China’s Nuclear Option To Sell US Treasurys

Crypto does not satisfy the demand for taking metal home. And we mean, literally, home. To put in one’s cabinet or under the floorboards. Or bury in the backyard. The essential feature being: personal possession.

Cryptocurrency was designed without any awareness of this need. Digital gold does not address it either. It is a need served only by physical metal.

And for many people, gold is too expensive. The amount they can take home is either too small (think of a 1-gram bar of gold vs. 3 1-ounce silver coins). Or the bid-ask spread on such tiny gold units is too large. For these folks, silver fills a need that gold (or anything else) does not.

These folks work for wages.

Silver is the most hoardable metal, i.e. marketable in the small (gold is the most marketable in the large).

Will the wage earners give up this need, and cease hoarding silver? Maybe. But it will take more than a bit of a drop in the silver price to make us think it’s happening. Today is yet another opportunity to say: “look at spreads, not prices.”

Anyways, let’s look at the supply and demand picture of gold. But, first, here is the chart of the prices of gold and silver.

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio (see here for an explanation of bid and offer prices for the ratio). The ratio rose, to a new high over 88.

Here is the gold graph showing gold basiscobasis and the price of the dollar in terms of gold price.

The scarcity (i.e. cobasis) rises with the rise in the dollar (i.e. inverse of the price of gold in dollars). This is the soon-to-expire June contract. However, this time the gold basis continuous, shows the same trend, if less dramatically.

The Monetary Metals Gold Fundamental Price barely moved, ending the week at $1,370.

Now let’s look at silver.

The same trend occurs in silver, though this contract is a bit farther out. Note the backwardation, a month and a half from First Notice Day.

The scarcity of silver (i.e. cobasis) increased, but not a lot. Especially not in light of the drop in price.

The Monetary Metals Silver Fundamental Price was down another quarter, to $15.34.

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