Silver Gets Frisky

Last week, the prices of the metals had been up Sunday night but were slowly sliding all week — until Friday at 7:00am Arizona time (14:00 in London). Then the price of silver took off like a silver-speculator-fueled-rocket. It went from $16.68 to $17.25, or 3.4% in two hours.

 

March Silver, 30 min. candles. Someone certainly piled in last Friday… – click to enlarge.

 

What does it mean? We don’t know. We would bet an ounce of fine gold against a soggy dollar bill that no one else does either. The old stories of silver shortage or manipulation have no power to explain this move. Why not? Because they are old.

The explanation would have to say that earlier in the day there was a reason for silver to trade well under $17 but as of that moment, it was urgent that the metal traded well over $17.

As often occurs, once the move hits certain levels on a price or a momentum chart, that’s all it takes. It’s of no use to say that in the long run this will be just another blip of noise. In the heat of the moment, these 60-cent moves are exciting.

Below, we will have an intraday silver chart that shows clearly something that is almost never available to the public. We have a plot of the basis against price. If other theories are right (e.g. manipulation, shortage) this chart should show nothing of interest.

We are at no risk of that. :)

 

Fundamental Developments

But first, the price action and regular basis charts.

 

Prices of gold and silver – click to enlarge.

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. It fell this week.

 

Gold-silver ratio – click to enlarge.

For each metal, we will look at a graph of the basis and co-basis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and co-basis in red.

Here is the gold graph.

 

Gold basis and co-basis and the dollar price – click to enlarge.

 

The pattern of the past few weeks did not continue. This week, when the price of gold went down, the co-basis (scarcity) went down on some days. When the price went up, the co-basis went down.

Our calculated fundamental price fell $32 to just about $100 over the market price.

Now let’s look at silver.

 

Silver basis and co-basis and the dollar price – click to enlarge.

 

In silver, scarcity increased a bit on Wednesday and stayed there through Friday (for our normal daily reading, but see below).

Our calculated fundamental price moved up 20 cents from last week. It had been higher, but actually fell a bit on Thursday and Friday. It is now a dime or two above the market.

Below is the chart we mentioned at the top of the report.

 

Friday, silver price and March silver basis intraday (times are GMT) – click to enlarge.

 

As the price rises about 40 cents, the basis rises about 60 bps from around -0.25% to +0.35%.

To understand this, picture a spread between the price of silver in the spot market — a bar — and silver in the futures market — a contract for March delivery of a bar. When the market is quiescent, this spread is consistent.

If there buying pressure in spot, then the spread will compress. If there is buying pressure in futures, then the spread will widen (or if it is negative like Friday morning, it can go positive).

On Friday, this spread widened about ¾ of a cent. This may not seem like much, but the market makers are fighting it all the way. They make money by buying spot and selling futures, called carrying silver.

Carrying tends to compress the spread. Despite the market makers, the speculators forced this spread wider by nearly a cent. Spread is much more stable than price. This move is a big deal.

 

Charts by: BarCharts, Monetary Metals

 

Dr. Keith Weiner is the president of the Gold Standard Institute USA, and CEO of Monetary Metals. Keith is a leading authority in the areas of gold, money, and credit and has made important contributions to the development of trading techniques founded upon the analysis of bid-ask spreads. Keith is a sought after speaker and regularly writes on economics. He is an Objectivist, and has his PhD from the New Austrian School of Economics. He lives with his wife near Phoenix, Arizona.

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Trade War Game On!
      Interesting Times Arrive “Things sure are getting exciting again, ain’t they?”  The remark was made by a colleague on Tuesday morning, as we stepped off the elevator to grab a cup of coffee.   Ancient Chinese curse alert... [PT]   “One moment markets are gorging on financial slop like fat pigs in mud.  The next they’re collectively vomiting on themselves. I’ll tell you one thing.  President Trump’s trade war with China won’t end well.  I mean, come...
  • From Fake Boom to Real Bust
      Paradise in LA LA Land More is revealed with each passing day.  You can count on it.  But what exactly the ‘more is of’ requires careful discrimination.  Is the ‘more’ merely more noise?  Or is it something of actual substance?  Today we endeavor to pass judgment, on your behalf.   Normally, judgment would be passed on a Thursday, but we are making an exception. [PT]   For example, here in the land of fruits and nuts, things are whacky, things are...
  • Getting High on Bubbles
      Turn on, Tune in, Drop out Back in the drug-soaked, if not halcyon, days known at the sexual and drug revolution—the 1960’s—many people were on a quest for the “perfect trip”, and the “perfect hit of acid” (the drug lysergic acid diethylamide, LSD).   Dr. Albert Hoffman and his famous bicycle ride through Basel after he ingested a few drops of LSD-25 by mistake. The photograph in the middle was taken at the Woodstock festival and inter alia serves as a...
  • Rise of the Japanese Androids
      Good Intentions One of the unspoken delights in life is the rich satisfaction that comes with bearing witness to the spectacular failure of an offensive and unjust system. This week served up a lavish plate of delicious appetizers with both a style and refinement that’s ordinarily reserved for a competitive speed eating contest. What a remarkable time to be alive.   It seemed a good idea at first... [PT]   Many thrilling stories of doom and gloom were published...
  • US Stock Market: Happy Days Are Here Again? Not so Fast...
      A “Typical” Correction? A Narrative Fail May Be in Store Obviously, assorted crash analogs have by now gone out of the window – we already noted that the market was late if it was to continue to mimic them, as the decline would have had to accelerate in the last week of March to remain in compliance with the “official time table”. Of course crashes are always very low probability events – but there are occasions when they have a higher probability than otherwise, and we will...
  • No Revolution Just Yet - Precious Metals Supply and Demand Report
      Irredeemably Yours... Yuan Stops Rallying at the Wrong Moment The so-called petro-yuan was to revolutionize the world of irredeemable fiat paper currencies. Well, since its launch on March 26 — it has gone down. It was to be an enabler for oil companies who were desperate to sell oil for gold, but could not do so until the yuan oil contract.   After becoming progressively stronger over the past year, it looks as thought the 6.25 level in USDCNY is providing support for the...
  • The “Turn of the Month Effect” Exists in 11 of 11 Countries
      A Well Known Seasonal Phenomenon in the US Market – Is There More to It? I already discussed the “turn-of-the-month effect” in a previous issues of Seasonal Insights, see e.g. this report from earlier this year. The term describes the fact that price gains in the stock market tend to cluster around the turn of the month. By contrast, the rest of the time around the middle of the month is typically less profitable for investors.   Due to continual monetary inflation in the...
  • Russian Gold Rush - Precious Metals Supply and Demand
      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]   One, we call this the fallacy of the famous market actor. Russia is famous. Its purchase of 9 times is therefore imbued with...
  • Flight of the Bricks - Precious Metals Supply and Demand
      The Lighthouse Moves Picture, if you will, a brick slowly falling off a cliff. The brick is printed with green ink, and engraved on it are the words “Federal Reserve Note” (FRN). A camera is mounted to the brick. The camera shows lots of things moving up. The cliff face is whizzing upwards at a blur. A black painted brick labeled “oil” is going up pretty fast, but not so fast as the cliff face. It is up 26% in a year. A special brick, a government data brick of sorts, labeled...

Support Acting Man

Item Guides

Top10BestPro
j9TJzzN

The Review Insider

Austrian Theory and Investment

Archive

350x200

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

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com

Diary of a Rogue Economist