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Silver “Scarcifies” – Precious Metals Supply and Demand
Silver “Scarcifies” – Precious Metals Supply and Demand
On Monday, Silver got Scarcer – and Simpler
On 23 July, we said:
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 of the September silver future is dropping. In other words, selling of futures. But while that was going on, there was enough buying of spot to keep it steady.
Then, perhaps some market participants became aware of the buying of spot. Or perhaps some other buyers got excited. Somebody was buying in size, because between around 2:30 and 3:00am, the price shot up from around $23.10 to $24.40. +$1.30.
After that, the price jitters sideways but ends up to about $24.65. And the basis ends up around 3%. There are periods when the basis correlates with price, e.g. from 10:00 to 14:00. During these periods, the price was driven by speculators in the futures markets positioning and repositioning.
And there are also times when they move in opposite directions, e.g. from 6:00 to 7:30. This means that price was driven by buying and selling of physical metal.
Receding Abundance
It is important to note that the price of silver went up, a lot, while the abundance of the metal to the market went down a lot. The Monetary Metals silver basis reading for Friday was 5.3%.
We have written a lot in recent months about the absence of the market makers. This is why the basis has been so high. If the market makers came back, we would expect the basis to be pulled in quite a bit.
We do not believe that this occurred, suddenly, between midnight and 3:00AM Monday morning in London.
…click on the above link to read the rest of the article…
There Ain’t No Such Thing as a Free Lunch – Part 3
There Ain’t No Such Thing as a Free Lunch – Part 3
In previous articles, I examined the negative externalities of post-Keynesian measures like unlimited monetary easing. First, I explained that such policies were inflating asset prices, squeezing working and middle classes, and thus leading to a core deflationary impact on the rest of the economy (see There Ain’t No Such Thing as a Free Lunch – Part 1). Then, I wrote that too many bailouts might lead to moral hazard and zombie companies, undermining future economic growth (see There Ain’t No Such Thing as a Free Lunch – Part 2).
If such policies tend to weaken the economy, then why assets like stocks, bonds, and real estate keep on rising?
Greed is Good
As already mentioned, bonds and equity markets have been more and more driven by the “Fed put” narrative (see The Fed Put Narrative Era). Besides, households might see the drop of interest rates as a screaming buy signal in the residential real estate space. People have been taught that any correction should be regarded as a huge investment opportunity, so everyone is willing to join the party.
Fear of missing out is a powerful catalyst, especially when wages inflation is so low that all you can do is hope for significant returns on investment markets. If the Fed has our back and if Nancy Pelosi is right about “the stock market floor”, then why not taking risks?
Narratives and Fantasy
Even if people love to state that “the market is not the economy”, assets like, stocks, bonds, and property, are supposed to reflect economic values somehow. And the bad news is that GDP growth has been decreasing for decades in Western economies (see chart below).
…click on the above link to read the rest of the article…
Gold’s Record Price Is All About Currency Debasement
Gold’s Record Price Is All About Currency Debasement
Gold broke its all-time price record on Monday and held above that level throughout the day.
So, what is this telling us?
It’s easier to understand gold’s record-breaking move up if you look at it from the other side of the equation. The dollar is now at its all-time low compared to gold.
In simple terms, the dollar is losing value.
This is a direct result of US government borrowing and spending backed by Federal Reserve money printing.
TD Securities reiterated that dollar debasement is driving gold in a note.
The USD weakens amid massive fiscal and central bank stimulus, a bloating debt pile and a slow growth environment.”
Since the economy crashed thanks to the governments’ shutdowns in response to the coronavirus, the federal government has borrowed trillions of dollars for its stimulus program. The June budget deficit was bigger than all but five of the yearly deficits in history. Meanwhile, the Fed is monetizing a big chunk of that debt through its government bond purchase program. In effect, it is buying up US debt and paying for it with money printed out of thin air.
All of this money creation is inflation. The rising price of gold reflects the inflationary pressure.
As more dollars go into circulation, each individual dollar is worth less, all other things equal. That’s why the price of gold is going up in dollar terms. We have more dollars chasing roughly the same amount of gold. That means it takes more dollars to buy an ounce.
This isn’t mere speculation. Money supply growth hit a new all-time high for the third month in a row in June. The only time we’ve seen money supply growth anywhere near this level was during the inflationary years of the 1970s. In June, year-over-year growth in the money supply came in at 34.5%. That was up from 29.5% in May.
…click on the above link to read the rest of the article…
Goldman Warns “Real Concerns Are Emerging” About The Dollar As Reserve Currency; Goes “All In” Gold
Goldman Warns “Real Concerns Are Emerging” About The Dollar As Reserve Currency; Goes “All In” Gold
In his morning critique of goldbugs’ resurgent optimism about the future of gold, which has exploded alongside the price of precious metals, which in turn have been tracking the real 10Y rate tick for tick…
… Rabobank’s Michael Every argued from the familiar position of one who views the modern monetary system as immutable, and bounded by the “Venn Diagram” confines of the dollar as a reserve currency and financial assets as a bedrock of modern household wealth, of which as Paul Tudor Jones recently calculated, there is just over $300 trillion worth, compared to just $10 trillion in total gold value.
Indeed, according to Every, the surge in gold is meaningless because “if you buy gold, technically that is going to make you money. And yet that money is still going to be priced in US DOLLARS – and that gives the whole game away.”
Like fans of the England football team, gold fans can dream of the distant past when gold was the centre of the global monetary system; but they can keep dreaming if they think those days are ever going to return. Gold may be an appreciating asset, but all the evidence suggests that it won’t be one that is of any direct relevance to day-to-day life, finance, and business. Your currency won’t be tied to it. You won’t get paid in it. You won’t spend in it or save in it (other than to the switch back to US Dollars). You won’t be doing deals in it or importing in it.”
…click on the above link to read the rest of the article…
Predictions Of The Dollar’s Demise Are Likely Premature
Predictions Of The Dollar’s Demise Are Likely Premature
Predictions of the dollar’s demise are likely premature and overblown. This post is in response to the rising interest in both precious metals and cryptocurrencies. Several factors are driving this trend. One is the idea governments have targeted cash and wish to move us towards a “cashless” society where they control our every move. Another is rooted in the idea inflation is about to raise its ugly head as currencies are debased.
I contend that for several years currencies have been trading in a hyper-manipulated state. It should be noted that fiat money is often sheltered from the storm of volatility by both politics and because it exists in a rather closed system. Wealth is contained within this system of fiat money by laws and rules that discourage freedom of movement. It is the coordinated collusion of the major central banks that have allowed this charade to exist. The fact it has not been recognized or acknowledged does not alter or guarantee the system will continue. The failure or major repricing of any of the world’s four major reserve currencies will destroy the myth that major currencies are immune to the fate that has haunted fiat money throughout history. When the nations granting these currencies prove unable to control their budgets history shows their currency is destroyed and crushed under the weight of debt.
One thing the global economy doesn’t need with all the uncertainty that is currently floating around is unstable currency markets. When you consider just how destabilizing currency swings can be it is easy to see how a strong dollar could obliterate the global economy. It should not be a surprise in our current situation that behind the curtain central bankers could be busy manipulating currencies so they trade in a narrow range that will not rock the boat.
How to Squash this Stealthy Attack On Your Wealth
How to Squash this Stealthy Attack On Your Wealth
You’re losing the war against your wealth.
In 1935, the official price of one gold ounce was $20.67. Today it’s around $1,770.
Price of gold 1935 vs. 2020
What happened?
The ounce of gold didn’t change. One troy ounce of gold still weighs one troy ounce.
One ounce in 1935 is still one ounce in 2020
What changed is the number of dollars it takes to buy one gold ounce. That stack on the left might look big compared to the paltry $20.67 on the right. It’s going to get a lot bigger.
The chart below shows the price of gold going back to early last century. The tiny blip in 1935 was a 69% increase in price at the time. It’s barely noticeable today.
Likewise, a $100 move in the price of gold will someday look like a tiny blip. Don’t let an endless stream of media panics distract you from what’s really going on. That stack of dollars can grow infinitely.
As the stack of cash grows, gold stays the same. Double the number of dollars needed to buy an ounce of gold and the ounce stays the same. It’s the dollar that’s worth less.
Consider this. $1,000 was a lot of money in the early 1900s. If an ancestor of yours had put $1,000 worth of cash away for you, today, it would barely pay for one month of rent at a downmarket apartment. Back then, it was a large sum of money.
However, if your ancestor had put $1,000 worth of gold into an envelope for you, it’s worth more than $80,000 today.
There’s a war against your wealth. The dollars you use to measure the wealth haven’t held up over time. Gold has.
With the U.S. government set to run a record deficit of $3.7 trillion in 2020, according its own CBO (Congressional Budget Office), it may soon take even more dollars to buy the one gold ounce.
Which Country Is the Largest Silver Investor In The World??
Which Country Is the Largest Silver Investor In The World??
Over the past decade, these top five countries were the leading silver investors in the world. From 2010 to 2019, citizens in these countries invested over two billion ounces of silver bars and coins. Which country was the largest investor of silver? Actually, I was surprised by the data.
Since 2010, investors from India, China, United States, Germany, and Canada purchased a tad bit more than two billion ounces of silver bar and coin. To be precise, it was 2,004 million oz. The world’s largest investor of physical silver bullion products turned out to be Americans. U.S. citizens invested in 929 million oz (Moz) of silver bars and coins over the past decade.
Indian investors came in second at 615 Moz, followed by Germany (265 Moz), China (139 Moz), and Canada (56 Moz). While I wasn’t shocked that Americans were the largest physical silver investors, I was quite surprised at the amount purchased by the Chinese and Canadians.
According to the data from the Silver Institute’s 2020 World Silver Survey (by Metals Focus), while the Royal Canadian Mint produced nearly 26 Moz of Official Silver Coins in 2019, it’s citizens only purchased 5 Moz of silver bars and coins last year. Thus, most of the Silver Maple Leafs were bought by Americans or other foreigners.
Furthermore, even though there are over 1.4 billion Chinese, it’s citizens only invested 139 Moz in silver bars and coins from 2010-2019. Chinese tend to favor investing mostly in physical gold bullion. In contrast, India, with a smaller population than China, invested more than four times in physical silver. Moreover, Indians prefer silver bars over coins. The overwhelming majority of the 615 Moz of physical silver purchased by Indians was in bar form… most likely 90+%.
…click on the above link to read the rest of the article…
The “Great Unlock” Does Not Change the Case for Gold
The “Great Unlock” Does Not Change the Case for Gold
This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Why a quick economic recovery might not be around the corner, gold investors could be facing a buying opportunity, and auction of first U.S. gold coin could see a $15 million bid.
The return to normal might seem rapid, but the economic rebound could be anything but
Given the sheer amount of damage that the pandemic caused to the U.S. economy, many are hoping that the recovery will be as quick as the reopening of stores and businesses – especially given the stimulus that has been issued. Yet, as FXEmpire’s Arkadiusz Sieron points out, the lockdown wasn’t a wholly governmental measure from start to finish, and the opening could very much reflect that.
Instead, many shutdowns occurred on an individual level, with citizens and business owners testing out the waters. The reopening is likely to happen in similar fashion, leaving consumers with a need to re-acclimatize to their pre-lockdown routine and certain businesses to act in accord.
The notion of a V-shaped recovery has caused some tumult in the gold market and stirred up optimism for the first time in a while. Yet any doubters are forgetting that the metal was doing just as well prior to the pandemic, riding on a six-year high driven primarily by low or negative interest rates.
The domestic economy that everyone is eager to return to was sending off red flags and recessionary signals for a while, whereas the global economy had likewise been contracting. The sheer necessity to keep interest rates low or negative for the foreseeable future is essentially a guarantee of the same environment that has been supportive of gold, and persistent issues like sovereign debt, fiscal deficits and general uncertainty are more than likely to keep it there.
…click on the above link to read the rest of the article…
In Gold We Trust, 2020 – The Dawning of a Golden Decade
In Gold We Trust, 2020 – The Dawning of a Golden Decade
The New In Gold We Trust Report is Here!
The In Gold We Trust 2020 report by our good friends Ronald Stoeferle and Mark Valek was released last week. It is the biggest and most comprehensive gold research report in the world. As always it contains a wealth of new material, as well as the traditional wide-ranging collection of charts and data that makes it such a valuable reference work for everything of interest to gold investors or indeed for anyone interested in precious metals (a download link to the report is provided below).
Left: casting gold bars. Right: using gold as a shield against assorted slings and arrows.
Here is a brief overview of the main subjects discussed in the report:
– A review of the most important events in the gold market in recent months
– An analysis of the impact of the Covid-19 crisis on the price of gold
– The increasing importance of gold in times of de-dollarization
– Silver – ready to fly high?
– Gold and cryptocurrencies
– Gold mining stocks: The bull market has started
– Outlook for the gold price development in this decade: A gold price of around USD 4,800 suggested by our quantitative model, even with a conservative calibration of the parameters.
As an aside, yours truly has also contributed a brief chapter to this year’s report, namely the chapter on capital consumption starting on page 192.
As this year’s IGWT report is published, gold has finally clearly reentered a bull market. Of course, with hindsight it is obvious that a bull market was underway ever since the mid-cycle correction ended in late 2015, but it was initially a very labored, halting affair, a “stealth” bull market if you will. And while gold may not yet be at a new all time high in US dollar terms, it has reached new highs in numerous other major currencies:
…click on the above link to read the rest of the article…
U.S. MINT GOLD COIN SALES ALREADY DOUBLE vs. 2019: Best BUY PRICES For Gold Eagle & Buffalo Update
U.S. MINT GOLD COIN SALES ALREADY DOUBLE vs. 2019: Best BUY PRICES For Gold Eagle & Buffalo Update
Sales of the U.S. Mint Gold Eagle and Buffalo coins are already double what they were for full-year 2019. And, with the Fed and central banks continuing to print money hand-over-fist, I doubt the demand for gold coins will diminish anytime soon.
Interestingly, sales for precious metals bullion retail products, according to Dan at Cloud Hard Assets, are running about 60% for gold and 40% for silver (total value, not ounces). Investors would be buying more silver, but due to the backlog and shortage of retail silver bullion products, individuals are being forced to buy more gold.
According to the U.S. Mint’s most recent update, sales of 2020 Gold Eagles totaled 332,000 oz compared to only 152,000 oz for 2019. Furthermore, Gold Buffalo coin sales have reached 117,500 oz versus only 61,500 for 2019. Again, we are only five months into 2020, so it will be interesting to see what demand for these U.S. Gold coins will be for the remainder of the year.
Investors looking to acquire Gold Eagles and Buffalos are still paying high premiums. In comparing the premiums for 2020 Gold Eagles and Buffalos, the best value that I could find from the leading online dealers is about 8%. However, the Gold Buffalo coin premiums were even higher.
Here is an update on the BEST BUY PRICES for 2020 Gold Eagles and Buffalos from the leading online dealers’ vs. CLOUD HARD ASSETS (Prices below based on $1,745+ gold spot price early Thursday):
As you can see, it’s important to compare the prices of gold bullion products (and services). Moreover, I am putting together a spreadsheet comparing the top online dealers’ Silver Eagle premiums vs. CLOUD HARD ASSETS. Today, the top online dealers 2020 Silver Eagle premiums are running about 59% of the current spot price vs. 39% for CLOUD HARD ASSETS. Again, it’s wise to compare prices and services at the different precious metals dealers.
…click on the above link to read the rest of the article…
TIGHTNESS CONTINUES IN RETAIL SILVER MARKET: Best Gold-Silver Eagle Buy Prices Update
TIGHTNESS CONTINUES IN RETAIL SILVER MARKET: Best Gold-Silver Eagle Buy Prices Update
With the lack of availability of precious metals retail bullion products, the premiums for gold and silver coins-bars continue to be quite elevated. Depending on the dealer, 2020 Silver Eagle premiums are still ranging between $7.5 and $13. Thus, the Silver Eagle premiums are between 47-81% of the spot price, depending on the dealer.
I continue to check the U.S. Mint website, but there still hasn’t been any update for Silver Eagle sales for May. While the U.S. Mint sold 7,000 oz of Gold Eagles in May so far, it shows no figure for Silver Eagles. The large online dealers are still struggling to obtain supplies of silver bullion products with the availability pushed back 2-4 weeks or longer.
Precious metals investors are wondering when retail gold and silver premiums will begin to decline. That’s a good question. Gold Eagle Premiums back in early 2009 shot up to 8% and then declined substantially in early summer. By the end of 2009, Gold Eagle premiums had fallen back to 4%, shown here from GoldChartsRus:
The gold and silver coin premiums used on Nick Laird’s GoldChartsRus website mainly come from MONEX. While these premiums provide investors with a guide, I wouldn’t trust MONEX as a company. Monex seems to continue to get into trouble by DEFRAUDING investors.
Federal Court Allows CFTC Case Against $290M Fraud to Proceed
The CFTC alleges Monex Deposit Company scammed thousands of retail customers out of more than $290 million (July 26, 2019)
Newport Beach precious metal dealer Monex accused of $290-million fraud (Sept 16, 2017)
So, good luck if you use or want to use MONEX to acquire precious metals.
Even though some gold bullion product premiums have declined, it will be interesting to see how the premiums will change as the global contagion continues to wreak havoc in the financial system and economy.
…click on the above link to read the rest of the article…
Important Factors Impacting The Gold & Silver Supply And Price
Important Factors Impacting The Gold & Silver Supply And Price
The majority of analysts still don’t understand that gold and silver are based on two different price or value functions. To understand the future forecasts for precious metals, investors need to the difference between the two value functions.
In my newest video update, Important Factors Impacting Gold & Silver Price And Supply, I discuss in detail the two different price functions and why the current commodity-based mechanism differs from the precious metals “Store of Value.”
In the video, I explain why the “commodity-priced mechanism” is important as a floor for the gold and silver prices. Unfortunately, because Harry Dent doesn’t understand this mechanism, he continues to put out faulty and incorrect analysis on the gold price. Dent stated in his April 13th video update that during the next deflationary collapse of the markets, gold would head back down to $900-$1,000 or the lows of 2008 at $700.
Dent’s gold forecasts continue to be wrong because he fails to incorporate the impact of “ENERGY” and the “COST OF PRODUCTION” on the gold mining industry.
I updated Barrick and Newmont’s combined total production cost versus the gold price for Q1 2020, and was quite surprised. Again, I explain why I don’t see gold heading anywhere near $700 due to the significant increase in cost to produce the yellow metal since 2006 when gold was the same price.
This video took longer to publish then I had planned due to the research. I was quite surprised to see Barrick and Newmont’s total production cost rise to nearly $1,400 an ounce for Q1 2020 versus the $1,272 average for 2012, when oil prices were over $100 a barrel.
…click on the above link to read the rest of the article…
Silver Coin Premiums Soar: Signal “Alt-Money” Demand As Re-Opening Recovery Hype Fades
Silver Coin Premiums Soar: Signal “Alt-Money” Demand As Re-Opening Recovery Hype Fades
Silver is the matrix of precious metals:
- on the one hand, it is an industrial metal, critical to the production process in many of the world’s most in-demand products;
- and on the other hand, it has been ‘money’ for millennia, playing second-fiddle as a spending ‘asset’ relative to gold’s ‘wealth’.
The question is always, which of these demand/supply attributes is more prevalent at any one time.
Right now, is it the “blue pill” of blissful ignorance that an economic recovery is imminent and v-shaped; or is it the unpleasant truth of the “red pill” that this is the beginning of the end of the current system and a post-COVID world will look very different (and require protection).
Well, we may have the answer.
The price of silver coins is surging (‘Monetary’ demand) as futures prices sink (‘industrial’ demand), somewhat shunning the hope-filled hyping of stocks’ recovery off the lows in March…
And in fact, this is the largest (physical) silver coin premium since Bernanke disappointed the markets in 2011 and since Lehman sent investors scrambling…
Additionally, the demand for “monetary” silver may be driven by the fact that it has never been cheaper relative to gold…
In ancient Greece during the age of Pericles, gold was valued at 14x silver. In ancient Rome, Julius Caesar valued gold at 12x silver.
It remained this way for centuries.
Even in the earliest days of the United States, eighteen centuries after Caesar, The Coinage Act of 1792 established a ratio of 15:1.
(According to the law, one US dollar is supposed to be 24.1 grams of silver, or 1.6 grams of gold. So those pieces of paper in your wallet are not dollars– they are technically “Federal Reserve Notes”.)
…click on the above link to read the rest of the article…
