Permanent Backwardation
The terminal diagnosis for the fiat monetary system — when gold refuses to come back from backwardation.
Antal Fekete
Temporary backwardation in gold occurs during periods of stress — holders briefly prefer metal over promises. This is correctable. Permanent backwardation is when the basis goes negative and stays negative. It means the last gold is being withdrawn from the futures market and will not return at any price.
What Triggers It
Progressive destruction of trust in paper instruments. Each round of monetary expansion, each bail-out, each manipulation of the interest rate structure pushes gold closer to permanent backwardation. When it arrives, it signals that the clearing mechanism of the futures market has broken down.
Implications
Fekete argued this would mean the end of the international gold trade as we know it. Gold would still exist, but it would no longer be obtainable through the paper market at any price. The gold basis chart is the early warning system.