The price of gold went up $12 this week, and that of silver $0.50. That’s not bad for gold and silver owners, and not good for the vast majority who are all-in on the dollar (though they don’t think of it that way).
Since we began publishing this Supply and Demand Report four and a half years ago, there have been several constants. One, we have focused on the supply and demand fundamentals, and the mechanics of the market.
Two, we have tried to show that short-term price moves are usually random. For example, we have documented many spike ups followed by let-downs whenever the Fed Chairman went on TV. And we all know that the long-term price trend is up (the mirror of the falling dollar). However, neither random short-term bursts nor the long-term trend is actionable for trading. In between, there is the fundamental which tends to pull the market price either up or down, depending on market conditions.
Three, there is no gain when the gold price goes up. This is because gold is not going anywhere. If you bought 100oz of gold 20 years ago, then you still have 100oz of gold now (minus storage costs). Sure, it’s worth more dollars but those dollars are worth proportionally less (and if you sell, the tax man will take a big chunk).
This may seem like mere semantics, but it’s an important principle. It’s the dollar which is volatile. And its gyrations can only get worse.
This post was published at GoldSeek on 29 May 2017.
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