• 43 mins Huawei’s Fate In The Air
  • 4 hours Tesla Slashes Prices Again
  • 6 hours The Modern History Of Financial Entropy
  • 22 hours Italy’s Central Bank Embraces Sustainable Investing
  • 1 day Trump Lifts Metals Tariffs To Cool Simmering Trade War
  • 1 day Researchers Push To Limit Space Mining
  • 1 day Could China Start Dumping U.S. Treasury Bonds?
  • 2 days Is Winter Coming For HBO?
  • 2 days Rise Of EVs Signals Peak Gasoline
  • 3 days Jeff Bezos Doubles Down On Space Colonization Ambitions
  • 3 days Gold Mining Stocks Stuck In Limbo
  • 4 days Executive Order Targets Huawei Over Espionage
  • 4 days Why Now May Be The Best Time Ever To Hold Gold
  • 5 days Fake News Sinks Shares In UK-Based Bank
  • 5 days De Beers To Build $468 Million Diamond Recovery Ship
  • 5 days Moody's: Turkey Faces Possible Credit Downgrade
  • 5 days Tesla's Solar Sales Are Slipping
  • 6 days Auto Industry To Get Temporary Tariff Relief
  • 6 days Welcome To The World’s Biggest Free Trade Area
  • 6 days Central Banks Are Stockpiling Gold At The Fastest Rate In Half A Decade
How Millennials Are Reshaping Real Estate

How Millennials Are Reshaping Real Estate

The real estate market is…

Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

Keith Weiner

Keith Weiner

Keith is founder of the Gold Standard Institute USA in Phoenix, Arizona, and CEO of precious metals fund manager Monetary Metals. He created DiamondWare, a…

Contact Author

  1. Home
  2. Markets
  3. Other

Gold Price Drop of 6 Nov: Drilling Down

The price of gold dropped abruptly Friday morning (Arizona time). How much of a drop? $10.30, as measured by the bid on the December future. How abruptly? That move happened in under a second.

At first, the price of gold in the spot market did not react. This caused what looks like a massive backwardation (recall that the cobasis = Spot(bid) - Future(ask) -- if the future drops relative to spot, that is backwardation). See the graph of price overlaid with the Dec cobasis.

Gold Cobasis and Price Chart
Larger Image

The cobasis briefly hits a peak around 11% (from its "normal" level, currently in temporary backwardation, around 0.5%).

The whole cobasis spike is over 79 seconds later. The spot price is finally updated and the giant apparition of backwardation is banished.

We are not London bullion market insiders. However, we would bet an ounce of fine gold against a soggy dollar bill that this backwardation was not actionable. That is, it represents a delay in updating a quote rather than an offer to let you decarry your gold and pocket nearly $17 an ounce (we would love to hear stories to the contrary).

There are enough serious problems with the dollar, and the gold market is hardly in a state that could be called normal. So let's not make this molehill into a mountain. One commentator asserted that the spot market did not "believe" the futures price.

The fact is that the event began in the futures market. It propagated to the spot market subsequently. Attributing motives is just guessing. Attributing it to manipulation is just making up ghost stories around the campfire.

 


Do you support the gold standard? Please come and be counted. Show the legislature and governor in Arizona that honest money is popular! Please come to the Monetary Innovation Conference in Phoenix on Nov 17 (Keith Weiner is a speaker). At the conference, speakers will discuss gold and how innovators are using it to solve real problems for real people. Please click here to register. After the conference, we may put on a Monetary Metals seminar if there is sufficient interest. Please click here if interested (different link).

 

Back to homepage

Leave a comment

Leave a comment