The Institutional Risk Analyst

When the price of gold rises what is really happening is that the value of fiat currencies is falling. The rout ongoing in the bonds of the various industrial nations suggests that the dollar and all of its subsidiary currencies are in big trouble. Yet none of these democratically elected governments are willing to take steps to arrest the decline in their credit standing, namely raising taxes and reducing public spending.

The key point to make about gold and backwardation isn't a gold price correlation to interest rates, but a gold basis correlation to interest rates. The basis spread is far more important than the price level when we talk about gold. I argue that we'll get to a point where essentially gold withdraws its bid on the dollar entirely. And gold goes into permanent backwardation more than a devaluation of money the backwardation of gold really represents a collapse in trust in the