Gold Shortage?

Given the new gold backwardation, bulls have returned back in force (1, 2, 3) to explain how this will push gold higher. But does backwardation correlate with flat price?

Compared with flat price (front month), there doesn't seem to be an easy correlation. The last breakout for gold prices in 2006 happened when there was no backwardation. More generally, a recent paper from the IMF shows that:

"... we find that the forecast from the futures market is hard to beat. We find that the forecasting performance of futures does not depend on the slope of the futures curve"

This means that all else being equal, 1) the current futures price is the best predictor of prices, and 2) the slope of the curve has little to do with futures prices. As a result, are the gold bulls falling into another example of confirmation bias? If supply is so constrained, why are prices not at all time highs?

From articles such as this, one would think that the world was scrambling for gold. With aggregate Jewelery demand up 50%+ yoy, central banks continuing their buying and supply constrained (per the bulls' own argument), why did gld fall nearly 25% in Q2? If the entire world is buying and the price falls, what happens if supply/demand moderates?

It seems like rather than supply and demand, one should be focusing on price reactions to supply and demand. After, commodities (esp. gold) are often purely psychological instruments.


Disclosure: I am short GDX