Bitcoin Mania

The price of gold has been rising, but perhaps not enough to suit the hot money. Meanwhile, the price of Bitcoin has shot up even faster. From $412, one year ago, to $1290 on Friday, it has gained over 200% (and, unlike gold, we can say that Bitcoin went up — it’s a speculative asset that goes up and down with no particular limit).

 

Bitcoins are a lot less tangible than this picture implies, but they are getting a lot of love recently [PT]

 

Compared to the price action in Bitcoin, gold seems boring. While this is a virtue for gold to be used as money (and a vice for Bitcoin), it does tend to attract those who just want to get into the hottest casino du jour.

 

Bitcoin has been on a tear lately – the same cannot be said of gold at the moment [PT] – click to enlarge.

 

Perhaps predictably, we saw an ad from a gold bullion dealer. This well-known dealer is comparing gold to Bitcoin, and urging customers to stick with gold because of gold’s potential for price appreciation. We would not recommend relying on this argument. Whatever the merits of gold may be, going up faster than Bitcoin is not among them.

We spotted another ad today from a mainstream financial adviser. The ad urged clients not to buy gold. This firm should have little need to worry. Stocks have been in a long, long, endless, forever, never-to-end bull market. Gold is not doing anything exciting now. $1234? “WhatEVAH (roll eyes)!” Stocks, well, the prices just keep on going up. Like we said, nothing whatsoever to worry about. Other than declining dividend yields. There’s more than enough irony to go around.

Speaking of dividend yield, that leads us to an idea. Readers know that we like to compare the yield of one investment to another. This is why we quote the basis as an annualized percentage. You can compare basis to LIBOR easily. And also stocks. Or anything else.

For example, the basis for December — a maturity of well under a year— is 1.2%. The dividend yield of the S&P stocks is just 1.9%. For that extra 70bps, you are taking a number of known risks, and some unknown risks too.

It is worth noting that the yield on the 10-year Treasury is up to 2.5%. Yes, that’s right, you are paid less for the risk of investing in big corporations than you are for holding the risk free asset.

Of course, the Treasury bond is not really risk free. But in any case, if the Treasury defaults then it’s safe to assume most corporations will be destroyed, if not our whole civilization.

 

The “risk-free” 10 year treasury note yields a lot more than last year, but while 2.5% is not exactly exciting, it is still more than the stocks in the S&P 500 Index are paying out in dividends. It doesn’t look like anyone is getting proper compensation for the risks involved [PT] – click to enlarge.

 

A Shortlist of Myths

We have heard the mainstream theory so many times, our heads are hurting. Here are the myths: the Chinese are selling, inflation is coming, and the economy is picking up.

China is selling. The Chinese people are selling the yuan to buy dollars – when they can get through the increasingly-strict capital controls. The People’s Bank of China takes the other side of the trade — selling dollars and buying yuan — to keep the yuan from collapsing.

When a foreign central bank holds dollars, it does not hold paper notes. Nor does it deposit them in a commercial bank. It holds Treasury bonds. Its sales of Treasuries may look scary, but that is just what is seen. The unseen is that the Chinese people are buying dollars. Those dollars come back to the Treasury market one way or the other.

 

Onshore Yuan, weekly. This is the USDCNY notation, which shows how many yuan one has to pay for one US dollar, i.e., a rising trend on the chart denotes a weakening yuan [PT] – click to enlarge.

 

Inflation is coming. The Fed is printing, the quantity of money is going up, there will be demand-pull, etc. Well, if that were true then the last place you would want to be is in an asset the price of which is set by the net present value of its future free cash flows. Or at least the price should be. If you think that stock prices have to rise in inflationary periods, look at what happened in the 1970s.

The economy is picking up. What can we say? There are two views on this. One has seen (or looked for) green shoots and nascent recoveries since the crisis. The other has seen rising asset prices, and with that a small wealth effect. We will not opine about Trump and the future of the economy here. We just wish to note that junk bonds have not sold off the way Treasuries have. Junk bonds have hardly sold off at all.

Quite the opposite. They have been massively bid up (i.e. yield has been crushed). We submit for your consideration that if inflation was coming and/or the economy was picking up, you would do even worse in junk bonds than in S&P stocks.

 

Happy days are here again!  Apparently there is currently practically no risk whatsoever in holding junk bonds. Especially the very worst ones are doing exceptionally well. Who are we to argue with “millions of well-informed investors” – they are always right, aren’t they? [PT] – click to enlarge.

 

The 10-year Treasury hit its low yield (so far) of 1.3% in July. Since then, it has been a wild ride mostly up to 2.6% in December. Since then it’s been choppy but falling (i.e. prices rising a bit).

July also happens to be when the yield on the Swiss 10-year government bond began rising. It made a low of -0.6% (yes, negative). Since then, the yield has gone up (i.e. bond price has gone down) to near zero in December. It is currently at -0.1%.

In Japan, the same occurred. Low yield on the 10-year government bond in July was -0.3%. The high was hit in December. Still elevated now, but off the December high.

It’s almost as if government bond yields around the world were moved by the same drivers, or even connected by some kind of arbitrage…

Whatever the cause of this worldwide selloff of government bonds may be, it is not selling by China. It is not inflation. It is not expectations that the economy will take off under Trump.

Maybe it’s just traders looking at price charts, buying because stocks are going up?

 

Precious Metals – Fundamental Developments

This week, the prices of the metals dropped. As always, the question is what happened to the fundamentals?

Below, we will show the only true picture of the gold and silver supply and demand. But first, the price and ratio 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 moved sideways again 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.

 

This week, our old friend returned. He is the correlation between the price of the gold (i.e., the inverse of the price of gold in dollar terms) and the co-basis (i.e., our scarcity indicator). They had been moving together.

This week, they met up for old time’s sake. The dollar is up from 24.75mg gold to 25.20mg. And the co-basis is up from -0.41% to -0.16%. At least in the April contract, which is rapidly approaching First Notice Day, and is already under downward pressure. For farther contracts, the co-basis is up, but not that much.

Our calculated fundamental price dipped twenty bucks. It is still $150 above the market price.

Now let’s look at silver.

 

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

 

The co-basis in silver move up big-time as well. The silver fundamental price also fell, about fifteen cents.

 

Charts by: Cryptowatch, StockCharts, BigCharts, St. Louis Federal Reserve Research, Monetary Metals

 

Chart and image captions by PT where indicated

 

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.

 

© 2017 Monetary Metals

 

 
 

 
 

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: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

3 Responses to “They’re Worried You Might Buy Bitcoin or Gold – Precious Metals Supply and Demand”

  • bitcoinnaldZep:

    Enjoy Very pleased Mining You possibly can Re-invest a new Mining Energize in all the “EXCHANGE” navigation bars on the left less notable to Excavation FASTER Today 1 m writing about you a very 100-200 us $ per day method! This wont last, a great idea is in while you can.

    [url=http://bit.ly/2noGbn3 ]bitcoin wikipedia hindi [/url]

  • bitcoinnaldZep:

    This seems to be out in the proverbial Ripley’s Believe It Or Less than. But as mind-boggling primarily may seem, word has it that in the not so far future, World Paper Money could likely be replaced by electronic-digital currency.

    Locate your bit coin address: A person have successfully created bitcoins wallet congratulations, you are ready to login furthermore you can receive money and silver coins. At this page you for you to fill your address that’s about 33 to 36 characters much time.

    12/26: Ryan Eriquezzo, WSOP Circuit Champion, makes an inspirational settle for the show as he nears the end of his self-imposed 6 month hiatus from poker. Calls for much understand from this young poker star who is quickly proving to be wise beyond his changing times. [Visit Website] [Download MP3].

    They are built by an operation known as bitcoin mining. There is where you use CPU power on your computer system in order to generate them. Each person generates the encryption keys which keep bit coins secure. By generating the encryption you are rewarded with bitcoin for your special effort.

    Be a home-based Guide – Do adore to be an online service provider by making searches, solving people’s online queries and transcribing voice calls? May several online inquiry services that require manpower to respond to the queries of men and women through the internet and aid you supplementations money within the internet. For example, there is often a site in order to as ChaCha Guide that makes it possible to earn from 2 to 20 cents everyone task. The number may not seem to be big, but if you can produce speed in executing each task, specialists . make sufficient amount cash and also strengthen your online search required skills.

    12/19: Interview with Robert Turner, inventor of Omaha (originally called “Nugget Hold’em” after the Golden Nugget where it debuted) in 1981/1982. SCBig and Gunner have a talk with Robert Turner about the overall game of Omaha. [Visit Website] [Download MP3].

    This may appear strange, but bank transfers are probably the most easily traceable form of sending funds. When a bank account is placed ID’s, company documents and personal documents have to be presented to be able to obtain a bank credit card account. Although this is not a 100% guarantee that company is legitimate, it does go a long way to a person peace of mind. It also means as possible request your funds back through your own bank should anything go wrong.

    [url=http://dl.oilexploration.ir/?bitcoin_365440 ]how to buy bitcoin with debit card [/url]
    http://www.znrzu.cn/website_informer_com/tinyurl.com%2Fjbaervv
    http://dl.oilexploration.ir/?bitcoin_365440
    http://soiq.ch/bitcoin53645
    http://webhop.se/bitcoinblast983973
    http://url.n39.eu/bitcoin514855

  • SavvyGuy:

    I don’t like the look of the 10-year Treasury yield log-vertical chart ($TNX). The downtrend line connecting the peaks in mid-2007 and end-2013 was broken late last year, and yields seem to be in “back-kiss” mode lately.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • The Biggest Stock Market Crashes Tend to Happen in October
      October is the Most Dangerous Month The prospect of steep market declines worries investors – and the month of October has a particularly bad reputation in this respect.   Bad juju month: Statistically, October is actually not the worst month on average – but it is home to several of history's most memorable crashes, including the largest ever one-day decline on Wall Street. A few things worth noting about 1987: 1. the crash did not presage a recession. 2. its...
  • Fed Quack Treatments are Causing the Stagnation
      Bleeding the Patient to Health There’s something alluring about cure-alls and quick fixes. Who doesn’t want a magic panacea to make every illness or discomfort disappear? Such a yearning once compelled the best and the brightest minds to believe the impossible for over two thousand years.   Instantaneous relief! No matter what your affliction is, snake oil cures them all. [PT]   For example, from antiquity until the late-19th century, bloodletting was used to...
  • Canada: Risks of a Parliamentary Democracy
      A Vulnerable System Parliamentary democracy is vulnerable to the extremely dangerous possibility that someone with very little voter support can rise to the top layer of government. All one apparently has to do is to be enough of a populist to get elected by ghetto dwellers.   Economist and philosopher Hans-Hermann Hoppe dissects democracy in his book Democracy, the God that Failed, which shines a light on the system's grave deficiencies with respect to guarding liberty. As...
  • Federal Reserve President Kashkari’s Masterful Distractions
      The True Believer How is it that seemingly intelligent people, of apparent sound mind and rational thought, can stray so far off the beam?  How come there are certain professions that reward their practitioners for their failures? The central banking and monetary policy vocation rings the bell on both accounts.  Today we offer a brief case study in this regard.   Minneapolis Fed president Neel Kashkari attacking a block of wood with great zeal. [PT] Photo credit: Linda Davidson...
  • Thoughtful Disagreement with Ted Butler
      Too Big to Fail?   Dear Mr. Butler, in your article of 2 October, entitled Thoughtful Disagreement, you say:   “Someone will come up with the thoughtful disagreement that makes the body of my premise invalid or the price of silver will validate the premise by exploding.”   Ted Butler – we first became aware of Mr. Butler in 1998, and as far as we know, he has been making the bullish case for silver ever since. Back in the late 90s this was actually a...
  • Donald Trump: Warmonger-in-Chief
      Cryptic Pronouncements If a world conflagration, God forbid, should break out during the Trump Administration, its genesis will not be too hard to discover: the thin-skinned, immature, shallow, doofus who currently resides in the Oval Office!   The commander-in-chief - a potential source of radiation?   This past week, the Donald has continued his bellicose talk with both veiled and explicit threats against purported American adversaries throughout the world.  In...
  • Precious Metals Supply and Demand Report
      Fat-Boy Waves The prices of the metals dropped $17 and $0.35, and the gold-silver ratio rose to 77.  A look at the chart of either metal shows that a downtrend in prices (i.e. uptrend in the dollar) that began in mid-April reversed in mid-July. Then the prices began rising (i.e. dollar began falling). But that move ended September 8.   Stars of the most popular global market sitcoms, widely suspected of being “gold wave-makers”. From left to right: Auntie Janet...
  • The Donald Can’t Stop It
      Divine Powers The Dow’s march onward and upward toward 30,000 continues without a pause.  New all-time highs are notched practically every day.  Despite Thursday’s 31-point pullback, the Dow is up over 15.5 percent year-to-date.  What a remarkable time to be alive.   The DJIA keeps surging... but it is running on fumes (US money supply growth is disappearing rapidly). The president loves this and has decided to “own” the market by gushing about its record run. During...
  • 1987, 1997, 2007... Just How Crash-Prone are Years Ending in 7?
      Bad Reputation Years ending in 7, such as the current year 2017, have a bad reputation among stock market participants. Large price declines tend to occur quite frequently in these years.   Sliding down the steep slope of the cursed year. [PT]   Just think of 1987, the year in which the largest one-day decline in the US stock market in history took place:  the Dow Jones Industrial Average plunged by 22.61 percent in a single trading day. Or recall the year 2007,...
  • Stocks Up and Yields Down – Precious Metals Supply & Demand
      Where the Good Things Go Many gold bugs make an implicit assumption. Gold is good, therefore it will go up. This is tempting but wrong (ignoring that gold does not go anywhere, it’s the dollar that goes down). One error is in thinking that now you have discovered a truth, everyone else will see it quickly. And there is a subtler error. The error is to think good things must go up. Sometimes they do, but why?   Since putting in a secular low at the turn of the millennium,...
  • The 2017 Incrementum Gold Chart Book
      A Big Reference Chart Collection Our friends at Incrementum have created a special treat for gold aficionados, based on the 2017 “In Gold We Trust Report”. Not everybody has the time to read a 160 page report, even if it would be quite worthwhile to do so. As we always mention when it is published, it is a highly useful reference work, even if one doesn't get around to reading all of it (and selective reading is always possible, aided by the table of contents at the...
  • Precious Metals Supply and Demand
      Fundamental Developments The prices of the metals shot up last week, by $28 and $0.57.   Heavy metals became pricier last week, but we should point out that the stocks of gold and silver miners barely responded to this rally in the metals, which very often (not always, but a very large percentage of the time) is a sign that the rally is unlikely to continue or hold in the short term. [PT]   Last week, we said:   “One way to think of these moves is...

Support Acting Man

Top10BestPro
j9TJzzN

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]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com