Gold Basis Report RE: Silver “Smashdown”
The “coordinated smashdown of gold and silver” was on everyone’s mind this week, but is it true? Did the price of paper gold (futures) divorce from the price of physical gold? One thing is for sure, the dollar gained from 21g to over 22g of gold on Friday. A 5% move in the world’s biggest paper currency is a big move.
We have long been predicting volatility as the paper monetary system goes off the rails. Those with their balance sheet in gold can safely watch. Just as most dollar-based investors do not lose sleep if a stock is rising that they don’t own, gold-based investors do not lose sleep if the dollar is rising. But those who borrowed dollars to buy gold are sweating…
Here is the graph showing the prices of the metals in dollar terms.
Gold and Silver Prices
One cannot understand the gold market in terms of the quantity of dollars the Fed “prints”, nor by looking at price charts. One must look at the basis (see here for a basic explanation). Week after week, we have been saying that the positive basis, i.e. contango is disappearing (hence the name of this report).