When is a Capital Gain Capital Consumption?

by Keith Weiner
Gold Seek

The price of gold dropped a few bucks this week, but the price of silver jumped about half a buck. The drumbeat for the gold bull market is well underway, and it is beginning now for silver. So let’s do a quick update on the supply and demand fundamentals.

Here is the graph of the gold basis.

[…] The basis has come in quite a bit—but it is still 3.6% annualized. We do not believe that this as a “true” reading. It is a sign of buying of futures, which is the opposite of scarcity of metal and the opposite of the crisis goldbugs believe is imminent. To clarify, we believe a crisis of counterparty defaults is coming, but today is not that day.

We believe this is a sign of the market makers absent from the market. Their balance sheets are in need of shrinking, and they are backing away from trades like gold carry.

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