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The Italian Job – Precious Metals Supply and Demand

Summary:
Lira Comeback? The price of gold jumped 35 bucks last week, and that of silver 48 cents. The dollar is now down to 23 milligrams of gold. Keith is on the road this week, so we will just comment on one thing. If Italy is serious about moving back to the lira, that will make the euro less sound (to say nothing of the lira). That will drive people mostly to the dollar, but also to gold. Italian deputy prime minister Matteo Salvini (as the leader of the Lega party he is actually the most powerful politician in Italy, despite not being prime minister). In the course of an escalating dispute with the European Commission over the country’s budget deficit and debt, he threatened that Italy would consider introducing a parallel currency in the

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Lira Comeback?

The price of gold jumped 35 bucks last week, and that of silver 48 cents. The dollar is now down to 23 milligrams of gold.

Keith is on the road this week, so we will just comment on one thing. If Italy is serious about moving back to the lira, that will make the euro less sound (to say nothing of the lira). That will drive people mostly to the dollar, but also to gold.

The Italian Job – Precious Metals Supply and DemandItalian deputy prime minister Matteo Salvini (as the leader of the Lega party he is actually the most powerful politician in Italy, despite not being prime minister). In the course of an escalating dispute with the European Commission over the country’s budget deficit and debt, he threatened that Italy would consider introducing a parallel currency in the form of so-called “mini-BOTs” – non-interest bearing Italian treasury notes which the Italian state would print and accept in payment. Not quite a return to the lira yet, as mini-BOTs would actually be denominated in euro, but they would certainly represent a lira-in-waiting. The people who have come up with the idea apparently believe that such a scheme would be in compliance with EU/ euro zone regulations. We are not so sure about that, but ultimately Brussels would not really be able to do much about it. No-one seems to be taking the threat seriously at the moment, but if the Italian government were to go through with it, it would undoubtedly undermine the euro. [PT]

Fundamental Developments

Let’s go straight to the supply and demand picture of gold. But, first, here is the chart of the prices of gold and silver.

The Italian Job – 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). The ratio dropped slightly.

The Italian Job – Precious Metals Supply and DemandGold-silver ratio

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

The Italian Job – Precious Metals Supply and DemandGold basis, co-basis and the USD priced in milligrams of gold

Another big drop in the dollar, and not so much change apparent in the scarcity of gold (i.e., the co-basis). The gold basis continuous did show a small move.

The Monetary Metals Gold Fundamental Price jumped $42 to $1,414.

Now let’s look at silver.

The Italian Job – Precious Metals Supply and DemandSilver basis, co-basis and the USD priced in grams of silver

In silver, the picture is a bit different. The July contract had been in backwardation, but no more.

The Monetary Metals Silver Fundamental Price was up 19 cents, to $15.65.

Here is an update of the ratios of the gold to silver basis and co-basis.

The Italian Job – Precious Metals Supply and DemandGold vs. silver basis and co-basis ratio.

So much for that trend.

© 2019 Monetary Metals

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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The Italian Job – 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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