Backwardation in a Falling Market: A Sign Bullion Prices Are About to Collapse?

freefallOur friend TF from TFMetalsReport has published a guest post arguing that the current backwardation in gold and silver in a falling market is signalling that bullion prices are about to experience a 2008 style collapse. 

The Doc has long believed that the gold and silver futures markets would experience a massive take-down immediately preceding the coming collapse and the metals’ largest gains.  Legendary gold trader Jim Sinclair recently stated the same, predicting an imminent wash out that would test the resolve of even the staunchest PM bulls, prior to gold heading to $3,500/oz.

Is gold and silver backwardation in a falling market signalling a washout gold and silver collapse is imminent?

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Guest Post, via TFMetals:

“It is a matter of basic arithmetic/economics that there is a bullish and bearish scenario for both contango and backwardation. Putting aside which scenario I find most plausible, I find it alarming when commentators show no awareness of the existence of the other argument.

Specifically, backwardation in the current environment of falling prices is precisely what one would expect to see in a sector which is about to crash. The lower-and-falling futures price is telegraphing the collapse of the market.
I’m not meaning to single-out you and Andrew Maguire here, as this is something I’m seeing/reading everywhere. I just happened to be listening to your clip today. However, if the bankers should be successful in engineering another Crash-of-’08 collapse in metals prices, all such commentators will lose credibility.
Just like all the mainstream clowns in 2008, they will say they were “surprised” by the collapse of prices – despite the fact that futures prices were telegraphing that price-collapse through backwardation in a falling market.
Note backwardation in a rising market implies the opposite. It implies precisely what you, Maguire and others have been saying — a “tight market”.

Obviously metals prices should be going straight up given all the new-and-escalating money-printing. However, when we’re telling people “what the market is saying” (these absurdly manipulated/fraudulent markets), at the very least we have to acknowledge what is being suggested: that bullion prices are about to collapse.”


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