Grain of Salt Required

The price of gold fell $7, and that of silver 24 cents. This was a holiday shortened week, due to Thanksgiving on Thursday in the US (and likely thin trading and poor liquidity on Wednesday and Friday). So take the numbers this week, including the basis, with a grain of that once-monetary commodity, salt. We will keep the market action commentary brief.

 

Relatively modern examples of salt money which was widely used in African countries until the early 20th century. The bars were clad in fibers to keep them from breaking up. The specimen at the top and in the bottom left corner were collected in Ethiopia (formerly known as Abyssinia), where they are used as a medium of exchange among nomads living in the Danakil Plains to this day. The salt-filled package made of leaves in the bottom right corner is late 19th century salt money from Angola. [PT]

 

Fundamental Developments

Here are the charts of the prices of gold and silver, and the gold-silver ratio.

 

Gold and silver priced in USD – click to enlarge.

 

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio rose.

 

In this graph, we show both bid and offer prices for the gold-silver ratio. If you were to sell gold on the bid and buy silver at the ask, that is the lower bid price. Conversely, if you sold silver on the bid and bought gold at the offer, that is the higher offer price.

 

Gold-silver ratio, bid and offer – 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 showing gold basis and co-basis with the price of the dollar in gold terms.

 

Gold basis and co-basis and the USD priced in milligrams of gold – click to enlarge.

 

The co-basis (our measure of scarcity) of the Feb contract rose slightly, as the price of gold fell slightly.

The Monetary Metals Gold Fundamental Price is up 8 bucks.

Now let’s look at silver.

 

Silver basis and co-basis and the USD priced in grams of silver – click to enlarge.

 

The story is the same in silver, with a bit larger rise in the co-basis.

The Monetary Metals Silver Fundamental Price is up 22 cents.

 

© 2017 Monetary Metals

 

Charts by: Monetary Metals

 

Image captions by PT

 

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.

 

 

 

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