Author Archives: Keith Weiner

     

 

 

A Record Amount of Bonds with Negative Yields to Maturity

Last week the price of gold went up $22, while the price of silver dropped ¢17. The big news last week was that the yield on all German government bond maturities is now negative. They are also all negative in Switzerland. And in Denmark, all maturities out to 20 years are negative. Interest rates are dropping rapidly in the US as well.

 

More than $14 trillion in bonds now trade at negative yields to maturity – with more than 25% of all “investment grade” bonds afflicted with this policy-induced malady. This is essentially ensuring accelerated capital consumption. As you can probably guess, prosperity is not going to increase as a result. [PT]

 

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Spoofers vs. the Underlying Trend

The price of gold fell seven bucks, but the price of silver was up $0.16. In other words, the gold-silver ratio did a little more reverting to that long-forgotten mean.

 

Launceston Castle in Cornwall, an example of a motte and baley fortification. The castle was built in 1067-1071 AD, either by the Count of Mortain (the half-brother of William the Conqueror) or Brian of Brittany. [PT]

Photo credit: P. Vincent

 

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Speculators Finally Wade Into Silver

Well, wasn’t this an interesting week! The price of gold was up a pedestrian $10, mere noise in the long-term signal. But in silver, we see plus one dollar. It was practically inevitable with the gold-silver ratio at an all-time high, after a big run up in the gold price with no corresponding run in silver.

 

1000 oz. good delivery silver bars – one COMEX futures contract refers to five of these shiny door stops. Recommendation: do not let them fall on your toes. [PT]

 

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Gold vs Other Assets

The prices of the metals went up +$15 and +$0.23. We will be brief this week, as Keith just got off a 17-hour flight from Perth to London.

Stocks continue their march upwards. And hence the gold price seems stalled—or is it? It may seem like gold goes up, when stocks go down and vice versa. That’s been the recent pattern. Why should people own money without return, when stocks are where the action is?

 

Gold-SPX ratio: in long-term gold bull markets, this ratio will trend higher. It has recently made a secondary, higher low, but not yet a higher high – which will be required to confirm a new bull market trend. In the short term, gold and stocks can be positively correlated, but in the long term they are antagonists (a rising gold price denotes rising demand for money, which usually coincides with falling demand for “risk assets” such as stocks). [PT]

 

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Too Much Excitement?

The prices of the metals fell last week, with that of gold -$9 and silver -$0.32. Of course, it was a week of stock market exuberance. Why would anyone want to own money, or seek safety when the Fed can seemingly push interest down / assets up indefinitely? As the old TV ad for Lotto proclaimed “you gotta be in it, to win it!”

 

“Stablecoin” Tether is used as a dollar stand-in on cryptocurrency exchanges that offer no fiat currency pairs. There has been a lot of speculation about the extent to which Tether is actually backed by US dollars. Despite these rumors and a recent admission by the company managing Tether that is is actually not fully backed with USD, it continues to be popular. It should be noted that BTC has a market cap of USD 224 billion and daily trading volume of USD 25 billion. [PT]

 

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Investments vs. Money

Last week the price of gold went up another $11, but the price of silver dropped 4 cents. The gold-silver ratio hit another new high, up another point, though down from Tuesday’s high water mark.

This obviously was not the week that wage-earners increased their money holdings or that institutions expressed a preference for the bargain of silver.

 

Prosperity is just around the corner… and so is the trade deal. [PT]

 

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Buyers of Gold vs. Buyers of Silver

Wow! What a week for dollar! It dropped a whole milligram from 23.2 to 22.2mg gold. The dollar is now at its lowest level in years, and on the verge of breaking down.

 

Silver, the precious metal of the common man [PT]

 

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Silver Price Driven by Reservation Demand

The price of gold went up a buck last week, but the price of silver dropped back 13 cents. And the gold-silver ratio marches further upwards.

Keith spoke at a conference this week, about how to analyze the fundamentals of supply and demand in gold and silver. He talked about the basis of course.

 

Silver coins – silver prices are partly influenced by an industrial demand component, but the fact that they move most of the time with the price of gold indicates that the main price driver remains reservation demand by investors. [PT]

 

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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.

 

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 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]

 

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Is Silver Still Useful as a Monetary Metal?

The price of gold jumped a whole twenty bucks last week. We imagine that the marginal gold bug is relieved to be rid of his gold, in this opportunity afforded by the highest price since early April. OK, all kidding aside, the price of silver went up a penny.

 

 

The gold-silver ratio keeps hitting new highs recently (this is actually a long-term trend, frequently interrupted by strong rallies of silver against gold). Is silver losing its usefulness as a monetary metal? [PT]

 

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The Money of the Free Market, not of Governments

Monday was Memorial Day holiday in America. Last week the price of gold rose 8 bucks, and silver 16 cents. With Keith traveling in Asia right now, this will be a brief report. But speaking of Asia, everyone seems to be talking about China’s (and other countries, such as Russia) accumulation of gold.

 

Accumulation of gold reserves over the past decade by various emerging market central banks (from the new Incrementum In Gold We Trust 2019 Report) [PT]

 

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The Seeds of the Next Bust Are Closer to Sprouting

The price of gold was up this week, by $10 and that of silver by ¢6. Something is brewing in the fundamentals that we haven’t seen since… last year. We will show a picture of this, below.

There are many problems with assuming a rising stock market means a growing economy. We’ve written many times about the much-greater growth of debt, i.e., borrowing to consume, which adds to GDP.

 

S&P 500 Index, monthly – the huge rally since 2009 was accompanied by the weakest economic recovery of the post-WW2 era. Evidently, the stock market does not necessarily reflect economic growth. Very often numerous other factors prove to be far more important drivers of stock prices. A pertinent example is Venezuela’s soaring stock market, which is up by 88,500% in the past year alone (this is not a typo). Meanwhile, the country’s economy is contracting since 2014, with the slump accelerating to a stunning -16.5% y/y in both 2017 and 2018. The S&P 500 Index is an island of sanity by comparison, at least superficially (the ceteris are of course not paribus). [PT]

 

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