Welcome, we have a new name and a new format to reflect that this is fundamentally about looking at supply and demand in the gold and silver markets. For an introduction and guide to the concepts and theory, click here.
The gold price was flat, and silver was down slightly. Is the long-awaited, much-discussed silver breakout still on? We don’t think so.
The Prices of Gold and Silver
Here is gold.
The Gold Basis and Cobasis and the Dollar Price
The cobasis has been moving sideways since early August. What’s interesting is that the price of the dollar measured in gold has been falling (i.e. gold has been “going up”). The sideways cobasis, which is just ever so slightly in backwardation, shows that demand for real metal is holding strong, relative to futures.
Now let’s look at silver.
The Silver Basis and Cobasis and the Dollar Price
The cobasis has been falling, but the dollar price has not. Silver does not have strong demand fundamentals at this time, and we see a very negative cobasis and indeed the basis is positive. Silver, unlike gold, is in contango. This does not mean that its price could not go higher. We never recommend naked shorting a monetary metal.
The Ratio of the Gold Price to the Silver Price
While anything could happen in the short term, we think this ratio has likely put in its low and will be heading upwards again, perhaps to break through its high of late July.