How does one figure a reasonable valuation for gold, other than by the marginal cost of production, which would have called for selling 4-5 years ago, at about $1,000?
You need to look at the spread in the futures contracts against spot which is called the basis. Traders can either buy a gold bar and sell a future against it or the other way around; sell a bar and buy a future.
When gold goes into bacwardation, traders basically make free money by doing the former.
Looking at supply and demand "fundamentals" or miner margin is one thing, but the real data is in the buying and selling of contracts is another. Look at the COT reports every Tuesday for that.
Does anybody know why, especially when stocks have stalled or dropped and bond yields are up?
Talk of QE tapering. Gold bugs said there would be massive inflation, it never materialized. Over the long term, gold has essentially 0% inflation adjusted returns. If inflation is at 2% in a given year it doesnt really make sense for gold to be up 25% in the same year, now does it? Gold's price over the last few years has not been grounded in any reality.
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