via Gold-Eagle - Who Said The Hydra Would Take It Lying Down?

Fekete is warning that backwardation in gold is coming.

http://www.gold-eagle.com/editorials_12/fekete041913.html

While I think that gold as a commodity will see backwardation in prices and that this will inevitably lead to a blow-off, something else might occur.

The World Gold Council maintains that gold will take its place as some sort of benchmark in foreign exchange markets.

You can check all of these notions by looking it up very easily, whereas at one time cobbling this information together was a chore in itself.

It certainly appears that the futures option chain for gold prices is very flat at the moment. But it also looks as if the central bank in the U.S. may be inflating markets in hopes of avoiding negative nominal rates at the short end of the treasury curve. If markets should fall, then negative nominal rates for deposits are inevitable.

Another outcome that is not being contemplated are negative rates across the entire yield curve for treasuries. We are seeing this in TIPS, except for longer dated securities, so it's not that far-fetched.

With the correction in gold prices, long-dated treasuries were yielding -3% in the repo markets, due to failures to deliver. JP Morgan Securities dumped all of the gold in their custodial accounts via the COMEX.

Gold prices recovered smartly on mis-interpretations that Mario Draghi was not averse to negative rates.

http://finance.yahoo.com/q/fc?s=GCK13.CMX

http://quotes.ino.com/exchanges/contracts.html?r=NYMEX_GC

http://online.wsj.com/mdc/public/page/2_3020-tips.html

FTAlphaville

-F6