Author Archives: Keith Weiner

     

 

 

Waving the White Flag

The price of gold rose two bucks last week, though the price of silver fell 10 cents. We have seen several analyses recently predicting big price drops, in one case by at least $500 in gold by the end of the year.

Is this what capitulation looks like? It’s said they don’t ring a bell at the top, but they don’t ring a bell at the bottom either.

 

The give-up moment arrives… [PT]

 

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Race to the Bottom

Last week the price of gold fell $17, and that of silver $0.30. Why? We can tell you about the fundamentals. We can show charts of the basis. But we can’t get into the heads of the sellers.

 

Other people’s fiat: in the global race to the bottom, it was recently the turn of emerging market currencies to tank. [PT]

 

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No Schedule for the Dollar’s Demise

A few weeks ago we said:

 

“This is not an environment for a Lift Off Event”

 

Illustration of different types of lift-off events one may encounter. [PT]

 

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Wrong-Way Event

Last week we said something that turned out to be prescient:

 

This is not an environment for a Lift Off Event.

 

An unfortunate technical mishap interrupted the latest moon-flight of the gold rocket. Fear not true believers, a few positive tracks were left behind. [PT]

 

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Small Crowds, Shrinking Premiums

The prices of gold and silver rose five bucks and 37 cents respectively last week. Is this the blast off to da moon for the silver rocket of halcyon days, in other words 2010-2011?

 

Various gold bars. Coin and bar premiums have been shrinking steadily (as have coin sales of the US Mint by the way), a sign that retail investors have lost interest in gold. There are even more signs of this actually, and this loss of interest stands in stark contrast to the firm gold price. Of course, retail investors have generally very little influence on the gold price anyway – they only serve as a contrary indicator. [PT]

 

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Oil is Different

Last week, we showed a graph of rising open interest in crude oil futures. From this, we inferred — incorrectly as it turns out — that the basis must be rising. Why else, we asked, would market makers carry more and more oil?

 

Crude oil acts differently from gold – and so do all other industrial commodities. What makes them different is that the supply of industrial commodities held in storage as a rule suffices to satisfy industrial demand only for a few months at most. By contrast, gold inventories are in theory large enough to satisfy fabrication and industrial demand for 70 years (“in theory” because this is under the assumption that there is no monetary or investment demand for gold). This is in fact one of the reasons why gold is the money commodity. [PT]

Photo credit: Getty Images

 

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Crude Oil Market Structure – Extremes in Speculative Net Long Positions

On May 28, markets were closed so this Report is coming out a day later than normal. The price of gold rose nine bucks, and the price of silver 4 pennies. With little action here, we thought we would write 1,000 words’ worth about oil. Here is a chart showing oil prices and open interest in crude oil futures.

 

WTIC (West Texas Intermediate crude) price and futures open interest – the vast increase in OI was largely the result of a breathtaking surge in speculative buying. [PT]

 

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Gold Lending and Arbitrage

There was no rise in the purchasing power of gold this week. The price of gold fell $22, and that of silver $0.19. One question that comes up is why is the fundamental price so far above the market price? Starting in January, the fundamental price began to move up sharply, and the move sustained through the end of April.

 

1-month LIBOR (London Interbank Offered Rate – the rate at which banks lend euro-dollars to each other). LIBOR and GOFO determine the gold lease rate, which is indirectly reflected in gold futures prices along the curve as well.

 

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Shill Alarm

One well-known commentator this week opined about the US health care industry:

 

“…the system is designed the churn and burn… to push people through the clinics as quickly as possible.

The standard of care now is to prescribe some medication (usually antibiotics) and send people on their way without taking the time to conduct a comprehensive examination.”

 

From the annals of modern health care… [PT]

 

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Waiting for Permanent Backwardation 

The price of gold dropped 9 bucks, while that of silver rose 3 cents. Readers often ask us if permanent backwardation (when gold withdraws its bid on the dollar) is still coming. We say it is certain (unless we can avert it by offering interest on gold at large scale). They ask is it imminent, and we think this is with a mixture of fear and longing for a higher gold price.

 

Lettuce hope this treasure is not cursed… but it probably is. [PT]

 

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Unfulfilled Prophecies

The price of gold fell $12 last week, but that of silver dropped 63 cents. What’s up with silver?! A prominent analyst wrote on April 19 of the “breakout” in silver. Of course, without the benefit of the basis and the Monetary Metals fundamental price, he could only see the price chart, plus the regular Wall Street indicators such interest rates, oil, and inflation.

 

A somewhat unsightly silver bar of historical interest, found in 1985 in the holds of the wreck of the Spanish galleon Nuestra Senora de Atocha, which sank near the Florida Keys in 1622. It was laden with silver the conquistadores had reportedly just stolen fair and square from Potosi in Bolivia. One presumes the perennially teetering on the verge of bankruptcy Spanish Crown was not very amused (34 of the bars belonged to the King outright, and he would have collected a 20% tax on the rest to boot). Anyway, lumps like this one don’t do breakouts; they do brick-outs and will hurt your toes if you’re not careful. [PT]

 

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Goldfinger Strikes, Sort Of

This week, we saw a tweet from a prominent goldbug. He said, “Russia added another 9 tons of gold to its reserves in March. The hits just keep coming.” How many errors in this short quip? We count six, exactly one error for every two words.

 

This one’s got everything: Smersh, Spectre, Putler and Pussy Galore! [PT]

 

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