Spillage

The price of gold dropped $16, but the price of silver was all but unchanged. Whereas last week we said:

 

“…the consumer goods stockpile stored in Treasury bonds (to extend our half sarcastic, half tongue-in-cheek analogy) increased this week.”

 

The 10-year note takes another peek at the wide spaces below its 50-day moving average. [PT]

 

Last week, it was the opposite. Consumer goods spilled out of the storage tank of Treasury bonds. The interest rate on the 10-year note ended the week at a level not seen since September 20. Those pesky apples and orange and gasoline and rent may have poured into crude oil. Or bitcoin.

Not to beat a dead horse, but we hope we have made it clear that assets are not stores of consumer goods, or purchasing power.

We also hope to make it clear that a price move higher does not compensate for a prior drop. Or in this case, a price drop of the bond (i.e., rising interest rate) does not compensate for previous price increases (i.e., falling interest rate). It just imposes capital losses on new investors, not necessarily the ones who made the capital gains.

The principal virtue of the unadulterated gold standard is not static prices. That’s neither possible nor desirable. The virtue is stable interest rates, and hence stable asset prices. And hence little opportunity to speculate outside of agricultural commodities which are subject to the weather.

We are far from that today. It is highly likely that in the restless churn of our markets, one price or another will jump higher. Perhaps that will be the price of gold?

 

Fundamental Developments

Read on for a look at the only true picture of the supply and demand 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). The ratio fell this week.

 

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

 

Uncanny how the scarcity (i.e., the co-basis) rose with the price of the dollar in gold (i.e., the inverse of the price of gold, in dollars). This usually indicates  repositioning by speculators.

In this case, the Monetary Metals Gold Fundamental Price, after falling the first half of the week, firmed up by $24 to $1,464.

Now let’s look at silver.

 

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

 

In silver, the same thing happened to the co-basis, although the price didn’t move.

And like in gold, the Monetary Metals Silver Fundamental Price rose, 44 cents to $17.25.

 

© 2019 Monetary Metals

 

Charts by stockcharts, 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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