Quantum Change in Gold Demand Continues – Precious Metals Supply-Demand Report

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by Keith Weiner, Acting-Man:

Fundamental Developments

In this New Year’s holiday shortened week, the price of gold moved up again, another $16 and silver another 29 cents. Or we should rather say the dollar moved down 0.03mg gold and 0.03 grams silver. It will make those who borrow to short the dollar happy…

Let’s take a look at the only true picture of the supply and demand fundamentals for the metals. But first, here are the charts of the prices of gold and silver, and the gold-silver ratio.

 Gold and silver prices in USD terms
Gold and silver prices in USD terms

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

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, bid and offer
Gold-silver ratio, bid and offer

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.

Here is the gold graph showing gold basis and gold price.

 Gold basis, co-basis and the USD priced in milligrams of gold
Gold basis, co-basis and the USD priced in milligrams of gold

Look at that quantum change after Christmas. The basis (i.e., the indicator of abundance) had peaked, and the co-basis (i.e. scarcity) had bottomed. Up until it reversed, those moves were tracking the price. As the price of gold was rising (the green line shows the inverse, the price of the dollar!), gold was initially becoming more abundant, less scarce.

But after Christmas, something snapped. Gold started to become less abundant as its price kept rising. This violates no economic law, though it has been a rare occurrence of late. Until Christmas week.

It should be no surprise that our Monetary Metals Gold Fundamental Price rose $29 this week, to $1,336.

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