Gold futures curve

[Overnight]

it does trade actively 24hrs... is there usually a difference in London spot and US?

Well, here's the thing. I do not think there is a "USA gold spot" price point. Anytime I hear about a spot price in gold, it is always the "London spot". All the financial guys speak about the "London spot". Never heard them say a "Fort Knox" spot.

What can we glean from this? For futures trading on a US exchange, we must take into account all the market dynamics to make a fundamental decision about which direction we should go in gold, regardless of the London spot. We must continue to treat it as a safe-haven instrument, no matter what the spot and contango/backwardation tells us. Gold is funky man. JackRab, keep studying it. I find the GC future fascinating. If you have the wherewithal, take a gander at GC versus DX. You might find an interesting inverted relationship there, between the two. (I cannot see the DX, I don't have it in my feed. :-( )

 

[JackRab]

If you have the wherewithal, take a gander at GC versus DX. You might find an interesting inverted relationship there, between the two. (I cannot see the DX, I don't have it in my feed. :-( )

That inverse relationship... probably due to Gold being valued in USD? So when USD rises (DX up) Gold drops somewhat to keep the international market price in balance..?

 

[Overnight]

That inverse relationship... probably due to Gold being valued in USD? So when USD rises (DX up) Gold drops somewhat to keep the international market price in balance..?

Well...Not exactly. Gold is not valued in USD. Gold is just, well, gold. Remember, gold has been used as a baseline for trade value for a bazillion years. I think every country puts some of their currency reserves into gold for the simple reason that every other country in the universe will accept gold as payment. That is the most simple dumbass explanation of why gold is still a standard of value-measurement, ever. I do not win a cookie.

For trading purposes, I have noticed that when fiat currencies go up, GC tends to go down and vice-versa. Since the USD is the most powerful currency out there, that is the relationship you would want to follow. If the value of the USD goes down, GC usually goes up (along with other FX futures). Keep an eye on that relationship, and do not ask why. Just follow it. Who the hell knows why up is the new down.

 

[JackRab]

Well...Not exactly. Gold is not valued in USD. Gold is just, well, gold. Remember, gold has been used as a baseline for trade value for a bazillion years. I think every country puts some of their currency reserves into gold for the simple reason that every other country in the universe will accept gold as payment. That is the most simple dumbass explanation of why gold is still a standard of value-measurement, ever. I do not win a cookie.

For trading purposes, I have noticed that when fiat currencies go up, GC tends to go down and vice-versa. Since the USD is the most powerful currency out there, that is the relationship you would want to follow. If the value of the USD goes down, GC usually goes up (along with other FX futures). Keep an eye on that relationship, and do not ask why. Just follow it. Who the hell knows why up is the new down.

Well I meant priced in USD.

The way I see it, if USD appreciates against every other (fiat) currency... that means for all others Gold will be more expensive... since it's priced in USD. So, for it to be equalized inline with a broad worldwide currency, it Gold should come down. That makes sense doesn't it?

A bit similar for Oil. Also priced in USD so kinda acts in a similar way, but that relationship with Gold would be stronger since the use of gold is primarily for value storage and oil for production/consumption.

I always want to know the why ... If I don't get the general workings, I'm not touching it! Made that mistake lots of times... and usually it will hurt at one point!

 

[Overnight]

Well I meant priced in USD.

The way I see it, if USD appreciates compared to every other (fiat) currency... that means for all others Gold will be more expensive... since it's priced in USD. So, for it to be equalized inline with a broad worldwide currency, it Gold should come down. That makes sense doesn't it?...

It is an interesting point. Should a world-wide commodity such as gold be priced in USD? If so, why? Why can it not be priced in the South African rand? But then, what is the rand compared to?

This delves into levels of economic theory that is beyond my comprehension. Gold fascinates me the most about it though. Every country with wealth has gold in their banks. So why do they base the value of their gold on USD? Why do they not base it on their own GDP? Why does it HAVE to be based on USD? And then the conversion rates come in and blah blah blah. But you know what? Screw it, it is a holiday weekend here in the USA, and some of us need a holiday break.

End of line.

 

[JackRab]

It is an interesting point. Should a world-wide commodity such as gold be priced in USD? If so, why? Why can it not be priced in the South African rand? But then, what is the rand compared to?

This delves into levels of economic theory that is beyond my comprehension. Gold fascinates me the most about it though. Every country with wealth has gold in their banks. So why do they base the value of their gold on USD? Why do they not base it on their own GDP? Why does it HAVE to be based on USD? And then the conversion rates come in and blah blah blah. But you know what? Screw it, it is a holiday weekend here in the USA, and some of us need a holiday break.

End of line.

It's because USD is the main reserve currency... so most stable/traded/available/accepted. SA Rand is very thin and not widely accepted. Other options could be Euro or Yen...

There are thoughts of pricing those in a world wide currency basket, but as of yet no agreements. Makes more sense though... especially when the Chinese have a more stable monetairy policy. Combination of USD/EUR/JPY/CNH...

Have a good weekend, .... what's the holiday weekend for?

 

[i960]

It is an interesting point. Should a world-wide commodity such as gold be priced in USD

Okay, so what are you actually going to buy gold with then? If you were to buy it with silver you'd need quotes for XAUXAG or GC/SI type stuff. Since the actual instrument is quoted in USD, a strong or weak dollar definitely makes a difference.

 

[TraDaToR]

https://www.goldbroker.com/news/backwardation-contango-gold-silver-market-explanations-466

"Backwardation in gold and silver is the consequence of interest rate manipulation by the government. Backwardation indicates that people prefer to be holding gold and silver, rather than fiat money (paper money) from a country (dollar, euro, etc.)."

 

[truetype]

@truetype, instead of just blabbing something in here... you should at least try and explain GOFO and gold lease rates etcetc....

Oy... Let's try this: gold vs a market that has a non-trivial term structure... compare/contrast...

 

[Trader13]

Let me try to guess which one exhibits seasonality ... thinking ...