Backwardation cannot predict what the gold price will do. In fact, nothing on this earth can do that because the future is always uncertain. But what backwardation does do is give a strong signal that gold is undervalued. That means gold is cheap and a good buy at current prices here at around $1,290. That conclusion is also supported by the strong rebounds we have seen the past few weeks whenever gold drops below $1,300.
So we have to ask ourselves why gold did not rebound today? My thinking is that the central planners know as well as anybody else that August is characterized by thin markets with high absenteeism because of holidays. So a determined price manipulator can push gold around with little resistance. So today backwardation is the consequence, rather than a rebound in price back above $1300.
Whenever gold is pushed into backwardation, it can be compared to the price manipulations by the London Gold Pool to keep gold at $35 back in the 1960s. It eventually ends and is followed by higher gold prices. These price rises are inevitable when the dollar and other currencies are debased by government and central bank policies that eat away slowly but surely at a currency’s purchasing power – and erode its usefulness so that eventually the currency collapses.
Source King World News
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