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]

 

In the meantime, we saw a fascinating graph comparing the bitcoin price to the market cap of USD Tether. We are not entirely sure what to make of it, but it suggests that the more dollars pour into tether, the more the price of bitcoin is pushed up.

Now, we are not experts in the mechanics of bitcoin much less Tether. But this does not strike us as organic demand for bitcoin, based on growing evidence that bitcoin will become money.

It smells to us like either some kind of arbitrage, or like a way to use Tether as a cheap way to fund a speculation. This is a question that will most likely have to be answered by the Bitcoin and Tether Supply and Demand Report.

 

There is a correlation between Tether’s market cap and the price of BTC, but the question is whether this is unusual (it probably isn’t). For instance, the largest cryptocurrency exchange by volume (Binance) does not offer BTC/USD , BTC/EUR or BTC/JPY trading pairs. If people trading on it want to buy or sell BTC, they must do so via one of the stablecoins – of which Tether is established the longest. [PT]

 

In other news, Deutsche Bank is laying off 18,000 people and restructuring. Other layoffs are surely coming to other major corporations, not to mention the perennially money-losing enterprises.

Will this be the signal for everyone to pile into gold and silver again? One reason for caution is the incredible switch from depression to mania in the space. Nearly everyone is convinced this is the breakout. That gold is going to rocket higher.

Where is that wall of worry that bull markets, especially in the early stage, are supposed to climb? On the other hand, as of the previous Report, the fundamentals of gold — if not silver — kept getting stronger.

 

Fundamental Developments

Now let’s look at the only true picture of supply and demand for gold and silver. 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). The ratio rose further.

 

Gold-silver ratio, bid and offer

 

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

 

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

 

There we see an upturn in the scarcity of gold (i.e., the co-basis) as the dollar strengthens (i.e. the price of gold, in dollars, drops).

But not that much. The Monetary Metals Gold Fundamental Price fell $43 to $1,419.

Now let’s look at silver.

 

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

 

With silver, we can see the scarcity continuing to follow the dollar price. That is, silver becomes scarcer when it sells off, and more abundant when it is bid up.

The Monetary Metals Silver Fundamental Price fell back 30 cents to $15.44.

Although the market gold-silver ratio rose, the Monetary Metals calculated fundamental gold-silver ratio fell a point to 91.9.

 

© 2019 Monetary Metals

 

Charts by: coinmarketcap, trading-view, 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.

 

 

 

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One Response to “Wall of Worry M.I.A. –  Precious Metals Supply and Demand”

  • utopiacowboy:

    They are all convinced that this is the breakout lol. You can bet that the exact opposite will happen. Gold bugs are always wrong. Eventually they will be right but only after they are all wallowing in despair.

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