Revenge of the Fundamentals

By Monetary Metals

The price of gold moved down about twenty Federal Reserve Notes, and the price of silver dropped $0.57. The big news is that the gold-silver ratio moved up about 1.5. We hate to say “we told you so,” well, OK. Actually… sometimes there’s a certain je ne said quoi about gloating.

[biiwii comment:  we told them so too but they – certain venues out there – are not listening, Keith]

*Achem*

In all seriousness, the dollar is going up. We measure it in gold, or alternatively in silver. In gold, the dollar rose 0.4mg gold to 24.84. In silver, it was up 60mg to 1.88g silver. We do not think that the dollar can be measured in terms of its derivatives such as euro, pound, etc. for the many of the same reason that the gold can’t be measured in terms of its derivative, the dollar.

Why is the dollar going up? It’s the debtors that give value to a debt-based currency (not the quantity). Right now, debtors are feeling the pressure. Meanwhile, most mainstream speculators are looking at price charts and they want all-in on the dollar (most would look at this as avoiding gold exposure).

Let’s take a look at the supply and demand fundamentals. But first, here’s the graph of the metals’ prices.

The Prices of Gold and Silver
letter may 22 prices, 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 was up significantly this week.

Continue reading Revenge of the Fundamentals

Gold Demand Falling

By Monetary Metals

We now calculate a fundamental on the gold-silver ratio over 81

The price of gold moved down about sixteen bucks, while that of silver dropped about three dimes. In other words, the dollar gained 0.3 milligrams of gold and 0.04 grams of silver.

We continue to read stories of the “loss of confidence in central banks.” We may not know the last detail of what that will look like—when it occurs one day. However, we will wager an ounce of fine gold against a soggy dollar bill that it will not look like today with the market bidding dollars higher.

Loss of confidence is just a meme used by gold bettors. What are they using to make their bets? Dollars. What are they trying to win? More of the dollars they say will soon go bidless.

*Achem*

One benefit to looking at the supply and demand fundamentals is that it tells us, more accurately than price action, what confidence in the central banks is really doing. So let’s take a look at that picture. But first, here’s the graph of the metals’ prices.

The Prices of Gold and Silver
letter may 15 prices, 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 was up this week.

Continue reading Gold Demand Falling