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

Aug 16, 2013 - 11:19am

And if you haven't yet...

I urge you to listen to this, too. https://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.

Aug 16, 2013 - 11:23am

This is also very important

I discussed this is yesterday's podcast but it needs to be posted here on Main Street, too: https://www.zerohedge.com/contributed/2013-08-15/physical-gold-demand-su...

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
Aug 16, 2013 - 11:25am

top 0ne?

volatility baby.

So It Goes
Aug 16, 2013 - 11:30am

Gold backwardation - getting worse again

https://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

So It Goes
Aug 16, 2013 - 11:31am

Thank you for posting that

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

Marblesonac
Aug 16, 2013 - 11:47am
nixy
Aug 16, 2013 - 11:51am

....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?

https://www.housepricecrash.co.uk/forum/index.php?showtopic=166794&s...

Marblesonac
Aug 16, 2013 - 12:01pm

No, it's there

Just click the mic.

Zoltan
Aug 16, 2013 - 12:04pm

@Turd I don't see a mic either

Tried refreshing.

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

Z

achmachat
Aug 16, 2013 - 12:07pm

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?

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