Monday , December 10 2018
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It’s Not That Day Just Yet – Precious Metals Supply and Demand

Summary:
Degrees of Urgency Monday was Veterans Day, a bank holiday in the US. The prices of gold and silver dropped and %excerpt%.61 respectively. “But isn’t gold supposed to go up when…?” Warren Buffet and Aragorn discuss what to do with the gold. Aragorn wants it, because he knows that even if it’s not today, “that day” will come. [PT] Why? Because everyone else will bid it up. Why? Because they expect someone else to bid it up. Why? Warren Buffet is right (though quite disingenuous). Gold has no utility. People buy it either expecting the end of the world or price gains. And the latter is not happening right now, so even those who buy it as a portfolio hedge are not feeling urgency. Certainly not as much urgency as those who are liquidating.

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Degrees of Urgency

Monday was Veterans Day, a bank holiday in the US. The prices of gold and silver dropped $23 and $0.61 respectively. “But isn’t gold supposed to go up when…?”

Warren Buffet and Aragorn discuss what to do with the gold. Aragorn wants it, because he knows that even if it’s not today, “that day” will come. [PT]

Why? Because everyone else will bid it up.

Why? Because they expect someone else to bid it up.

Why? Warren Buffet is right (though quite disingenuous). Gold has no utility.

People buy it either expecting the end of the world or price gains. And the latter is not happening right now, so even those who buy it as a portfolio hedge are not feeling urgency. Certainly not as much urgency as those who are liquidating.

Ultimately, people will buy gold to avoid being a creditor to the Fed. And on that day, price will not matter (and hence will be skyrocketing). But good ol’ Aragorn had it right: “today is not that day.

Fundamental Developments

Now let us look at the only true picture of the supply and demand fundamentals of gold and silver. But, first, here is the chart of the prices of gold and silver.

It’s Not That Day Just Yet – Precious Metals Supply and DemandGold and silver priced in USD

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio (see here for an explanation of bid and offer prices for the ratio). It rose this week.

It’s Not That Day Just Yet – Precious Metals Supply and DemandGold-silver ratio

Here is the gold graph showing gold basisco-basis and the price of the dollar in terms of gold price.

It’s Not That Day Just Yet – Precious Metals Supply and DemandGold basis, co-basis and the USD priced in milligrams of gold

Look at that big rise in the paper currency that everyone loves to hate! It went up over 0.4mg gold!

Of course, most people see this move inverted — a drop in gold. With the drop in the price, gold became a bit scarcer (not so much for farther months — December is nearing expiry and hence is under selling pressure).

The Monetary Metals Gold Fundamental Price dropped $26, $1,314. This is a rare time when the fundamental price moved essentially with the market price. For whatever reason, last week the price was driven by the selling of physical gold metal.

Now let’s look at silver.

It’s Not That Day Just Yet – Precious Metals Supply and DemandSilver basis, co-basis and the USD priced in grams of silver

Silver shows a sharper rise in scarcity (i.e., the co-basis).

The Monetary Metals Silver Fundamental Price fell 34 cents, to $15.22.

 

Charts by Monetary Metals

Chart and image captions by PT

Dr. Keith Weiner is the president of the Gold Standard Institute USA, and CEO of Monetary Metals. Keith is a leading authority in the areas of gold, money, and credit and has made important contributions to the development of trading techniques founded upon the analysis of bid-ask spreads. Keith is a sought after speaker and regularly writes on economics. He is an Objectivist, and has his PhD from the New Austrian School of Economics. He lives with his wife near Phoenix, Arizona.

 

 

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It’s Not That Day Just Yet – Precious Metals Supply and Demand 
 

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Keith Weiner
Keith Weiner is president of the Gold Standard Institute USA in Phoenix, Arizona, and CEO of the precious metals fund manager Monetary Metals. He created DiamondWare, a technology company that he sold to Nortel Networks in 2008. He writes about money, credit and gold. In March 2015 he moved his column from Forbes to SNBCHF.com.

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