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THIS website is a place to show the practical applications of the works of Professor Antal E. Fekete by his student Sandeep Jaitly with special regard to the gold and silver market. The services offered here will give an insight as to whether the gold market is being driven by unmet physical demand or more superficial and transient activities like futures speculation. To read more about the services on offer click on "Gold Basis Service" in the toolbar above.
Economic activity is underpinned by the 'arbritage of spreads'. Please follow the links in the COMMENTARY menu to read about "Economic activity and spreads", "Types of spread" and "Gold, Silver and the basis."
What is it all about?
An exact picture about the true state of demand for physical gold – the only demand that matters – can be made from changes in the value of the basis† and contra-basis‡. The basis is a measure of the return available to warehouse gold for a definite period. Its dual, the contra-basis is a measure of the premium paid to unwind this warehousing. The difference between the basis and the contra-basis is as superficially trivial as the difference between the ‘bid’ and the ‘offer’ price for gold.
However, this superficial triviality assumed by most financial practitioners is a foundation of the Austrian School of economics founded by Carl Menger. The difference between the bid and the offer for any good is a direct corollary of the subjective theory of value as described in his Grundsatze der Volkswirtschaftslehre of 1871. The difference between the bid and the offer – as great as the difference between chalk and cheddar cheese – is a sublime characteristic only truly understood by the Austrian School.
Changes in the difference between the bid and the offer or ‘spread’ of any good can determine alot about the potential course of cleared prices for that good. The same principle applies to the difference between the basis and the contra-basis. Furthermore, when these principles are applied to gold – that substance whose marginal utility declines the least – important deductions can be made about the future trajectory of the current monetary system.
These commentaries on gold are meant to represent a current application of the original principles established by Carl Menger. Monitoring the bases is a clearer way to observe where the gold market quoted in United States Dollars is likely to head, both short and long term. They are less crude and volatile than the United States Dollar price of gold – itself more a reflection of that particular currency than gold inherently.
These writings are the practical representation of the works of Professor Antal E. Fekete by his student Sandeep Jaitly. They do not constitute investment advice.
† The difference between the nearest future bid and spot offer. ‡ The difference between the spot bid and the nearest future offer.