The prices of the metals didn’t change much this week.
We thought we would take this opportunity to quote Warren Buffet. His comment at Harvard in 1998 earns him the despite of the gold community.
“Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
We don’t care much for his conclusion either: no need to own gold, nothing to see here about our failing monetary system, move along folks. However, he does have a point.
When the government expelled gold from the monetary system, it took away gold’s utility. Gold does not pay interest today. That’s why most people want nothing to do with it. And it’s also why the gold community is so focused on the price of the metal. Other than protect you from the End Of The World As We Know It, gold is a chip for betting in the speculation casinos.
Without interest, it cannot circulate as money. Interest is the flow regulator valve. Zero interest means 100% hoarding and 0% circulation.
The concept of utility comes from being able to use something. Money is used for investing and spending—precisely what the government has suppressed since 1933. So what’s left?
Read on for the only the only true picture of the supply and demand fundamentals that ultimately drive the price action. But first, here’s the graph of the metals’ prices.
Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio.
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 basis (i.e. abundance) increased a but this week. However, our calculated fundamental price rose a few bucks.
The same exact thing occurred in silver. Slightly growing abundance, but our model shows a slightly higher fundamental price.
Keith Weiner will be in NYC the week of August 21. No seminar this time, but if you are an accredited investor and want to discuss gold investing, please contact us.
Additional Resources for Earning Interest on Gold
If you’d like to learn more about how to earn interest on gold with Monetary Metals, check out the following resources:
In this paper we look at how conventional gold holdings stack up to Monetary Metals Investments, which offer a Yield on Gold, Paid in Gold®. We compare retail coins, vault storage, the popular ETF – GLD, and mining stocks against Monetary Metals’ True Gold Leases.
Adding gold to a diversified portfolio of assets reduces volatility and increases returns. But how much and what about the ongoing costs? What changes when gold pays a yield? This paper answers those questions using data going back to 1972.
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