By Monetary Metals
“Gold Traders Pay Most in Years to Keep Big Bullish Bet Alive”
There are two views of the markets for the monetary metals. One, as we have discussed many times in this Report, holds that gold and silver will eventually go up so high that those who own the metals will be rich. This is the Schrodinger’s dollar view. Buy gold because the dollar will soon collapse—witness China and Saudi Arabia selling dollars. And gold is going up—when it’s measured in dollars.
Believers in the surgit aurea view are always on the lookout for a new angle to support their thesis. For example, we came across this article. Apparently, silver is in such a massive shortage that a mining company, “…got approached by an electronics manufacturing company … [who] wanted to bid on our silver…”
So, a silver consumer went to a silver produce to bid (at what price?) on the silver. Therefore, silver is going to $100, and there will be “some kind of major reset”.
Our view is the other view. The prices of the metals move in a dynamic process comprising producers, hedgers, consumers, warehousemen, and speculators. In short: supply and demand.
We had the good fortune this week to find another article, pure gold vs. the soggy dollars quoted above. The headline should be crystal clear to regular readers of this Report. “Gold Traders Pay Most in Years to Keep Big Bullish Bet Alive.” The article states:
“The cost of rolling futures into a later-dated contract was recently the highest in about six years, said Bernard Sin, head of currency and metal trading at Geneva-based refiner MKS (Switzerland) SA. Those holding June futures would have paid an extra $3.40 an ounce on May 23 to swap that position for the most-active August contract…”
The last paragraph calls it by name: contango.
So what do you believe could drive the prices of the metals?
- Silver is going higher because consumers are talking to producers?
- Gold could go lower and the catalyst is speculators may be weary of spending $3.40 every two months ($20 per ounce per year)
This holiday-shortened week (Monday was Memorial Day in the US), the prices of the metals were sideways to down. Until Friday. And on that day, a labor report hit that motivated gold hoarders to stock up and silver consumers to go into an absolute frenzy of manufacturing thousands and thousands of tons of silver into products ranging from mobile phones to antimicrobial surfaces, to solar panels. Or is that what happened at 8:30am New York time?
Read on for the only true picture of the supply and demand fundamentals. But first, here’s the graph of the metals’ prices.
The Prices of Gold and Silver
Continue reading The Cost of Bullish Bets