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Market Distortions Dictate What’s Ahead — 8 Comments

  1. I don’t think these historical charts are applicable anymore due to crypto in the picture. As soon as you start accounting for the crypto market into PM market (to create a scenario where crypto doesn’t exist today), those charts would follow a lot more closely with smaller divergence (and, potentially, closely inline with what you expect to see in PM market).

    What I am trying to get at is all these historical charts have less relevance now than it was before the crypto-era. Crypto market is affecting all around the world, which makes my point even more valid.

    • (1) I disagree with the specific point about cryptocurrencies *necessarily* affecting the validity of the charts in one way or another.

      (2) I agree somewhat with the general point in that charts are less reliable than some think.

      (1):
      a) I have seen elsewhere some analysis strongly suggesting that in fact, contrary to advertisement, cryptos have not taken away from investment in PM and PM stocks. I must admit to having been only partially convinced. It is on a paid site, and even if it weren’t I don’t have time to find the argument other than that to the extent that it suggests (if I correctly recall) that there is evidence suggesting that cryptos are still a significantly smaller market than PMs and PM securities.
      b) Even if cryptos are a big deal here, maybe the effect would be the other tail.

      In other words, the State here there and everywhere may find a great way to crack down on cryptos (key-logging, draconian punishments or threats thereof; EMP; who knows what). A subsequent panic flings people into PMs and the PM market.

      (2):
      There are always special cases. It is at least partially because of these special circumstances that chart interpretation is not always reliable–and less reliable than its fans think, in my opinion (though I depend a lot on chart-gazing myself).

      For example, the increased State intervention is a big special case. Nixon’s change in the handling of gold was a special case. Breton Woods was a special case. FDR’s confiscation, Hitler’s confiscations of Jews’ gold–all special cases. The increasing concentration of capital into oligopoly/monopoly melded with the State, not continuous but in a jerky fashion, sometimes backwards but generally forwards, for the past centuries has been one special case after another. Increasing importance of fixed/constant capital and internationalization (tied to the process) has been a series of special cases. Ditto wars. Yet charts have worked. A bit.

  2. Just one more opinion: Bitcoin Buyers Are Not Gold Buyers….

    Is Bitcoin Demand Hurting The Price Of Gold?
    Dec. 15, 2017 10:43 AM ET |
    Includes: BTC-USD, COIN, GLD, GTU, IAU, OUNZ, PHYS, QGLDX, SGOL
    Dave Kranzler
    Dave Kranzler
    Long/short equity, Deep Value, special situations, contrarian
    Investment Research Dynamics
    (1,993 followers)
    Summary

    Bitcoin buyers are not physical gold buyers.

    The large buyers of physical gold do not care about cryptocurrencies as a Central Bank asset.

    The price of gold is affected by the supply of paper gold issued by the Comex market makers.

    This analysis focuses on the retail investor demand for gold and Bitcoin. Institutional investors, for the most part, do not invest in gold or cryptocurrencies.

    I want to dispel a false narrative about Bitcoin and the price of gold. The mainstream and alternative medias have been propagating the idea that the frenzied capital flowing into Bitcoin is affecting the price of gold negatively. The idea is that Bitcoin is an alleged safe haven asset (very unproven, untested) that is diverting capital away from the precious metals. For instance:

    As gold loses steam after rallying to 12-month highs, one market expert says he is seeing bitcoin (sic) take a chunk out of the yellow metal.

    Source: TheStreet.com

    This notion has no validity. The U.S. retail investor bought 27 tonnes worth of U.S. Mint gold eagles in 2016 (985k ozs) Year-to-date this year, U.S. retail has bought 20 tonnes of gold eagles (715k ozs) (U.S. Mint statistics). This is less than 1% of the total amount of gold produced + scrap recycling annually. Even including the gold that is purchased in the U.S. over and above US Mint sales, the amount of gold buying in the U.S./EU is so small relative to large buyers of gold that it has little to zero affect on the global price of gold (and silver). Sorry Americans, but you’re just not that important.

    Demand from the large gold “consumers” will likely exceed supply in 2017. China/India/Russia combined purchase more gold mined in 2017 than in 2016 (Gold demand). Global mine production was about 3100 tonnes in 2016 – it should be slightly below that in 2017. Total supply including recycled gold was roughly 4500 tonnes in 2016. Per the data in that link, you can see supply/demand was estimated to have been equivalent in 2016. In terms of the degree to which the physical gold market affects the market price of gold, those are the primary sources of demand. At the margin, countries like Turkey will also affect the market price. Turkey has already imported over 320 tonnes of gold YTD in 2017, a record amount.

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  3. I’ve been reading through some additional articles, it does look like maybe crypto’s have had “some” effect in the past, but some if not many of them have certainly lost interests in them.

    For example, going forward into deeper financial problems as Spock and Plunger have pointed out, what would you prefer, gold or a digital currency?

  4. Since 2012 another relation got reverse. The spread between long dated treasury vs short dated treasury (spread). When Spread goes yield difference narrows and when spread rises yield difference between long T and short T widens.

    SGR was counter to the spread before 2012 that would have aligned SGR with SPX and the credit spread Junk to treasury TLT ratio.

    Since 2012 both SPX and Credit spread diverged big time as above chart shows.

    AND SGR aligned with the spread big time. Now I am waiting to see if the spread reverses and will SGR also or not?

    SGR is the key to credit condition in PM sector.

    May be some one here can explain how the spread affects the market and SGR.

    Below is the post some may have seen on tent.

    https://goldtadise.com/?p=425966

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