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1.) Have you heard of gold backwardation? It seems a fairly under researched subject, to put it mildly, despite it being relevant in today's financial markets. It is also relevant for #Bitcoin 
. I will try to break it down in this thread.
. I will try to break it down in this thread.
2.) Futures contracts can be in contango or backwardation. Contango is pretty normal for commodities in need of expensive storage, and means that for example the spot price is lower than the futures price. Backwardation on the other hand means the spot is higher than the futures.
3.) An example of perfectly normal backwardation is grain futures, where just before a large harvest, the spot price is higher that of a future delivery. It simply means there is rather high demand and low supply in the near term. Ok, so what about gold backwardation?
4.) Here is the thing: gold is not "supposed" to ever be in backwardation. Its S2F is > 50. It is a commodity not to be consumed, but hoarded. That means there is never a shortage of gold, in the sense that there can be a shortage of oil, livestock, or of grain.
5.) Though not always the case, gold backwardation can be a signal that there is something deeply wrong with the financial system. Imagine yourself a rich gold owner and gold moves into backwardation. You can sell gold at spot, and simultaneously buy a cheaper futures contract.
6.) This is "risk free" return, you get money instantly, and a contract to buy back all gold for less than what you sold for, while taking on no cost of carry. When gold owners pass on this opportunity, it may be because they don't trust the system to deliver on the contract.
7.) Between 1989 and 2009, gold was in backwardation four times - the longest of them being for a brief period of three days. Since 2013, gold backwardation have been persistent, sometimes lasting for weeks and even months.
8.) Low interest rates have resulted in the diminishing of a factor which usually helps push gold into contango. The canary in the coalmine of the collapse of paper money may therefore be hidden in plain sight. But it doesn't mean it's not there.
9.) Bitcoiners may be interested in following this indicator, which can be a red flag, or simply a brief market phenomenon due to illiquidity in a contract about to expire. It ought to be researched fundamentally rather than statistically.
10.) Check out @kweiner01's optimistic post on the subject. https://keithweinereconomics.com/2012/03/15/when-gold-backwardation-becomes-permanent/
"Debt is backed with debt, based on debt, dependent on debt, and leveraged with yet more debt. For example, today it is possible to buy a bond (i.e. lend money) on margin (i.e. with borrowed money).
The time is now fast approaching when all debt will be defaulted."
The time is now fast approaching when all debt will be defaulted."
