Jackass on CONTANGO
mining firms in the 1990's were tempted to participate in an ugly game that helped to destroy their business
it was foward sales with leverage, aka hedging
the contango is the opposite of backwardized
now, dont you feel you fully understand?
if each successive month in the futures gold contract is traded for a slightly higher price than the previous, then you have what is called a contango
so miners would sell 2 to 3 years forward, and pocket a substantial sum from the contango, a prepaid interest that served as whopping since leveraged with futures contracts
I am unclear why the contango was present before during the declining trend, honestly
backwardization occurs when forward prices are LOWER than current months
to attempt to clarify my own confusion, I believe contango is the norm, and hedgers over-used it
they still average about 3 years forward sales on production, insanely
so now, after selling too much forward, they have brought down forward month prices, thus flattening out the forward price curve
hedged miners sold forward so much they lost their contango
central banks leased (sold) so much they will soon have to make margin calls
this whole country is all about EXCESS, and its unwinding
a good signal that the GOLD GAME is over will be to observe BACKWARDIZED futures pricing
that means gold has been sold in excess way ahead of now
the big boys are lining up their exit
I hope this helps
ooops, soon to be kicked off library PC by a European kid with acne
/ jim |
