Tag: gold

Post #2112: Oh, the price of gold is rising out of sight

 

Oh the price of gold is rising out of sight
And the dollar is in sorry shape tonight
What the dollar used to get us now won’t buy a head of lettuce
No the economic forecast isn’t right
But amidst the clouds I spot a shining ray
I can even glimpse a new and better way
And I’ve devised a plan of action worked it down to the last fraction
And I’m going into action here today.

From:  I’m changing my name to Chrysler, by Arlo Guthrie.

Gold blew through $3100 an ounce this morning.

When the stock market is making new highs, everybody steps up to take credit for it.

But gold?  Nope. Nobody ever takes credit for a rising price of gold.  Given the cheapness and ubiquity of public lies these days, you’d think some prominent braggart would try.  But nobody ever tries to own a rise in the price of gold.   That’s because a rapidly rising price of gold is never good news.  And peaks in the price of gold tend to occur when the 💩 is in the process of hitting the 🚁.

What caught my eye about $3100 is that this has to be getting close to setting a new record for the price of gold in real (inflation-adjusted) terms.

If I take the prior price peaks (red arrows I added to the chart above) and use the BLS inflation calculator to express them in 2025 dollars, I find that we’re now just 14% below the all-time high price of gold in real (inflation-adjusted) terms.

So, when Guthrie wrote about the rising price of gold, in the context of the 1979 bail-out of Chrysler, following two Arab oil embargoes, the resulting energy crises, two long, deep U.S. recessions, and the near-destruction of the U.S. auto industry with its lack of energy-efficient cars, in a context of persistent double-digit rates of inflation … the price of gold, in real terms, was somewhat higher than it is today.

I’m trying to take some comfort in that.  Either things aren’t as bad now, as they were then.  Or they aren’t as bad, yet.

Either way: Eat, drink and be merry.

My most recent prior post on this topic was from half a year ago:

Post #2017: The price of gold is up. That’s never good.

Post #2018: The five prices of silver, while I can still recall them.

 

I just want to write this down before I forget it, in case I ever need to know this again.

For a silver bullion item of a given weight and purity (fineness), the following prices should occur, from lowest to highest:

Lowest:  Scrap value is what a refiner will actually pay you, to take your silver for re-melting.  It’s what you can sell silver for, if all you can sell it for is scrap.

Generic bar sell-to price is what a bullion dealer will pay for “any bar, any condition”.  If it’s a bar, of the stated weight and purity, they’ll pay that for it.

Coin and good delivery list bar sell-to price.  This is what a dealer will pay for name-brand or mint-issued coins and bars.

Spot:  The price you see quoted on the business news.  This is the price for current delivery of bulk metal of a known fineness, per troy ounce of pure silver content.  This is flanked by or maybe is one of the bid and asked price.  Doesn’t much matter as bid and asked are rarely far apart in an orderly market.

Generic bar buy-from or list price.   This is what a dealer will sell you a generic, any-issuer any-reasonable-condition bar for.

Coin and good delivery list bar buy-from price. This is what a dealer will sell you these items for.

Note that I don’t list “melt value”.  That phrase gets tossed around a lot, and a whole lot of people will show you the “melt value” of your purchase as spot price (maybe even spot asking price) times your weight of pure silver.  I don’t think that’s how it works, for selling silver as scrap (to be re-melted).  Near as I could tell, the price I’d get is the scrap price.  If all I could do is have the silver melted down.  But this fictitious “melt value” shows up often enough to be worth calling out.

As Gresham’s Law would suggest, for silver bars, dealers seemed to be one or the other, with regard to “good” bars or any bars.  Kitco (top-drawer) seemingly only deals in name-brand like-new-quality merchandise.  Buy or sell.  By contrast, those who bought generic bars sold both generic and name brand bars, at different prices.  I think that all makes sense.  Maybe.

The only practical upshot is that if a bar can be sold as a name-brand good-quality bar, it should be.  It’s worth several percent of the value of the bar.  Barring that, if it can be sold as “a bar”, instead of scrap silver, it should be.  Likewise.  And only as a last resort would you send a bar of any sort, in good condition, off to be remelted, and only receive scrap value for its weight in silver.

Conclusion.

God willing, I will never need to know this again.