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cptindy
Penny Hoarding Member
572 Posts |
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beauanderos
1000+ Penny Miser Member
USA
2408 Posts |
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thogey
1000+ Penny Miser Member
USA
1617 Posts |
 Posted - 08/02/2010 : 22:36:38
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quote:
Originally posted by beauanderos
I need a new brain in order to understand that stuff???? 
Ray, I was going to insult you, as usual, until I read the article.
Maybe cptindy could summarize it. He was writing to a more sophisticated audience than anyone I hang out with. |
Come to the new and improved realcent: http://realcent.org
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Nickelless
Administrator
USA
5580 Posts |
Posted - 08/02/2010 : 22:52:50
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Think of it as cash-and-carry today versus future delivery on a promise to pay. The futures market typically sees prices rising for certain commodities for delivery at a certain date in the future. However, backwardation refers to futures prices being higher for immediate delivery of the commodity in question. If buyers aren't certain that they will be able to take physical delivery of a certain commodity at a certain date in the future because of the uncertainty of the supply of that commodity, they will be willing to pay higher (or backward) prices to take delivery right now. Conversely, sellers may not be willing to sell a commodity in exchange for a particular currency at any price in the future if they fear that the currency will lose its purchasing power--they will offer delivery at a higher current price now so that they can spend that currency before its purchasing power drops, and they will become less and less inclined to accept that currency at any price as time passes.
What this boils down to with regard to gold backwardation is that people are wanting to dump their FRNs as quickly as possible and take physical possession of their gold as quickly as possible. They're willing to pay more for gold and take delivery right now because they don't trust either the gold supply on the market or the future purchasing power of FRNs.
Here's a little more light reading that should help you more than I can:
You must be logged in to see this link.
You must be logged in to see this link. |
Visit my new preparedness site: Preparedness.cc/SurvivalPrep.net
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beauanderos
1000+ Penny Miser Member
USA
2408 Posts |
Posted - 08/02/2010 : 23:25:24
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quote:
Originally posted by Nickelless
Think of it as cash-and-carry today versus future delivery on a promise to pay. The futures market typically sees prices rising for certain commodities for delivery at a certain date in the future. However, backwardation refers to futures prices being higher for immediate delivery of the commodity in question. If buyers aren't certain that they will be able to take physical delivery of a certain commodity at a certain date in the future because of the uncertainty of the supply of that commodity, they will be willing to pay higher (or backward) prices to take delivery right now. Conversely, sellers may not be willing to sell a commodity in exchange for a particular currency at any price in the future if they fear that the currency will lose its purchasing power--they will offer delivery at a higher current price now so that they can spend that currency before its purchasing power drops, and they will become less and less inclined to accept that currency at any price as time passes.
What this boils down to with regard to gold backwardation is that people are wanting to dump their FRNs as quickly as possible and take physical possession of their gold as quickly as possible. They're willing to pay more for gold and take delivery right now because they don't trust either the gold supply on the market or the future purchasing power of FRNs.
Here's a little more light reading that should help you more than I can:
You must be logged in to see this link.
You must be logged in to see this link.
Substitute silver for gold and that could be me bidding on ebay... I'm willing to outbid others, even above melt on certain items, because I suspect they won't be offered much longer when the price explodes. So yeah, Eric, I guess I am kinda backwards on this subject  |
Hoard now and hold on!
http://coppermillions.blogspot.com/
http://wherewillyoubein2012.blogspot.com/ |
Edited by - beauanderos on 08/02/2010 23:25:59 |
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Red Alert: Gold Backwardation!!!
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