Skip to content

Additional resources for earning interest in gold

9 responses to “Monetary Metals Silver Headfake Report: 22 June, 2014”

  1. Yellen downplayed the possibility of emerging inflation during the Fed announcement. Speculators are thinking that the Fed will try to keep real interest rates negative, and they are betting that hoarders will be buying commodities including gold and silver as inflation hedges.

  2. Thanks jtibbs and bleubelle.

    limco: My point in this article is that quite a lot of people quite suddenly turned on the “inflation trade”. The suddenness of it is itself suspicious, and the lack of demand for physical metal is telling.

    More broadly, is the question of what a falling interest rate does to prices. One theory, based on the quantity of money, predicts rising prices. I have proposed a different theory: http://keithweinereconomics.com/2013/12/28/the-theory-of-interest-and-prices-in-paper-currency/

  3. HI There is a wide difference between the absolute value of the basis and the cobasis, i.e. 0.25 vs 1.2
    What is the reason for this wide spread? is this due to a wide spread between the future bid and ask? If so what does this gap say about the demand for silver?

  4. “[High stocks to flows] means, among other things, that the supply of silver to the market need not come from the mines. All existing stocks of silver are potential supply, under the right conditions, and at the right price.”

    If the implication here is that silver will be dishoarded as the price rises, you are ignoring the very nature of silver as a monetary metal. It is axiomatic that as the dollar falls against silver, more silver will not come to market, but will go into hiding.

  5. Thanks for the questions.

    jfbastian:

    basis = future(bid) – spot(ask)
    cobasis = spot(bid) – future(ask)

    The math dictates that if the bid-ask spread widens on either spot or futures, then that will cause either basis or cobasis to drop, depending on which spread and in which direction.

    It does not, in itself, say something about demand if the spread is widening. It says something about liquidity. I have written a few articles touching on the issue of liquidity in silver, arguing that it is dropping.

    mossmoon: If the basis is rising with the price, then that does mean that silver is being dishoarded. I agree with you that, in the end, price will be rising (likely exponentially) and it will be fueled by increased hoarding. But that will be a time of hugely negative basis, and positive-and-rising cobasis–backwardation. That day will come, but it is not this day.

  6. Hello Keith, I appreciate your attempts to educate the public about this little studied (or at least little understood), aspect of the PM Markets. Some of us are visual, some are more verbal in their way of understanding things. Perhaps a visual of a chart of the basis/cobasis, which would predict prices rising would be helpful. You may have already done one for all I know but I haven’t seen it. What did the basis cobasis studies predict prior to the run up of silver to 49 last time?

  7. Hello Kieth, Thanks for the wonderful insight. Have you looked at this basis/cobasis information for gold going back to the 2008 lows. Seems like the commercials were really short back then just like they are now, but somehow gold still rallied and more than doubled in 3 years. Did we have backwardation back then?

Leave a Reply

Want to join the discussion?

Feel free to contribute!

This site uses Akismet to reduce spam. Learn how your comment data is processed.