Gold Futures' Spread Continue to Tighten

I wanted to provide a quick update for those who are following the "backwardation" talk out there.

I am currently showing the August, October and December gold futures contract all at the same exact bid. Also, the December has a mere $0.80 discount to the February. The futures market has still not entered a backwardation state but it is just about there. I will continue to monitor this and report on it should it occur.

Also, thus far I have not seen anything that would signal any problems with the delivery process for the August gold contract but one thing that does stand out is that J P Morgan continues to be the consistent, large stopper of gold for their "House" account. Morgan is acquiring a lot of gold.

It is going to be interesting to see whether they retender it before the month ends or at some point during another delivery month process but either way, they are acquiring it right now.

I am still watching that $1340 level in the December gold contract. So far it is proving to be formidable resistance. Strength in the gold shares is helping keep a very firm bid in gold but it is silver that is really proving a great degree of lift to the yellow metal.

That push through $20.50 is squeezing the shorts and it now looks as if the metal has a decent shot at testing $22.00.

Downside support for silver is first at $20.50 followed by $20.

Incidentally, gold is moving higher in spite of the fact that the US Dollar is stronger today.