Author Archives: Keith Weiner

     

 

 

Rising Scarcity and a Nascent Change in Trend

Last month, we noted that there could be a trend change in progress. Not only are the prices of the metals rising (which is just a mirror-image of the dollar falling, from 27.6 milligrams of gold just before Christmas to currently under 26mg). But the scarcity of gold as we measure it, using the spread between the price of gold in the spot and futures markets, has been rising.

 

All the gold in the world (excluding Ben Bernanke’s grillz collection). The estimate appears a bit dated, but even if we e.g. assume that there are  about 180,000 tons of mined gold in the world, the cube would only be slightly larger (approx. 20.5 by 20.5 meters, or 67.25 by 67.25 feet).  There is actually considerable uncertainty regarding the total amount of gold mined in the course of history, but the fact remains that it is quite rare. At the same time, its existing stock is very large compared to the flow of new gold supplied by mines every year. The large stock and only slowly growing stock is one of several reasons why the market has chosen gold as money. [PT]

 

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Supply-Demand Fundamentals Improve Noticeably

Last week was another short week, due to the New Year holiday. We look forward to getting back to our regularly scheduled market action.

 

Photo via thedailycoin.org

 

The prices of both metals moved up again this week. Something very noticeable is occurring in the supply and demand fundamentals. We will give an update on that, but first, here’s the graph of the metals’ prices.

 

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Rate Hike Heeded by Gold, Ignored by Stocks

The price action was not what most of those in the gold community hoped for (or predicted). The price of gold dropped another $24 and that of silver nearly a whole dollar.

 

Observing the stock market triggers all sort of reactions….

Cartoon by Bob Rich

 

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A Lawsuit Makes Waves

The price action was mixed last week. Those hoping for dollar declines in gold terms were disappointed. However, silver gave them a sop as the price of the buck declined by one one-hundredth of a gram of silver. In Monetarist terms, gold went down $18 and silver up 11 cents.

Monetarism, in its insistence that the dollar be used to measure gold, is in denial that the value of the dollar is unstable. Everyone knows that the Fed tries to devalue the dollar at 2 percent per annum (as it reckons it), yet insists on using it as the meter stick for measuring economic value.

 

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A Plethora of Reasons

We’ve gone through a succession of events and processes that were supposed to make gold go up. The following list is by no means exhaustive:

 

  1. Quantitative Easing
  2. Bernanke’s Helicopter Drops
  3. Janet Yellen’s Keynesianism
  4. Obama’s Deficits (US government debt is now a hair away from $20,000,000,000—and that’s just the little part of it they put on their balance sheet)
  5. The election of Trump
  6. The Italian Referendum (current as we write this)

 

gold-and-scales1We knew it! The darn thing is simply too heavy to go up! But it is going to get a boost now, because the vast majority of mainstream analysts who turned bullish as the rally earlier this year was close to ending have turned bearish by now…[PT]

 

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How Not to Predict Gold Prices

Sometimes, we think that every story in the gold community has the same template:

 

  1. I have inside information to share with you
  2. My peeps are telling me that <XYZ> will happen
  3. If <XYZ> happens, then the gold price will go ballistic
  4. (<XYZ> will happen, I just know it)
  5. So buy gold now, to front-run <XYZ>
  6. If you, you will make lots of money
  7. (Money is not gold, but dollars)
  8. Unless The Dark Cabal acts in their old nefarious ways
  9. If The Dark Cabal does, then don’t blame us
  10. Like the last time we predicted $200 silver or $30,000 gold

 

tinker-tailor-soldier-spy-nop-briexSecret gold bug information is passed on…

Illustration by Nop Briex

 

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The Quality of Money

 

“The problem with central banks is that they increase the quantity of money in the same way that the problem with piping sewage into a swimming pool increases the quantity of water.”

 

the-gasp-dollarThe doubleplus-ungood FRN.

 

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Illusory Riches, Obvious Impoverishment

I address this essay to two groups. One group is those among the liberty movement, who believe that there’s nothing wrong with inequality. These are often Objectivists, who unknowingly defend a regime that artificially suppresses working people.

 

steal

And suddenly, you feel much lighter…

 

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Big News

The big news this week is that Donald Trump was elected to be the next president of the United States. Whether due to his comments about restructuring the government debt, tariffs on imported goods, or other economic concerns, many expected news of his election to push up the price of gold. They were wrong.

 

chart-1-december-gold-aDecember gold, 60 minute chart. Those expecting a Trump victory to lead to a rise in gold prices were right for about 2 ½ hours – but market participants reassessed numerous initial market reactions once it was clear the election was a clean sweep for the Republican party – the dollar reversed course and rose sharply, and gold declined commensurately  [comment by PT] – click to enlarge.

 

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First Rule

This week the prices of the metals, as measured in terms of the much-abused and much-hated but much-preferred US dollar, went up. +$28 and +0.66 respectively.

 

set_of_shiny_gold_coins_money_imageWinning! Sometimes…

 

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Confidence Speculation

Twice last week, the prices of the metals spiked. Once on early Monday due to a cause unclear to us. The second time on Friday late morning (Arizona time) due to, get this, additional problems for Democrat Hillary Clinton. The stock market dropped at the same time that the prices of the metals surged. Call it the confidence speculation.

 

clinton_comey_gnHillary Clinton and FBI chief James Comey. As absurd as this must appear to anyone looking at the situation in a detached manner, anything that might endanger Ms. Clinton’s election victory seems to be seen as negative for market confidence .

 

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Collectivism Across Party Lines

 

“There is nobody in this country who got rich on his own — nobody.” – Elizabeth Warren, campaign speech 2011

“If you’ve got a business – you didn’t build that. Somebody else made that happen.”

– Barack Obama, campaign speech 2012

 

BOSTON - JUNE 25: President Barak Obama with Senate candidate Elizabeth Warren during at a fundraiser in Symphony Hall on Monday, June 25, 2012If you acquire any possessions by economic means, this is to say by your own efforts, serving consumers in voluntary trade, they actually do not belong to you, according to these two elitist leftist politicians (who you may be interested to learn, are far from poor).  Only what the State graciously allows you to own is yours – provisionally.

Photo credit: Matthew J. Lee / The Boston Globe via Getty Images

 

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