The Exquisite Market Setup – Monetary Metals Supply-Demand
Interesting Developments in Gold
There is an exquisite setup building once again. Tight fundamentals in the gold market apply upwards pressure on the price. For quite a while, we have been saying gold’s fundamental price was around a hundred bucks above the market price. Well, the market price moved up $46 this week. What happened to the fundamental price? You’ll have to read on to see (no cheating and reading ahead!) but suffice to say it’s quite a bit higher than the market.
Byzantine Empire. Constantine VII Porphyrogenitus, with Romanus I and Christopher. 913-959 AD. Gold Solidus, Constantinople mint. Struck 924-931 AD.
At the same time, the fundamental price of silver is below the market price. We included a graph last week, showing that gold is being sold at a discount and silver at a premium to their fundamental prices. The price of silver moved up this week, though it didn’t move like gold. It was up, then down, then up, then back down, ending a mere nine cents higher than last week. In fact, on Friday, the price of gold went up about 0.8% but the price of silver dropped 1.7%.
And this is the crux. According to popular belief, the prices of the metals are supposed to move together. Silver is supposed to go up when gold goes up, only more. This is due to money printing, inflation, economic fear, anticipation of further policy madness from the Fed, or whatever. It’s much clearer when you price everything in gold.
The fundamentals for silver just aren’t there right now. What happens when a trading thesis is believed by just about everyone?
These are the market upsets about which stories are told years later.
Could we see gold with a 13 handle and silver with a 14 handle? Read on…
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