Author Archives: Keith Weiner

     

 

 

Loose Monetary Policy Remains in Place

Last week, we asked where then will silver go. Well, the price moved around this week, dipping on Thursday but then rebounding sharply on Friday. It closed up 13 cents from last week. The price of gold rose $24.

This week, the Federal Reserve announced that it will not hike rates. Most economists (and traders) have long been expecting a hike (not us).

 Fed_tightening_cartoon_09.09.2015_largeIt was just a thought….

Cartoon by Bob Rich

 

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Precious Metals Surge

The price of gold bumped up thirty bucks, and that of silver about one buck. Is this liftoff — when the dollar falls sharply, and the price of each metal in dollar terms skyrockets?

 

the-lord-of-the-rings-sarumanSilver gets the Saruman question…(see further below)

Photo credit: New Line Cinema

 

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Surging Contango

There are two views of the markets for the monetary metals. One, as we have discussed many times in this Report, holds that gold and silver will eventually go up so high that those who own the metals will be rich.

 

Silver and VIPs PhilipsburgPhilipsburg, Montana, 1890: evidently, these gentlemen did not suffer from a silver shortage.

Photo via mininghistoryassociation.org

 

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The Dollar Increases in Value

The dollar moved up, though most people would say gold fell about $40, and silver 32 cents. In the mainstream view, the value of the dollar is 1/N (N is the quantity). So how could the dollar go up? Certainly, the quantity keeps on increasing.

 

1 buckThe buck.

 

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A Wake-Up Call

The price of gold moved down about twenty Federal Reserve Notes, and the price of silver dropped $0.57. The big news is that the gold-silver ratio moved up about 1.5. We hate to say “we told you so,” well, OK. Actually… sometimes there’s a certain je ne said quoi about gloating. *Achem*

In all seriousness, the dollar is going up. We measure it in gold, or alternatively in silver. In gold, the dollar rose 0.4mg gold to 24.84. In silver, it was up 60mg to 1.88g silver. We do not think that the dollar can be measured in terms of its derivatives such as euro, pound, etc. for the many of the same reason that the gold can’t be measured in terms of its derivative, the dollar.

 

Paper airplane made out of money with clouds in the backgroundIllustration via irs.com

 

Why is the dollar going up? It’s the debtors that give value to a debt-based currency (not the quantity). Right now, debtors are feeling the pressure. Meanwhile, most mainstream speculators are looking at price charts and they want all-in on the dollar (most would look at this as avoiding gold exposure).

 

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Confidence Not Lost Yet

The price of gold moved down about sixteen bucks, while that of silver dropped about three dimes. In other words, the dollar gained 0.3 milligrams of gold and 0.04 grams of silver.

We continue to read stories of the “loss of confidence in central banks.” We may not know the last detail of what that will look like—when it occurs one day.

 

fedFederal Reserve – still managing to maintain enough confidence

Photo credit: Adam Fagen / Flickr

 

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The Euthanasia of Widows and Orphans

In my testimony in support of the gold legal tender bill this year, I discussed failing pension funds. Retirees who count on their pension checks are being told that their monthly check will be reduced by up to 60%.

 

2012-W-50-Proof-American-Gold-Eagle-CoinSound money also looks better than the government’s scrip!

 

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A Loss of Momentum

The price of gold moved down slightly this week, while that of silver dropped more substantially—1.9%. We don’t see much decrease in the enthusiasm yet from this minor setback.

This was a shortened week due to the May Day holiday outside the US.

 

liquid gold 2Photo credit: R.P. Visual

 

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The Metals Take Off

The price of gold shot up over $60 this week. The price of silver moved up proportionally, gaining over $0.85. The mood is now palpable. The feeling in the air is that of long suffering suddenly turned to optimism. Big gains, if not the collapse of the price-suppression cartel, are now inevitable.

The headlines and articles, screaming for gold to hit $10,000 to $50,000, are pervasive. Today we won’t dwell on our favorite point that if the price of gold hits $50,000 then that means the price of the dollar has collapsed. If you own an ounce of gold, then you may have a lot more dollars. But unfortunately, each of those dollars is worth a lot less.

Today, we want to look at this new alleged precious metals bull market. Does it have legs? Are we likely to see silver hit $20, much less $1,000? We will support our analysis with a new graph to show the big picture.

 

paper metals

Photo via sprottmoney.com

 

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Erroneous Analysis of Precious Metals Fundamentals

We came across an article at Bloomberg today, talking about silver supply troubles. We get it. The price of silver has rallied quite a lot, so the press needs to cover the story. They need to explain why. Must be a shortage developing, right?

At first, we thought to just put out a short Soggy Dollars post highlighting the error.

Then we thought we would go deeper. Here’s a graph showing the price action in silver since the beginning of the year, overlaid with our abundance indicator.

 

chart-1-abundance Silver price vs. silver abundance – click to enlarge.

 

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The Prices of Gold and Silver Drift Apart

Another interesting week, in that the price of silver separated from the price of gold. The former went no nowhere, while the latter gained over 4.5%.

We get the trading thesis, that if the precious metals are in a bull market, then silver should go up more than gold. Silver is the high-beta gold. It’s a smaller market, less liquid, and at the same time it’s the preferred vehicle for betting on a rising price.

 

Entering-The-MineInside the Sierra silver mine in Wallace, Idaho

Photo credit: silverminetour.org

 

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What Differentiates Gold from Silver?

Well that was an interesting week. Gold went down over thirty bucks and silver went up over thirty cents. How much longer can this silver rally continue in the face of gold’s non-participation? Will speculators really be comfortable bidding silver up to $20 while gold sits at $1200? Do the fundamentals support a higher silver price?

 

chart-1-June Gold future, 30 min.Gold, active June futures contract over the past week – click to enlarge.

 

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