Gold Spot Price Higher Than Futures Prices For First Time Ever

Posted on December 9, 2008 by Robert Rothenberg

For the first time ever yesterday. the spot price of gold traded higher than the futures price where investors or speculators accept the delivery of gold at a pre-determined later date at a pre-determined price.

Typically, the futures price equals the spot price plus the return you would receive if you took your funds and invested in a risk-free asset such as a Treasury Bill.

Most of the business media focused on this and indicated that investors were demanding ownership in physical gold rather than an exchange traded fund or some other derivative due to the uncertainty in todays economy.

This may be true to some extent. However, as Dennis Gartman reported in his daily report, the return on Treasury Bills are negligible. A 90 day treasury-bill is currently yielding in the vicinity of 1/100th of a percent so the spot price and futures price should be almost identical all things being equal.

Only time will tell if this situation will change going forward. What are your thoughts regarding gold investing? Will investors demand to have actual gold in their posession or will they be satisfied owning a derivative that participates in any upside in golds price? Your comments are greatly appreciated.

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4 Responses

  1. ABC Finance Articles » Gold Spot Price Higher Than Futures Prices For First Time Ever, on December 9th, 2008 at 11:38 pm Said:

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  2. Hal, on December 10th, 2008 at 5:20 am Said:

    I think the T-Bill issue does play a big part of it right now. You might be interested in seeing this post: Investors are expecting a lot of deflation.

    The U.S. Treasury completed a remarkable auction of four-week Treasury bills today. No surprise that there was a ton of demand for the only investment still viewed as a safe haven — there were bids worth $120 billion for the $30 billion of bills being sold. But how low did bidders go on the yield they’d accept to own the bills? All the way down to zero. That’s right, the U.S. government just borrowed $30 billion at a cost of zero percent interest. That follows yesterday’s auction of 3-month T-bills at the microscopic rate of 0.005%, the lowest since the long-running 3-month maturity first hit the market in 1929.

    Given news like this I think there’s a fair number of people afraid of some kind of depression looming and that actually having physical gold is going to be a necessity.

    You also might be interested in this site tracking the COMEX deliveries for the month: Vaporize COMEX CountDOWN Category

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  3. Hal, on December 13th, 2008 at 5:13 am Said:

    No problem. Thanks for the forum and info your putting up here. It is definitely an interesting time we are living in.

    Reply

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