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Precious Metals Supply and Demand Report

See the introduction and the video for the terms gold basis, co-basis, backwardation and contango.

Fundamental Developments

Last week he price of gold was up nine bucks, and that of silver 6 cents. These small changes mask the relatively big drop on Tuesday—$13 in gold and $0.48 in silver — and recovery the rest of the week. The gains above previous week occurred on Thursday.

 

Gold Bar

Speculators have lately warmed up to precious metals – this is also evident in a large increase in net speculative long positions in the futures markets - Click to enlarge

Gold and Silver Price

The question is which move is driven by fundamentals, and which is by speculation against the trend? We will show graphs of the basis, the true measure of the fundamentals.

But first, here are the charts of the prices of gold and silver, and the gold-silver ratio.

 

Gold and Silver Price

(see more posts on gold price, silver price, )
Gold and Silver Price

Gold and silver prices - Click to enlarge

Gold:Silver Ratio

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio moved up slightly this week.

 

In this graph, we show both bid and offer prices for the gold-silver ratio. If you were to sell gold on the bid and buy silver at the ask, that is the lower bid price. Conversely, if you sold silver on the bid and bought gold at the offer, that is the higher offer price.

Gold:Silver Ratio

(see more posts on gold silver ratio, )
Gold:Silver Ratio

Gold-silver ratio, bid and offer - Click to enlarge

Gold Basis and Co-basis and Dollar Price

For each metal, we will look at a graph of the basis and co-basis 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 co-basis in red.

Gold basis and co-basis and the dollar priced in milligrams of gold

The dollar fell this week (the mirror image of the rising price of gold), now down to 24mg gold. And the basis rose a bit, another 12bps on top of the 11bps move last week.

Gold Basis and Co-basis and Dollar Price

(see more posts on dollar price, gold basis, Gold co-basis, )
Gold Basis and Co-basis and Dollar Price

Here is the gold graph - Click to enlarge

Gold Fundamental Price

Our calculated gold fundamental price dropped about $17. So the market price is rising, and the fundamental price is still above the market price by about $31. A big change from last week when the fundamental price was $57 over the market price.

Gold Fundamental Price

(see more posts on Gold, gold price, )
Gold Fundamental Price

Gold – fundamental vs. market price - Click to enlarge

Silver Basis and Co-basis and the Dollar Price

Now let’s look at silver.

In silver, the price did not move much. However, the basis jumped up 22bps (against the pressures of the contract roll which is ongoing). The continuous silver basis, which is not subject to contract roll pressures, also jumped 21bps.

Silver Basis and Co-basis and the Dollar Price

(see more posts on dollar price, silver basis, Silver co-basis, )
Silver Basis and Co-basis and the Dollar Price

Silver basis and co-basis and the dollar priced in grams of silver - Click to enlarge

Silver Fundamental Price

So it should be no surprise that our calculated silver fundamental price fell $0.50. The fundamental price is now below the market price (though not a lot).

Silver Fundamental Price

(see more posts on silver, silver price, )
Silver Fundamental Price

Fundamental and market price of silver - Click to enlarge

Two weeks ago, we asked:

So is the silver sell-off over?

Now it is time to ask if the silver buy-up is over.

Last week, we noted:

 

One thing is for sure. If the fundamentals don’t continue to firm up further, or at least hold at the present level, then this rally is doomed like all of the others in the last 6 years.

 

© 2017 Monetary Metals

Image captions by PT where indicated

Full story here
Keith Weiner is president of the Gold Standard Institute USA in Phoenix, Arizona, and CEO of the precious metals fund manager Monetary Metals. He created DiamondWare, a technology company that he sold to Nortel Networks in 2008. He has his PhD from the New Austrian School of Economics. He lives with his wife near Phoenix, Arizona. In March 2015 he moved his Gold Standard column from Forbes to SNBCHF.com.
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