Let's talk about the gold market

[thriftyandboringinohio]

Thanks kbird. Here's a long term chart of gold vs oil

How-Do-Oil-Prices-and-Gold-Prices-Relate.jpg

[kbird]

Thanks kbird. Here's a long term chart of gold vs oil

How-Do-Oil-Prices-and-Gold-Prices-Relate.jpg

Thrifty, I want to note that your chart from beginning to end took place in the era where the USD has been the reserve currency of the world. Over the long-term, the prices of oil and gold have tended to move together.

If gold doesn't re-enter the financial system as a reserve asset, it probably makes sense to own both gold and oil.

If gold does re-enter the financial system as a reserve asset, which is a scenario that Russia and China and other countries buying gold seem to be preparing for, I would think that the gold/oil ratio would expand significantly and gold would far outperform.

I own both, but more gold than oil.

[Milton Kuo]

i believe the commodity exchanges have the right to settle contracts in cash if they can't do delivery. thus, if there's no physical in the warehouse, the settlement is at whatever the paper market says it should be.

I think that's correct. I seem to remember reading that what crushed the Hunt brothers when they cornered the market on silver was that the rules were changed such that demands for physical delivery could be abrogated and those on the hook for delivering silver could close the contract by paying the paper price.

[I don't recall seeing this thread at all last year. The re-do of the web site has seemingly blocked me from seeing a lot of content.]

[jk]

meanwhile the price of gold is weighed down by the huge paper market, which appears to be suppressed by the desire to prop up the appearance of value in the dollar. and meanwhile russia buys physical gold with the dollars and euros used to buy its oil and gas. similarly export revenues are used to buy gold by kazakhstan, china, turkey, india, serbia, thailand, ghana,....

[globaleconomicollaps]

The Gold/Oil ratio has departed decisively from its historic channel. My theory about this is that the Saudis have stopped recycling petrodollars into gold. We have been talking about the death of the dollar for at least ten years. This is it. If you don't like the red or green lines just ignore them.
gold-oil-1968-2021-small.png

The conventional wisdom that bitcoin has taken the market from gold is wrong. Gold is near the top of the old channel and doing very well.

[jk]

The Gold/Oil ratio has departed decisively from its historic channel. My theory about this is that the Saudis have stopped recycling petrodollars into gold. We have been talking about the death of the dollar for at least ten years. This is it. If you don't like the red or green lines just ignore them.
The conventional wisdom that bitcoin has taken the market from gold is wrong. Gold is near the top of the old channel and doing very well.

i don't understand the statement i bolded above. if the saudis have stopped buying gold that reduces demand and should lower the price of gold.

[thriftyandboringinohio]

The price of gold is near all-time highs again, around $1,900/ oz. August 2020 was the all time high at $2,067
Seems worthy of mention.


au1825nyb.gif

[jk]

i think it's also worth mentioning that so-called "digital gold," bitcoin, which in some minds was an improved store of value, turns out to be highly correlated with tech stocks. meanwhile in a time of turmoil, gold goes up. best line i've read about this phenomenon, with apologies to muslims: there is no gold but gold.

[kbird]

I'm not sure there's much going on here except a flight to gold based on war fears. And yes, bitcoin's price weakness is proving to me that it is not much more than a speculative asset at this point. I think gold is going to continue to be boring until we get a Sunday night revaluation announcement.