• 11 hours Jeff Bezos Doubles Down On Space Colonization Ambitions
  • 17 hours Gold Mining Stocks Stuck In Limbo
  • 1 day Executive Order Targets Huawei Over Espionage
  • 2 days Why Now May Be The Best Time Ever To Hold Gold
  • 2 days Fake News Sinks Shares In UK-Based Bank
  • 3 days De Beers To Build $468 Million Diamond Recovery Ship
  • 3 days Moody's: Turkey Faces Possible Credit Downgrade
  • 3 days Tesla's Solar Sales Are Slipping
  • 3 days Auto Industry To Get Temporary Tariff Relief
  • 4 days Welcome To The World’s Biggest Free Trade Area
  • 4 days Central Banks Are Stockpiling Gold At The Fastest Rate In Half A Decade
  • 4 days U.S.-China Impasse Threatens Rare Earth Trade
  • 4 days Wall Street Bears $1 Trillion Brunt Of Trade War
  • 5 days Mobile Sports Betting Isn’t Quite Minting Millionaires Just Yet
  • 5 days The Marijuana Industry’s Shocking Secret
  • 5 days A Generational Shift Is Quietly Unfolding In The Mining Industry
  • 5 days Pentagon To Pay $6 Billion To Help Build Border Wall
  • 6 days Beijing Backlash: Stocks Slammed, Gold Boosted
  • 6 days Market Sentiment At Its Lowest In 10 Months
  • 6 days Trader Compares Current Market Environment To 2007
How Millennials Are Reshaping Real Estate

How Millennials Are Reshaping Real Estate

The real estate market is…

Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

Keith Weiner

Keith Weiner

Keith is founder of the Gold Standard Institute USA in Phoenix, Arizona, and CEO of precious metals fund manager Monetary Metals. He created DiamondWare, a…

Contact Author

  1. Home
  2. Markets
  3. Other

Silver Elevator Keeps Falling, Report 8 May, 2017

The dollar moved strongly, now over 25mg gold and 1.9g silver. This was a holiday-shortened week, due to the Early May bank holiday in the UK.

The big news as we write this, Macron beat Le Pen in the French election. We suppose this means markets can continue to do what they wanted to do before the threat of Frexit, shutting off trade between France and the rest of Europe, and who knows what else Le Pen was plotting to do to the French people.

This will be a short Report this week, as Keith has been working hard on a paper to address the question of which metal will have the higher interest rate. Look for that on Monday.

Below as the only true look at the supply and demand fundamental of the metals, but first, the price and ratio charts.

The 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 had another major move up this week, after a major move up last week and one the week before.

It now sits at the same level it was a year ago. If it breaks above 76, then the next resistance looks to be 80.

The Ratio of the Gold Price to the Silver Price

(Click to enlarge)

For each metal, we will look at a graph of the basis and cobasis 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 cobasis in red.

Here is the gold graph.

The Gold Basis and Cobasis and the Dollar Price

(Click to enlarge)

If we didn’t know better, we would say that as fast as the cobasis (i.e. scarcity, the red line) ran up, the price of the dollar (which is the inverse of the conventional view of the price of gold) ran up faster.

Actually, that is accurate. And consequently, our calculated fundamental price of gold fell over twenty bucks (though it’s still more than twenty bucks over the market price).

Now let’s look at silver.

The Silver Basis and Cobasis and the Dollar Price

In silver, the same phenomenon occurred though with exaggerated degree.

Last week and the week before, we asked:

Some speculators definitely got flushed. However, the question is how many and how much?

Then we said:

Clearly it happened to more of them this week. And, unless the fundamentals get stronger, it is likely to flush even more leveraged futures positions. Our calculated fundamental price fell three cents this week, now a buck thirty under the market.

It happened to more of them this week. That’s what a rising cobasis with falling price of silver means. A selloff of futures. A flush of the leveraged speculators.

Unfortunately for them, owners of metal were also selling. Our calculated fundamental price of silver fell almost penny for penny with the market price. It remains about a buck twenty under the market.

We saw a technical analysis trader write a note this weekend. He said he plans to short silver on Monday. When the technicals and then fundamentals align, that can make for an interesting week.

Keith will be speaking at the Metal Writers Conference in Vancouver, at the end of the month.

By Keith Weiner via Monetary Metals

Back to homepage

Leave a comment

Leave a comment