Goldfinger Strikes, Sort Of

This week, we saw a tweet from a prominent goldbug. He said, “Russia added another 9 tons of gold to its reserves in March. The hits just keep coming.” How many errors in this short quip? We count six, exactly one error for every two words.

 

This one’s got everything: Smersh, Spectre, Putler and Pussy Galore! [PT]

 

One, we call this the fallacy of the famous market actor. Russia is famous. Its purchase of 9 times is therefore imbued with meaning, that the sale of those same 9 tons is not given. Because the sellers are not famous.

Two, the concept of stocks to flows measures the abundance of a commodity. It is not a measure in terms absolute tonnage, which would be useless. It looks at how much of the good is accumulated.

Virtually all of the gold ever mined in human history is still in human hands. Russia’s purchase is merely the shifting of a very small percentage of total stocks from one corner of the market to another. Hell, 9 tons is a small fraction of 2017 mine output let alone 5,000 years of accumulated mining output.

Three, this goldbug speaks often of a change in the monetary order, hopefully and presumably one based on gold. But this bit about Russia shows the ambiguity of most gold bugs. Buy gold because of new monetary order and because its price will go up. Huh? If the dollar is collapsing, what meaning does the price of gold measured in dollars mean? Conversely, if one is promoting a new monetary order, why promote Russian gold buying to promote a quick trade to make a buck?

Four, this purchase by Russia is bullish (remember, it’s not a sale by smarter people to the dumb money of central banks). Is all news bullish? 2011-2016 would suggest it isn’t.

Five, a gold standard is not about central banks buying gold. Or loading up on gold. Or having “enough”. There is no amount of gold that could ever conceivably be enough for the Russian central bank to have, to defend a gold price peg. All rubles (and dollars, pounds, etc) did not begin life as gold deposits. They cannot retroactively be declared to be gold-redeemable.

Finally, the ruble is not exactly in a rising trend. So whatever “hits” he means, it is not a “hit” to the US dollar. Which the goldbugs want to hear, in the dualist world of gold going up vs. seeking out good news about the dollar going down because it’s good for gold.

 

USD-RUB, weekly –  to be precise, the Russian ruble weakened sharply until early 2016, making a low of more than 85 rubles per USD. Since then it has actually strengthened quite a bit, but the trend was recently rudely interrupted after new sanctions were imposed on Russia. [PT]

 

Fundamental Developments

That said, gold fell ten bucks, but silver rose about half a buck. Silver bugs have begun to (more aggressively) say that the rally’s back on. We will look at the fundamentals, but first, here is the chart of the prices of gold and silver.

 

Gold 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). There was a big drop in the ratio.

 

Gold-silver ratio, bid and offer

 

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

 

Gold basis, co-basis and the USD priced in milligrams of gold

 

There was a small increase in the scarcity of gold (i.e., the co-basis, red line), as its price fell. The Monetary Metals Gold Fundamental Price fell $2 this week to $1,507.

Now let’s look at silver.

 

Silver basis, co-basis and the USD priced in grams of silver.

 

Silver’s scarcity fell, however unlike in gold, the price of silver was up considerably. Much of this buying was buying of metal, rather than buying of futures contracts as typically seen in recent years.

The Monetary Metals Silver Fundamental Price rose 31 cents to $17.77.

Here is a chart of the silver fundamental price for the last year. Has the silver fundamental price broken out? We would want to see more evidence before pronouncing this. Heck, not even the market price has so far surpassed its level from January.

 

Fundamental silver price vs. market price

 

© 2018 Monetary Metals

 

Addendum by PT:

Note that large speculators recently held the biggest net short position in silver futures since at least 1990 (very likely it was actually an all time record). In other words, if silver were to begin trending up, it would presumably have quite a bit of room to run.

 

Charts by: BigCharts, 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.

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

One Response to “Russian Gold Rush – Precious Metals Supply and Demand”

  • Patrick:

    There’s more Gold above ground than there ever has been before. And more Silver, Zinc, Copper and Steel. Similar can be said for even crypto in a sense, but one thing they seem to be ‘digging up’ at a pace magnitudes faster than all of them combined is fiat currency. Seems there’s no end to the trillions of Dollars, Euros and Yen they’re finding these days and, with so much above-ground paper in circulation, it boggles the mind that it’s still worth more than lighting on fire to heat your home with.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • The India-China Border Issue
      Deep-Seated Racism and Happy-Smiley Hypocrites In Delhi, people of the northeastern part of India, who have mongoloid features, are derogatorily called “chinky.” It is not unusual for men in Delhi to stop their cars to proposition a random girl from the northeast for a sexual encounter, assuming her to be “loose.” Indians' ignorance about the geography of their own country, their irrationality, superstitions and bigotry have been fertile ground in these days of Covid-19. People...
  • Silver “Scarcifies” – Precious Metals Supply and Demand
      On Monday, Silver got Scarcer – and Simpler On 23 July, we said:   “Well, it’s complicated.”   The action on 27 July was not.   Silver spot price vs. September basis   Notice the big drop in the basis starting around midnight (London time). It falls from over 7% to under 2%. To refresh: Basis = Future(bid) - Spot(ask) For the first two and half hours, the spot price is not moving. So, the only way the basis can drop is if the price...
  • Best Laid Schemes
      A Really Neat Bridge   But, Mousie, thou art no thy-lane, In proving foresight may be vain; The best-laid schemes o’ mice an’ men Gang aft agley, An’ lea’e us nought but grief an’ pain, For promis’d joy! – Robert Burns, To a Mouse, on Turning Her Up in Her Nest With the Plough (in extract), 1785     Installation of the final cable support pipes on the Gerald Desmond bridge replacement. Here is a drone video of the project. [PT] Photo by...
  • Silver Explodes — But Why? Precious Metals Supply and Demand
      Explosive Days in Silver The silver market witnessed another explosive day! At midnight (in London), the price of the metal was $26.90. By 9pm, it had rocketed up to $28.95, a gain of 7.6%. This is not normal. But then, we are not in a normal world.   After several years of going nowhere and a downside fake-out in March this year, silver has come to life rather dramatically... [PT]   The Republicans are spending like drunken Modern Monetary Sailors. And...

Support Acting Man

Austrian Theory and Investment

j9TJzzN

The Review Insider

Archive

Dog Blow

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

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

     
    Buy Silver Now!
     
    Buy Gold Now!