The action in gold on Friday was notable.
Spot gold jumped over $5. And the rally has continued this morning, with gold now back above $1,110 for the first time in over a week.
The jump appears to have been driven by concerns over an proposed E.U. bailout of Greece, as well as political fears after the sinking of a South Korean ship near the border with North Korea.
Here's what's more interesting. Gold futures took flight on Friday. To a much greater degree than the spot price.
Spreads on the front-month contract leaped from $0.60 to $13.30. And the trend continued across the futures board. The six-month future spread gained from $4 to $18.10.
The gold market is now significantly in contango. Investors are betting that the metal is going higher and higher over the coming months.
Interestingly, it was exactly such a futures structure that helped boost the oil market over the past year. In a contango, buying can beget buying as investors buy metal to store with expectation of selling it down the road at higher prices. The reason we saw record amounts of crude going into storage in the first half of 2009.
Might Friday's jump trigger a similar boost for gold?
By. Dave Forest of Notela Resources