 photo galleries regarding Egypt.

The vids that will start to pour out of Egypt on You Tube will be sadly incredible. Most of us (myself included) can't imagine mayhem on that scale.

Hopefully we never do.

http://www.tfmetalsreport.com/comment/340990#comment-340990

opticsguy's picture

@DPH

the people who should feel bad are those who borrowed cheap to buy at the top of the market in May and June.  They will be underwater for a long time....

thisismynewname's picture

Adam Hamilton has some interesting comments...

... on GLD redemptions and it's impact on pricing in a bull or bear market: 

http://www.321gold.com/editorials/hamilton/hamilton081613.html

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