Monetary Metals Supply and Demand Report: 5 Jan, 2014

An extraordinary thing is happening in silver. Not to its price, which went sideways, but its supply and demand. Read on. Most people would say that “gold went up” $24. Of course, gold does not go anywhere. It is the dollar, which is jittering around like a seismograph needle during an earthquake. Measured in gold, [...]



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6 replies
  1. cbarton says:

    Keith, it is a recurring theme in your analysis that higher prices lead to more abundant supply to the market, and that, conversely, lower prices tend to make the metals more scarce. As you say above, “a higher price brings out more sellers and discourages some buyers.”

    The implication here is that price drives supply and demand, whereas the common adage is that supply and demand determine the price. Indeed, you also hold to this latter notion when you say that with supply being abundant, the price of silver is unlikely to rise in a hurry.

    So, now I am utterly confused: Does supply and demand determine the price, or is it the other way around, price determining availability of metal?

    Thanks.

    • Ulrich C L says:

      I belive the point Mr. Weiner is trying to make in his newsletter is that for gold and silver the worldwide supply is near constant and therefore cannot provide much valuable trading information. Instead he has his eye on the supply to the markets, or in other words, the dynamic of private hoards vs. trades. So yes, he is talking about two different supplies here one flexible and the other inflexible, only one of which is driven by short-term market forces. The global mined and refined supplies of gold and silver on the other hand are a result of thousands of years of history and while also driven by market forces in a sense hardly budge even for world wars, black plagues or mongol invasions.
      Also keep in mind that holders of monetary metals can hold on to them indefinitely since they are nonperishable and if todays trade opportunities are uninviting there is always tomorrow. Nobody except maybe miners has to sell, to bring his goods to the market on any given day. The dynamic is similar for oldtimers and old masters and other collectibles which are limited in supply but can theoretically be traded every day or once a century and are also used by some people as stores of value. They are obviously not money since not interchangeable and since they dont hold value outside a small scene of specialists and collectors. But they can be coaxed out into the open by a high enough bid.

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