Monetary Metals Supply and Demand Report: 1 Feb, 2015

There was some big price news this week. We gold thinkers say that the dollar jumped over ½ mg gold, and 100mg silver on Thursday. Harry Potter’s muggles would say gold fell to $1257 and silver to $16.94 before gold bounced back to nearly unchanged and silver bounced much less. All can agree that the [...]



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8 replies
  1. [email protected] says:

    Keith.
    What about a bit of Bonnie and Clyde?

    That aside, I have long suspected that in a slowing industrialised world, the price of silver would head down.
    From a technical analysis monthly perspective, silver is in a strong downtrend and no turn in sight.
    $8.50 will not surprise me !

    Again…thanks for your analysis. Very interesting.
    SW

  2. Freeman says:

    Thanks, Keith. My tentative hold on the new paradigm weakens when currency numbers enter the picture. By design, I’m sure, to distract and confuse. Perhaps a table of “prices” denominated in gold/silver for something other than currencies might be a helpful reinforcement. Is such a table available to us?

    • Jim_n says:

      @Freeman

      In addition to the link that Keith provided, In a 1997 essay, “A Gold Standard Today” (when gold was around $350), George Reisman discussed how one can mentally create his own gold standard to express prices of goods and services now. He showed how to transition from thinking in fiat to thinking in bullion terms. You can find his essay at http://www.capitalism.net. In 2011 the people at Eidetic Research updated Reisman’s figures to reflect gold at $1800 and they also worked up some numbers for silver priced at $5 and $40. Their website is http://www.eideticresearch.com. You can use either essay as a guide to figuring out bullion based prices at current fiat values.

  3. johnmurbach says:

    Keith:

    Thank you for your valuable insight and information. Like you, I learned to price goods and services in real money. Only in my case, instead of grams, I choose traditional US specie in the form of Treasury gold coins, Standard silver dollars, and subsidiary silver dimes, quarters, and halves (the latter humorously called “junk silver” by novices and pedants who know no better).

    Fortunately, as a teenager, I witnessed the transition from silver to clad (base-metal) coins, and from silver promises (Certificates) to Federal Reserve IOU-nothings. I understood what was going to happen to our money in 1964-68, while it was happening.

    When I first began driving in 1967, gasoline was priced 25¢ to 30¢ per gallon here in the Los Angeles area. In other words, the equivalent of 2.5 to 3 silver dimes. We were still using silver coins then, Gresham’s Law having yet to complete its inevitable operation. Standard silver dollars pretty much disappeared from circulation around 1965, but I did spend them as a kid before then. Many in the numismatic community in those days were fully aware the long-dead Thomas Gresham would prevail, and why.

    Just recently, the silver-dime to gasoline ratio has reached an unbelievable 1.8 dimes to the gallon (currently, Feb 2, 2015, it is 2.0 dimes). Never before have I seen gas this cheap. A friend in Virginia (also a coin dealer) reports 1.5 silver dimes per gallon. The range in my lifetime (b.1950) has been 27¢ to about $4.50 in currency units, and about 2.5 to 4.5 silver dime-equivalents per gallon, but never this cheap.

    Prices in gold coins (grams to you, US Treasury Gold Dollars to me = 1/20th of a $20 gold Double Eagle) are so incredibly low as to be almost give-away prices: over 24 gallons per gold dollar.

    This of course only applies to those actually owning specie. Silver and gold money are easy to exchange at any money changer’s place of business for the Federal Reserve units that people seem to fawn over and Legal Tender laws seem to require.

    Even before I became a numismatist and then a coin dealer (the latter, in 1969), I understood that there never was a prohibition on American buying, selling, or owning gold from the supposed outlawed years of 1933-74. Like most silly laws passed for political convenience, this one was ignored by one and all. I bought my first English gold sovereign in 1965 for $9.25, that being the retail (or Ask) price. Melt at the time (0.2354 oz X $35 was $8.25 in round numbers), while dealer wholes or Bid was $8.75.

    If you have any interest in this, please ask me about what just occurred in the last few weeks with the price of US collector gold coins in circulated grades all the way to MS63/64. Something that has never been seen before (or at least, since 1933).

    John

      • johnmurbach says:

        Thank you. Briefly, they collapsed to “scrap” value. Most circulated $5, $10, and $20 gold coins from Very Fine grade to “Commercial Uncirculated” now trade wholesale at spot to 2% back of spot. Rare dates for now seem to have avoided the carnage. Mint State 60 to 63 (the low end grades, I assume you are familiar with the 70-point grading scheme) now also Bid close to scrap. Saint-Guadens Double Eagles, which have to compete head to head with modern Gold Eagles & Maples, etc. in the 1-ounce category, have similarly melted in price, with a medium sized retailer this last Friday at the Long Beach coin show explaining MS63 Certified (PCGS & NGC) Saints were Bid at 3% over spot, and a deal with a couple of thousand MS64s traded at 7% over spot. In times past, the MS64s were 20% to 25% over. Apmex.com shows slightly higher Bid prices. The there were long faces at Long Beach all the same.

        This dealer I spoke to tells me he will begin arbitraging the drop (my word, not his) by promoting the cheaper coins to his customers wanting Eagles or Buffaloes. He also expects that once the Cable TV coin operators begin their next promotions, they’ll be big buyers since they can tout the tight spreads.

        I talked to Austin, Texas dealer Dave Carruthers who has been in the business as long as I have (though I am retired now) who confirmed that in his 40 year career he has never seen pre-1933 US gold coins trading at “scrap” value.

        What does it mean? I have no idea. Perhaps today’s generation of gold buyer, never having collected earlier US coins, prefers bullion coins. Easier to figure the price. Also, endless negative publicity from websites selling bullion products have steered new investors away from “rare” coins because of their markups.

        Or there may be simply too many coins for the market to support. They have finally returned to monetary items.

        I’ve always owned early US gold with the idea in mind that I might spend it one day. The collector premiums, predicated on there BEING collectors, might have finally disappeared on the commonest coins (millions of US gold coins never went into the Mint’s melt pots in 1934-37 to be made into coin-melt bars).

        Also, over the holidays, MS65 graded common Morgan dollars saw their Bids drop from $150 to $95. Of silver dollars in all grades, several million exist. One example: when the vaults of the failed Continental Illinois Bank were opened after its 1984 collapse, there were 1.1 million 1881-S Morgan Dollars found in their reserves. Bags and bags of original Mint States.

        John

  4. Keith Weiner says:

    Thanks for sharing that johnmurbach. I am a student of spreads. Spread, not price, is what tells you what’s really going on.

    My interpretation is that the speculators have left the room (in gold, at least). I think this is a good thing, though obviously those who want gold to “go up” are frustrated because it is speculators who push up the price and the source of “profits”.

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