Gold Futures Chain

The simple way of looking at the gold markets is to assume there's not much gold around. Only because its a very rare commodity with inert properties, does it get stored only to collect dust in the end.

After you die, it will manage to keep its allure for many centennials. If worse comes to worse, somebody WILL pry it from your cold, dead hands and throw your children in a FEMA concentration camp. This apparently allows people to sleep better at night as they hug the machine pistol under their pillow, gloating at the collapse of all fiat currency.

The gold markets, from the perspective of gold bullion as money, are chronically illiquid. Sure, there are lots of futures contracts traded, counterparty skullduggery, exchange of currency, but the actual gold in an unrefined state that only ever sees the light of day is when its loaded onto a Brink's truck at the mine or at the airport nearby. This is when the machine guns are brandished, even though there's nobody around.

In fact, the entire lot of refined gold mined in a year is traded in the short space of a week. The rest of the year is a modern form of baroque Cartesian philosophy class 101 enacted daily. Gold is somehow magically produced in the futures market at the behest of the banking pontiffs. The price pontiffs declare heresy against the banking pontiffs. And so it goes.

So when you have the price advancing as it did, people are leveraging up and not taking delivery. But the bullion banks are at the point of default. When you have a correction as we do now, then the bullion banks are suddenly liquid in bullion with people taking delivery. That means that the market stabilizes finally, and prices are set to rise as the market becomes illiquid eventually as demand saps supply.

But when gold is in backwardation, you have liquid markets where bullion exchanges are made, the bullion banks are liquid and the bullion has become re-monetized.(whereas the trend was once demonetization) Gold prices haven't gone into backwardation just yet, as the Dodd-Frank act precluded contracts for difference from trading solely the price.

But the futures chain has to be watched for backwardation now.

http://finance.yahoo.com/q/fc?s=GCU11.CMX

P.S. As far as gold goes, nobody trades gold for gold. Ever. But do you trade gold for silver? Mebbee. This is why the gold/silver ratio is important.

Daily Ichimoku/GBN.V

With the rout in the markets, the event that will probably be a non-starter is the award of the tailings impoundment area license, which should be occurring Wednesday this week. If it doesn't happen, then of course, two weeks later. We also have the 1Q 2012 quaterly report due on Sept. 30, which will settle the question of costs and grades.

In a market where there is a complete absence of any cogent economic model for gold mines save stock price appreciation, a gold mine with free cash flow and robust dividends will stand out from the rest. We'll be quite fortunate after all is said and done if the GBN.V management has this in mind.

The daily ichimoku picked out the decline in the stock price, will it now pick out the exact moment of the rise? Anyone jumping in on Friday may actually have a sterling trading idea on hand.

supersize: http://www.flickr.com/photos/11747277@N07/6177923291/sizes/l/in/photostream/

stockcharts.com

-F6