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Message: Antal E. Fekete - Update

All in my opinion, please do your own DD. This is not investment advice.

I hear you ebear. As I've said since I began posting I'm not a believer in the conspiricist mumbo jumbo. I am a gold bug but strictly from a supply/demand, holder of value and demise of the US dollar point of view.

However this backwardation issue is very interesting. My guess is that you all get it, but I'll put it in laymans terms anyway...

Spot gold ALWAYS trades in contango. Meaning the future price ( say six months down the road) is always higher than todays spot price. The reason for this is the "cost of carry". Unlike other commodities which are consumed, gold stays in the warehouse for the most part. Even gold delivered results in the owner taking on "safe keeping" fees/ delivery fees etc.

In other words, as long as all is right in the world, spot gold should never be allowed in an efficient market to trade above the future price. The existance of this (called backwardation) should be met immediately by seller locking in the gain on the spot market and replenishing their sold ounces on the futures market.

Ie. I'm sitting on 1000ounces. I sell them today at a premium and buy a 1000ounces for delivery in six months for a cheaper price. I win on the transaction immediately + I don't have to pay safekeeping fees.

This happens in other commodities as people bet on crops/ seasonality issues, or on the health or stage of the economy, but gold is different as its considered currency.

The current situation is like somebody paying you for borrowing from them. Loan me a $1000 now and I'll give you back $950 later.

It speaks highly to a significant breakdown in both supply/demand and faith that future contract will be honoured.

From a completely unrelated view, gold looks exceptionally strong from a technical view. Looking at the chart on the ETF GLD, A couple of weeks ago gold broke out of a text book ascending triangle which was resisting at around $75. This was off a double bottom of around $69. The measured move on the breakout should therefore have been the base $6 (differnce from $69 to $75) which is what is did as screamed up to $81. in perfect text book fashion it turned and tested the previous resistence ($75) which became support and a couple of days later we're back to $80 where we closed around today. Its a very strong technical reading to say the least and my bet is we're very much at the beginning of a new wave up.

Lastly the fundamentals simply could not be better. All central banks have joined the bailout (err stimulus) game. There simply isn't going to be enough gdp to service the debt being brought forth. The only way out is curency devaluation. As long as enough people in the world continue to believe in gold as a holder of value it will shine. And honestly other than the yuan, I don't see a lot of alternatives coming around any time soon...

I made a call on gold exploding a year and a bit ago as it floundered in the $550-600 range and I'm making it again. Given that elliot wave theory holds that wave 5 often extends in commodities (versus wave 3 in other securities) my guess is that a kahuna is indeed here, and a measured move to $2000 by the end of 2009 is not only possible, but actually probable in my opinion.

my gold coin anyway...



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