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]


One notable one, from the man who confidently asserted we will have hyperinflation by the end of the year — in 2009 — now says that the dollar is close to losing its reserve currency status. Clearly, if the dollar goes down, the price of gold (measured in these going-down dollars) will be up. For those that want profit$, that number again is 1-800-BUY-GOLD!

The debtors of the world can’t “replace” their dollar debts. What would this even mean? The creditors of the world can’t find any other irredeemable currency that comes remotely close in terms of liquidity. And that is aside from the issue that the system will fail first in the periphery, so it will be better to hold dollars than dollar-derivatives (e.g. the pound and the euro, much less toilet paper such as bolivar and lira).

Another popular theme is that stocks and bonds will have their comeuppance, when stocks crash and gold skyrockets. This is openly wishing other investors ill (as distinct from analysis of the debt problem or the Fed’s credit cycle). Does one party’s gain depend on anothers’ losses? We believe this is part of the reason why so many normal people want nothing to do with gold (the other being, prior to Monetary Metals, gold did not have a yield).

For our part, we try to say as often as we can that our dire prognosis for the monetary system or even our conclusion that rising assets are a process of capital consumption, is not based on blaming people for speculating. The Fed applies perverse incentives, and everyone is forced to make the best of those incentives, like it or not. We reserve our condemnation for apologists of irredeemable currency, central planning, socialized credit, and collectivized resources.


Fundamental Developments

The dollar will resume its fall (not measured in terms of its derivatives, but in terms of gold) soon enough. Indeed, the Monetary Metals calculated fundamental gold price had bottomed in late June at around $1,300, and started to rise in late August. Now, it looks like the fundamental silver price may be bottoming at over $15.50.

We will look at the supply and demand fundamentals of both metals. 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). It rose further, to yet another record high this week.


Gold-silver ratio


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


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


We show the October and December basis, as the October contract is under selling pressure. The December contract shows a drop in the basis (purple line, i.e., abundance) and a rise in the co-basis (yellow, scarcity).

This week, the Monetary Metals Fundamental Gold Price rose by two bucks to $1,373.

Now let us look at silver.


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


It is the same story in silver, only the continuous silver basis is rising. The Monetary Metals Fundamental Silver Price fell $0.05, to $15.81.


Charts by: Monetary Metals


Chart and image captions by PT


© 2018 Monetary Metals


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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