Sideways Silver Market, Report 16 October, 2016
Not much price action at the metals tables in the casino. Gold -$7, and silver -$0.10. Gold to silver ratio unchanged.
This will be a brief report, due to the rigors of travel this week.
Read on for the only true picture of the fundamentals of the monetary metals. But first, here’s the graph of the metals’ prices.
The Prices of Gold and Silver
Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio.
The Ratio of the Gold Price to the Silver Price
For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and cobasis in red.
Here is the gold graph.
The Gold Basis and Cobasis and the Dollar Price
Gold’s scarcity (i.e. red line, cobasis) is up this week, though the price of the dollar (i.e. green line, the inverse of the price of gold) didn’t move much.
Now let’s look at silver.
The Silver Basis and Cobasis and the Dollar Price
The cobasis rose, but not so pronounced as in gold.
© 2016 Monetary Metals
The basis in silver now looks to be around 0%, a level not seen for many months.
Are geopolitical events adding to the mix along with woes about DB?
Part of the explanation could be the retunr of asia (especially china) closed for one week. Indians seem also to come back a little more at around 1250.
The fact that gold’s cobasis is back to where it was in January when the price was $200 lower, is quite positive, no?
If I understand: The physical market got tighter, while prices didn’t go up (much). Implies physical buying and futures selling? about equally? So, Keith’s “fundamental” prices would have risen a little?
Keith: Which silver contract? Please note that the graph says “Sep”. (September contract, should be impossible now in October, right? Last week’s graph said the same.)
I’m reading that the price of gold ETF shares fell slower than spot contracts did, forcing the ETFs to take delivery of gold. This might explain why the Cobasis rose this past week.
You’ve probably been asked this many times before but is there any reasonably simple way that the average man can get this basis and cobasis data for himself, to have a tinker with? The lbma GOFO and SIFO used to be at least a half decent proxy, but since their withdrawal from publication there is zero information available, apart from attempting to calculate it from first principles and raw data.
You can work it out an approximate yourself if you have access to the live data, but there is a bit more involved in getting an accurate figures. Re GOFO and SIFO we are working on a method to calculate these and are doing back testing right now, and we would be looking to make them publically available as charts.
Forgive me if I’m probing too far Bron, but are you able to guide us a bit more for amateurs, or alternatively summarise the methodology to assess it on a daily basis? It’s frustrating to rely on Keiths’ weekly free update, when such an important indicator should really be in the public domain, or readily determinable from publicly available information. If I understand it correctly, one issue is partly in obtaining reliable spot prices, as futures prices are freely available. An estimate based on mid prices would probably also be passable to assess relative movements, in the absence of major moves in the spreads. In any case, daily SIFO/GOFO would be a great enhancement.
The methodology is straightforward https://monetary-metals.com/basiscobasis/ but interpretation is more involved, some of it systematised into Keith’s fundamental price. Spot and futures prices can be obtained from the source but once you look to publish any resulting data license issues arise, which we are looking at, and hopefully we can afford to make it freely available and not have to charge a subscription fee.
These articles are also useful:
https://monetary-metals.com/why-does-the-paper-gold-price-track-the-physical-gold-price-part-i/
https://monetary-metals.com/why-does-the-paper-gold-price-track-the-physical-gold-price-part-ii/
https://monetary-metals.com/644/