James Turk tells King World News:
Gold backwardation is occurring because the big bullion dealers, hedge funds and arbitragers, do not want to take this risk. This phenomenon highlights the difference between physical metal and all of its paper substitutes. When backwardation in the metals occurs, it means two things: First, people want physical metal and not paper promises to deliver metal in the future.
Second, it means that the physical market is starting to drive the price of the metal, rather than what we have seen the past several months where paper selling drove gold and silver prices to abnormally low levels. The bottom line, Eric, is that in a year or two when we look back at today, we will marvel at how cheap the prices of physical gold and physical silver plummeted to.”