Author Archives: Keith Weiner

     

 

 

The “Risk Asset” Dip Not Worth Buying is on its Way

The prices of the metals rose, gold by +$11 and silver by +$0.25. The question on everyone’s mind (including ours) is: what will cause a change in the gold price trend, or what will make gold go up in a large and durable way? And that leads to another way of looking at this question.

 

Here is a very good technical reason to adopt a constructive attitude toward gold despite the fact that its nominal price in USD terms is seemingly not going anywhere of late. By remaining fairly stable in recent weeks, gold is rising relative to the S&P 500 index (SPX). In other words, the purchasing power of gold is increasing – and not only relative to the stock market. Similar trend changes can be observed elsewhere (e.g. in gold vs. industrial commodities). We will soon discuss this in greater detail. [PT]

 

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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]

 

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The Last to Go

Terry Goodkind wrote an epic fantasy series. The first book in the series is entitled Wizard’s First Rule. We recommend the book highly, if you’re into that sort of thing.

 

An image from the title page of Terry Goodkind’s best-selling fantasy epic “Wizard’s First Rule”. We’d be at bit wary of standing around on that stone-slab bridge to be honest. [PT]

 

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While Not Saving The Planet, Let Us At Least Have A Good Time

The price of gold went up seven bucks, and that of silver rose eight pennies.

For many people, the attraction to gold and silver began with a desire to protect themselves from the monetary train wreck of 2008. That often grew into a sense that gold is the solution to that problem.

 

The post 2008 GFC monetary train wreck: US true broad money supply is expanded by more than 153% in a mere decade, as the Fed takes over “money creation duties” from a banking system reluctant to expand credit further. [PT]

 

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Aiming for Knowledge and Better Decision-Making

The price of yellow metal went up nine bucks last week. And the price of silver three rose cents, which is back to where it was two weeks earlier. We need to rant, and promise to tie it back to the prices of the metals. We have written these past several weeks about the fact that the franc has been rendered useless. Owning a franc does nothing for you, other than to trade to the next person at hopefully a higher price.

 

When the money of the realm becomes literally useless as money – the charts and data example above shows excerpts of what happened in Germany from WW1 to the hyperinflation blow-out of 1923. In the end, one simply could no longer use the Reichsmark as a medium of exchange. [PT]

 

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

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