by Keith Weiner
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.