Author Archives: Keith Weiner




Arbitrage and Artifacts of the Quoting Process

The prevailing view in the gold community is that banks are speculators who bet on a falling price. To begin with, they commit the casino faux-pas of betting on Do Not Pass at the craps table. When everyone wants the price to go up, the banks seem to want it to go down. Uncool.

In contrast to this view, ours is that the banks are arbitrageurs. They aren’t betting on price, they are profiting from the small spreads in between bid and ask, spot and future, future and Exchange Traded Funds.



Photo via


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Some Perspective on Price Ratios

The price of gold dropped six bucks, and silver seven cents.

Without much price action, let’s look a few other angles to gain some perspective.



Photo credit: Fox umbrellas


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There is no Santa Claus

I have written previously about the interest rate, which is falling under the planning of the Federal Reserve. The flip side of falling interest rates is the rising price of bonds. Bonds are in an endless, ferocious bull market. Why do I call it ferocious? Perhaps voracious is a better word, as it is gobbling up capital like the Cookie Monster jamming tollhouses into his maw. There are several mechanisms by which this occurs, let’s look at one here.

Artificially low interest makes it necessary to seek other ways to make money. Deprived of a decent yield, people are encouraged (pushed, really) to go speculating. And so the juice in bonds spills over into other markets. When rates fall, people find other assets more attractive. As they adjust their portfolios and go questing for yield, they buy equities and real estate.


santaBelieve it or not …


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Friction Caused by Regulations

Many people agree that it’s important to move to a free market in money (i.e. the gold standard). They also say that it’s just as important to fight bad taxes and regulation. In their view, government interference in the economy is like friction in a car. The more friction you add, the slower the car goes. One source of friction is much the same as any other.

Let me explain why it doesn’t quite work that way, using a few examples. Suppose the government imposes an expensive tax on employers based on the number of full-time employees. Full time is defined as working at least 30 hours per week. Employers respond to this tax by reducing the hours of as many employees as possible below the threshold. The law still harms employers, but less than intended. If the law were a bullet aimed at the chest of the employer, it ends up causing a flesh wound.


big-governmentRegulatory friction – a perennial obstacle to economic growth

Cartoon by


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A Very Fast Move

The price of gold dropped abruptly on Friday morning (Arizona time). How much of a drop? $10.30, as measured by the bid on the December future. How abruptly? That move happened in under a second.

At first, the price of gold in the spot market did not react. This caused what looks like a massive backwardation (recall that the cobasis = Spot(bid) – Future(ask)—if the future drops relative to spot, that is backwardation). See the graph of price overlaid with the Dec cobasis.


chart of Friday actionGold price vs. December cobasis – click to enlarge.


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Whys and Wherefores

What’s the difference between the Supply and Demand Report 1 November and the Supply and Demand Report 8 November? Just a minor punctuation change. Last week, we asked (rhetorically) if silver would have a 14 handle again.

This week, the market answered. Why yes, yes we can!



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European Socialism

I have visited and spent weeks at a time in Europe. On this recent trip however, something clicked for me as I stared out my hotel window at a train station and seeing other public mass transportation moving on the street. In Europe, I think that most people don’t have cars because they’re too expensive.


cradle-to-graveFrom the cradle to the grave …

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THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

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