Lower Prices, Stronger Fundamentals

Lower Prices, Stronger Fundamentals

Since last week’s Report, the price action has been downwards.

Gold and Silver Price Chart

The price of gold dropped about $50, and that of silver $1.35. The gold-silver ratio rose to its highest level since the end of 2020.

<a href='/lexicon-gold-silver-ratio/' target='_blank' rel='noopener' data-lazy-src=


Technical chartists are either throwing in the towel, or tearing their hair out. We advise against tearing one’s hair out. It does not make the price go up, but it’s painful and may be permanently disfiguring. And we can offer some hope. Let’s take a look at the fundamentals for gold and silver, starting with our famous gold fundamental chart.

Gold Price Fundamental Analysis – Gold Basis

Gold Price Fundamental Analysis – Gold Basis Chart

The price of the dollar is now up to 17.62 milligrams of gold (inverse to the price of gold, in dollars, of $1,750).

But notice the drooping basis. This is a measure of gold’s abundance to the market. Virtually all of the gold mined in human history is still in human hands. And of course, metal is not destroyed or created. Abundance and scarcity are measured with respect to the market. Sometimes, metal is coming to market with such abundance, that the marginal use for it is to go into carry trades. Other times, as now, the marginal source of it is coming out of carry trades.

Here’s the same chart, and fundamental analysis for silver.

Silver Price Fundamental Analysis – Silver Basis

Silver Price Fundamental Analysis – Silver Basis Chart

The strengthening of fundamentals is much more pronounced (as is the gain in the price of the dollar, as measured in metal).

One feature to note: the basis has gone negative. This is not the near month (i.e. December), but the 6-month continuous basis. The basis has not been this low in years. That is, silver is less abundant to the market than it has been in, in a long time. The cobasis has jumped up a lot, though not yet above zero. Thus not yet in backwardation (the Dec contract is now very close).

Finally, let’s look at the ratios of the gold basis to silver basis, and gold cobasis to silver cobasis. In other words, the relative abundance and relative scarcity of the two metals.

Gold Silver Ratio Fundamental Analysis – Gold Silver Ratio Basis Analysis

Gold Silver Ratio Fundamental Analysis – Gold Silver Ratio Basis Analysis Chart

This chart is showing stronger fundamentals for silver compared to gold, and this relative strength has not been this high since Peak Covid.

Could the gold-silver ratio rise still further (i.e. silver underperform gold), perhaps due to contagion from the likely default of China’s Evergrande? Yes. It is possible. The basis cannot predict timing, nor whether the price will get farther out of whack.

The basis can only say that it is currently out of whack, and to get back into whack the price of silver needs to rise more than the price of gold.

Monetary Metals produces research and fundamental analysis of gold and silver prices that you literally can’t find anywhere else. And it’s all free!  To receive the Supply and Demand Report as soon as it is published, join our mailing list.

Make sure to subscribe to our YouTube Channel to check out all our Media AppearancesPodcast Episodes and more!

Monetary Metals is Hiring!

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:

The New Way to Hold Gold

The New Way to Hold Gold

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.

Case for Gold Yield in Investment Portfolios

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.