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The ONLY Variable That Matters To The Price Of Gold
The ONLY Variable That Matters To The Price Of Gold
There are all sorts of positive fundamentals when it comes to the price of gold. There are the positive supply/demand fundamentals. The gold market is in a supply deficit. Mine reserves are at a 30-year low . The price of gold is below what is necessary to sustain the gold mining industry .
There are the positive geopolitical fundamentals. The world’s two most-unstable leaders – Kim Jong-un and Donald Trump – have been constantly trading threats and insults. And both of these people have nuclear weapons at their disposal. There is the endless “War on Terror”.
There are the positive economic fundamentals. Western real estate bubbles in major urban centers are at never-before-seen levels of insanity. Western markets are generally also at bubble levels, with U.S. markets representing bubbles on steroids . Western governments are bankrupt.
In relative terms, none of these fundamentals count .
There is one more important fundamental for the price of gold. Not only is it the most important fundamental, but it involves a variable which dwarfs all other fundamentals in magnitude — combined.
Regular readers have heard many times before that gold (and silver) is “a monetary metal” . The definition is simple. Gold is money. Therefore the price of gold must change proportionate to changes in the supplyof other forms of “money” (i.e. currency).
This is not a theory. It is a function of simple arithmetic. An elementary numerical example will illustrate this principle.
Suppose (in the entire world) there was a total of 10 oz’s of gold. Suppose also (in this hypothetical world) that there was a total of only $10,000 U.S. dollars. And in this hypothetical world, the price of gold is $1,000/oz.
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OPEC Head Tells Oil Market to Stop Panicking About Prices – Bloomberg
OPEC Head Tells Oil Market to Stop Panicking About Prices – Bloomberg.
Everyone in the oil market should stop panicking because crude supply and demand will return to equilibrium, OPEC’s Secretary-General said.
Members of OPEC, who pump about 40 percent of the world’s oil, aren’t waging a price war and haven’t demanded an emergency response to the plunge in crude futures, Abdalla El-Badri said at the Oil & Money conference in London yesterday. While the direction of oil prices, which have collapsed about 25 percent since June, remains unclear in the short term, they will have to rebound to guarantee long-term supply, he said.
“We don’t see really fundamental changes in the supply side or the demand side,” El-Badri told reporters during a briefing at the event. “Unfortunately everyone is panicking. The press is panicking, consumers are panicking. We really should think and see how this will develop.”
Crude collapsed into a bear market this month as Saudi Arabia and other producers deepened price discounts for their oil. U.S. crude production climbed to the highest level in at least 31 years last week as the shale boom moved the country closer to energy independence. Global consumption will increase this year at the slowest pace since 2009, according to the International Energy Agency.
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