Monetary Metals Supply and Demand Report: 16 Nov, 2014

On Monday through Thursday, the uptrend in the dollar continued, but on Friday, something snapped. Usually, there is no way to know what triggers a major change. Zero Hedge believes that the fuse of Friday’s fireworks in the monetary metals was lit by the decline in so called inflation expectations in the Thomson Reuters / [...]

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9 replies
  1. Yuhannl says:

    “Two, you won’t like all of the other things that will accompany $5,000 gold if it does happen”

    Cannot agree more with this statement. I think the gold bugs need to acknowledge the problems associated with gold rising to $5k and not just thinking they’ll become very rich when it happens.

    Dollar collapse also means you can’t do anything with your gold, at least temporarily anyway…

  2. Keith Weiner says:

    Thanks for catching the error. I have updated the post with the correct intraday silver chart.

    Yuhanni: I would not say you can’t do anything with your gold per se, though revealing that you have gold could be very dangerous. That is my understanding of the first dark ages period.

    • Yuhannl says:

      Keith – I have to agree with you on the danger part. Imagine rocking up to the vault where you think your life-savings are kept safely only to be shot dead by the trust-worthy security guard….

  3. tjmmz9843 says:

    “Incidentally the rising cobasis heading into each contract’s expiry is a compelling piece of data to debunk the manipulation theories…If bullion banks were massively naked short, they would not be selling but buying.” – It depends. My understanding of the latest manipulation theory is that “they” (usually BIS or JPM) dump supply on the market suddenly to take out the bid stack / run the stops, then buy back as the price falls. I have no idea if that’s true – but if it were, “they” would not maintain large short positions; their shorts would be transient.

  4. tjmmz9843 says:

    “This may be nothing more than an overdue rally, a correction.” – Yes; “specs bought” in the sense that some needed to cover their shorts (or had their upside stops hit).

    “you won’t like all of the other things that will accompany $5,000 gold if it does happen” – it’s funny, but that’s what people were saying in early 2009, about $2,000 gold. Inflation? 🙂 Because, today in 2014, one can picture gold hitting $1,500 or even $2,000 easily (which would double or quadruple the miner stocks, from where they are now).

  5. Keith Weiner says:

    tjmmz: So they temporarily sell but the price permanently goes down? No one front-runs their short-covering? Hmm..

    The mainstream theory is rising money supply –> rising prices and that this is “inflation”. So, the theory goes, you should buy something that “keeps up with” this inflation. Gold comes to mind.

    That is not what I am proposing. I am proposing higher unemployment which sooner or later means higher strife and violence. I am proposing defaults and insolvencies, shuttered plants and stores and whole malls. Picture Detroit expanding, with outcrops coming to a city near you. Are prices high? Maybe, but that’s not the greatest feature. No, what’s salient is the collapse in trust–for good reason. By the time people are so distrusting of the government’s credit that gold is priced at $5,000 I think palpable signs and real problems stemming from their distrust in all other areas will be bleeding through.

    • tjmmz9843 says:

      I don’t really believe the manipulation theories; just trying to understand and right now, I guess I’m Devil’s Advocate. I think the manipulation theorists might say that gold has an abnormal demand curve where stupid Americans will panic into gold when it’s up in dollar terms, and out of gold when it’s down. So yes, a “smackdown” (the manipulationists’ word) would bring on additional selling, which keeps the price down for the manipulators (biggest banks) as they neatly cover their shorts. But, whatever.

      I agree that $5,000 gold would mean a massive collapse in trust; which implies a massive collapse in real debt, and with that, mass unemployment as the real economy chokes and (hopefully) re-organizes. I just don’t think we’ll necessarily get there. $2,000 gold will happen if/when the Chinese simply begin deploying their $4 trillion in forex reserves into gold. And $2,000 gold will set off enough alarm bells that America might finally get its act together, and head off worse events. Or if China-Russia-Iran form a non-dollar / Gold Standard trading bloc, and pick up some more countries (Germany?), then America would see $5000 gold, but the havoc and destruction would at least be isolated to America.

      I’m just noticing that the quantity of base money does affect our expectations of what is a reasonable price vs. a high price. I am aware of your and Dr. Fekete’s criticisms of QTM, and find many of them persuasive. But in 2008, the Fed’s balance sheet was under $1 trillion and gold had never gone beyond $1000/oz; $2000 seemed like that crazy-high price which should spell the end of the world. Today, the Fed’s balance sheet is $4.4 trillion and a price of $1500 or $2000 is easily envisioned, and would not be very bad. There’s a connection. A linear QTM does not work (especially not on short time scales); nonetheless, when a money’s base quantity is being grown, the money is being depreciated.

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