Monetary Metals Supply and Demand Report: 30 Mar, 2014

The gold price fell about forty bucks, and the silver price fell about fifty cents. There are many ongoing rumors about what could be happening in supply and demand for the metals. Mostly, these are about how the world is gobbling up physical metal and the prices will soon skyrocket. A well-known commentator this week [...]



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14 replies
  1. pherisse says:

    Another bad week for gold and a bad one for the dollar, so I was sure that Keith would be happy !

    Most commentators are now bearish for gold based on TA but you will still find some some who are still on the moto “to da moon” but there are a very small minority and fortunately there are here, otherwise there would be nobody anymore to be scoffed !

    Lastly, the above numbers show clearly that speculators are not frontrunning physical buyers/hoarders who used the COMEX (and LBMA ?) to purchase their gold but we still do not know if and what transactions are made off market without using these exchnages (or the Shangai gold exchange).

    Lastly, it seems more and more probable that the dollar devaluation against gold will now come in a sudden non linear event compared with what happened from 2001 to 2011.

  2. Keith Weiner says:

    pherisse: If you know my writing, you know that I don’t think gold has a good or bad anything. Gold isn’t going anywhere, it’s the dollar that goes mostly down but can go up due to credit tightening.

    I agree with your last point, that what’s coming to the dollar is likely to be highly non-linear. Though this does not preclude a linear drop in the intermediate term, from 24mg to 12, and from 12 to 6 before the final catastrophic plunge to 0.

    bleubelle: thank you. 🙂

  3. mongoose33 says:

    Keith, I appreciate your analysis. I used to listen to the gold bulls, and for whatever reason ZeroHedge published your analyses–which oddly enough seemed quite dispassionately different than what the GB were arguing. I give ZH credit for presenting multiple sides.

    So I watched–and discovered that what you were/are saying fits market action better than others. A couple weeks ago I was considering a purchase of PMs but before I read your report, and I held off. There just doesn’t seem to be any pending technical reason why PMs are going to start zooming up.

    I’m educated as a quantitative scientist so when I see someone else doing that kind of thing, it makes me feel all warm inside. Data doesn’t lie. 🙂

  4. dnarby says:

    Since the political reality (Bund having to wait years to get what seems a piddling amount of gold repatriated, China hoovering gold like Scrooge McDuck, etc.) conflicts with the market reality (what Keith has been reporting and analyzing), it seems a “linear event” (AKA “phase transition”) is inevitable.

    But one thing I have learned is to never be too sure about anything.

  5. WallyB says:

    Keith,

    Can you clear this paragraph up for me? I don’t know if the way you are saying it is throwing me or what…

    “By plotting the dollar on top of the cobasis, we can see speculative vs. fundamental moves. In a speculative move, the two lines move together. That is, as gold is sold (i.e. the dollar gets stronger) the cobasis rises (i.e. gold becomes more scarce). As gold gets bought (weaker dollar) the cobasis falls (less scarce gold).”

    If gold is being brought to market (what i take to be “sold” here, which i guess it depends on which institution is doing the selling to make this work…) then should’nt the cobasis be pushed down? And when gold is bought (what i take to mean hoarders hoarding metal) then wouldn’t that make gold more scarce and push the cobasis up? Any help here?

    • Greg Jaxon says:

      When gold is brought to market, it becomes less “scarce” and trends toward contango.
      When it is sold away from the bullion markets and into hoards, it becomes more scarce and trends toward backwardation.

    • Keith Weiner says:

      Wally: I was referring to a speculative move, which refers to changes in speculative, i.e. futures, positions. I should have said if gold futures get sold…

  6. Greg Jaxon says:

    “By plotting the dollar on top of the cobasis, we can see speculative vs. fundamental moves. In a speculative move, the two lines move together. That is, as gold is sold (i.e. the dollar gets stronger) the cobasis rises (i.e. gold becomes more scarce). As gold gets bought (weaker dollar) the cobasis falls (less scarce gold).

    If the lines move in opposite directions, it’s not a speculative move but fundamental.”

    KEITH! My man! You summed it all up so beautifully there! This could be the seed of the whole idea for your site, the one thing you can say that conveys the deep value in your approach.

    Just regarding this week’s price action, I subscribe to the theory that Ukrainian physical is just being rehypothecated out the wazhoo,but that it is newly present in the bullion bank vaults and has thus satiated the temporary backwardation for now. So… manipulation, but of the non-market sort that involves actual new liquid metal (possibly even freshly melted). I have no evidence of this, just my crazy imagination.

    • Keith Weiner says:

      Thanks Greg,

      I’ve been biting my tongue on the Ukrainian gold rumors. Could it be that Ukraine, what with facing the possibility of a Russian invasion, want to move their gold to a safe place in the meantime? They may be a bit more worried about a looting army more than about rumors that circulate in the gold bug community…

  7. MetalsD says:

    Hi Keith,
    I’m always interested in what you have to say, especially when it confronts some of the popular (mis)perceptions of the market. So on that note and seeing as you’re interested in using data to discern the truth of situations, what do you make of this chart?

    http://goldchartsrus.com/chartstemp/IntradayGCManipulation.php

    Six years of intraday gold price data from 2006-2012 clearly showing (on average) a fall from the London open all the way to the PM fix from where it recovers overnight?

    Coincidence, bad data, attributable to other factors, naive analysis?

    I await you reply with interest.
    MetalsD

    • Keith Weiner says:

      Metals: I don’t know what to make of it. It raises more questions than it provides answers. First, what price is that a graph of? Spot gold? COMEX futures? Second, are they using the bid price, ask price, or last cleared price?

      A few tens of cents on a $1000 gold price is small. The bid-ask spread and the spot-futures spread widen by that much or more at times of low liquidity (e.g. overnight).

      I have a major ongoing theme in my writing. Most Westerners think of gold in terms of its dollar price. They trade it to make more dollars, which they regard as money. They want to buy gold while it’s “going up” and sell gold hopefully before it “goes down”. In a broad sense, *THIS* is the manipulation.

      Entire generations of people have been trained to think of the government’s paper scrip as money, and gold as a volatile commodity.

      If this wasn’t so, then how would anyone explain why gold continues to come to market even after the price drops? Or comes to market *because* the price drops? Most people have no idea how to value gold, the singular best money ever discovered. Their faith in the failing government bond is strong.

      “Yes, Yes!” says the gold speculator. “Those people should know to stop selling, and let the price go up–so I can sell my gold and make a profit!”

      So long as market participants view gold only in terms of how many dollars it can buy, then the price will move all over the place. It’s like the planchette on a Ouija board.

  8. sway@bigpond.net.au says:

    Hi. I am not really sure about all this,but I grant it is good analysis.

    As a speculator or potential hoarder/dishoarder I can buy or sell futures contracts and get out either way by closing the trade and settle in Cash.
    However in effect I am taking out a contract to either deliver gold or take delivery.
    So if I am a deliverer of gold in effect a dishoarder, i am buying $$$ and punting that they will go up in value, and visa versa if I take delivery.

    Could it not be true that the $USD is being or at least be trying to be stopped (manipulated) from falling relative to gold ?
    After all the size of the currency markets dwarfs the gold market, and the USA has a lot lose if the $USD is devalued which makes me wonder why they are printing so much.

    Anyway, I am a small hoarder because I believe it is wealth. What I buy has ZERO effect on the price.

    BIG BIG players know golds true value and in $$$$ terms that is much higher than quoted on a tote board.

    SW

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