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  • Gold Anti-Trust Action Committee -- Dan Norcini: The real gold market speaks: 'When markets begin moving in this direction, narrowing the spread, they are said to be moving towards a condition known as, "backward ation". True backwardation occurs when the front month moves to a PREMIUM over the next month and particularly over the next set of three or four different contract months. Backwardation is a powerful signal of very strong demand that is attempting to send a signal to the market that it needs more of that commodity to satisfy existing levels of demand. While market price manipulation can be somewhat effective short term for fogging signals generated from a rising price in gold for example, it is generally unable to affect the spread structure of the entire set of futures contracts listed on the board at any given time. With this in mind, take a look at the April 2009 Comex gold contract and its spread between the June 2009 Comex gold contract. Notice the narrowing of the spread, or the move in the direction of backwardation. '

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  • FT Alphaville » Blog Archive » The gold backwardation theory: Normally, we would join them in their enthusiasm for the backwardation if we were talking about soybeans, or cotton, or sugar or crude; but in the case of gold, we are far less given to this sort of enthusiasm, for the ?Bugs? are misinterpretin g what is happening there. Simply put, o/n funding rates are so low, with the o/n fed funds rate as effectively near zero as it can get, that there are strange distortions taking place in gold lending operations. The ?Bugs? want very badly to see collusion and manipulation and intervention and all sorts of mischief taking place in the gold market. Instead, we see rather boring, inordinately prosaic interest rate arbitrage taking place and little else. Yes, there are shortages of gold coins in the market, and yes the spot/1st and even to the 2nd future gold future is backwardated, but this is hardly the stuff of manipulation and central bank intervention. We would counsel everyone to take a deep breath; to sit down and count to ten.

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