Author Archives: Keith Weiner

     

 

 

You Actually Can Eat Gold, But Its Nutritional Value is Dubious

“You can’t eat gold.” The enemies of gold often unleash this little zinger, as if it dismisses the idea of owning gold and indeed the whole gold standard. It is a fact, you cannot eat gold. However, it dismisses nothing.

 

Over-the-top garnish: Gold leaf-laced donut (reportedly costs $100), gold-laced cakes, sushi roll with gold leaf (according to Japanese lore, eating it is supposed to bring luck), gold-cake eater in Dubai. Nutritional value of the gold leaf is zero, but at least it isn’t toxic. So yes, one can eat gold, but it won’t relieve hunger pangs. We would like to point out here that absolutely no-one is trying to eat bank note-laced cakes. [PT]

 

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Running From “Risk-Free” to Not So Risk-Free Debt 

The price of gold blipped $13 last week, while the price of silver was unchanged. Speaking of interest rates and central planning by central banks, we note that in mid-2016, a correction (counter-trend move to the main trend) began in 10-year bond yields.

 

10-year treasury note yield vs. 10-year German Bund yield over the past decade [PT]

 

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Hammering the Spread

The price of gold fell nine bucks last week. However, the price of silver shot up 33 cents. Our central planners of credit (i.e., the Fed) raised short-term interest rates, and threatened to do it again in December. Meanwhile, the stock market continues to act as if investors do not understand the concepts of marginal debtor, zombie corporation, and net present value.

 

The Federal Reserve – carefully inching forward to Bustville

 

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Speculators vs. Arbitrageurs

The price of gold rose six bucks, and the price of silver rose 26 cents last week. Before we look at the graphs, we want to address a reader question. This week, someone asked about how we calculate the Monetary Metals  fundamental gold price.

 

The theoretical fundamental gold price (black line) vs. the market price for gold since late 2015. Worth noting: most of the time, the fundamental price is leading the market price; whenever the gap between the two prices was very large in the past, the market price would more often than not catch up with the fundamental price. Recent exceptions to this rule of thumb occurred in mid and late 2016, when market prices first rose and then fell and the fundamental price followed their lead, and again this year, when a big surge in the fundamental price failed to lead to a rally in market prices (however, on this occasion the fundamental price corrected quite sharply before an accelerated decline in market prices took hold). Since early July the gap between these two prices has gradually widened again and has become quite sizable. It remains to be seen whether the fundamental price will work as a leading indicator this time. As noted above, in the long term it tends to lead in most cases. [PT]

 

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Suspect Predictions, Ill Wishes and Worthwhile Targets of Scorn

This price of gold fell three bucks, and the price of silver fell ten cents last week. Perhaps because of the ongoing $150 price drop so far since April, we saw some doozy email subjects and article headlines this week.

 

Panic on the inflation Titanic. [PT]

 

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Fundamental Developments

The price of gold dropped five bucks, and that of silver 40 cents last week. But let’s take a look at the supply and demand fundamentals of both metals. Also, we continue to follow the development in the gold-silver ratio.

 

One can buy a lot of silver for one’s gold these days. Silver has become extraordinarily cheap, but keep in mind that it was even cheaper vs. gold in the early 1990s (see the section on silver further below for the details). Nevertheless, it seems clear that the risk-reward probabilities are increasingly favoring silver.

 

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Fundamental Developments

Last week the price of gold fell three bucks, and that of silver fell a quarter of a buck. But let us take a look at the supply and demand fundamentals of both metals. Also, we have an interesting development in the gold-silver ratio, a topic we have not addressed in a while.

First, here is the chart of the prices of gold and silver.

 

Gold and silver priced in USD

 

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Fundamental Developments

While the price of gold was up $19 last week, the price of silver was unchanged. Of course, we are not going to bias our discussions of the fundamentals, based on bearish or bullish theory.

 

This week it turned out that the lighthouse is actually more solid than many people seem to think of late… [PT]

 

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Fundamental Developments –  The Gap Keeps Widening

Last week, the lighthouse went down 24 meters (gold went down $24), or 50 inches (if you prefer, silver went down 50 cents).

 

They done whacked our lighthouse! [PT]

Image credit: Skip Willits

 

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The Fundamental Price has Deteriorated, but…

Let us look at the only true picture of supply and demand in the gold and silver markets, i.e., the basis. After peaking at the end of April, our model of the fundamental price of gold came down to the level it reached last November. $1,300. Which is below the level it inhabited since Q2 2017.

We will look at an updated picture of the supply and demand picture. But first, here is the chart of the prices of gold and silver.

 

Gold and silver priced in USD

 

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FRN Muscle Flexing

Shh, don’t tell the dollar-paradigm folks that the dollar went up 0.2mg gold this week. Or if that hasn’t blown your mind, the dollar went up 0.01 grams of silver.

It’s less uncomfortable to say that gold went down $10, and silver fell $0.08. It doesn’t force anyone to confront their deeply-held beliefs about money. But it does have its own Medieval retrograde motion to explain.

 

Even the freaking leprechaun is now offering government scrip…  this really takes the cake. [PT]

 

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Aragorn’s Law or the Mysterious Absence of the Mad Rush

Last week the price of gold dropped $8, and that of silver 4 cents.  There is an interesting feature of our very marvel of a modern monetary system. We have written about this before. It sets up a conflict, between the perverse incentive it administers, and the desire to protect yourself in the long term.

 

Answer: usually when it is too late… [PT]

 

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THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

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