Demand And Supply | EssayIvy.com

Running Head: DEMAND AND SUPPLY 1

Demand and Supply.

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DEMAND AND SUPPLY 2

Demand and Supply.

Cash is the main means of settlement in pricing gold and silver in the future markets. It is

however not consistent with the conditions of supply and demand in the real or current market.

In the current market, physical bullion is bought and sold. Bullion supply in the future markets is

magnified by uncovered contracts printing which represent gold claims. This is temporary and

false. The raise in paper bullion supply contracts results in decrease in the price in future markets

regardless of the high bullion demand in the physical market and its reduced supply. Using

empirical evidence and economic analysis, it is easy to conclude that the bear market in bullion

has been created artificially.

The law of supply and demand is the economics backbone. In the Comex future market,

5,000 ounces of silver or 100 troy ounces of gold are transacted. The prices of gold and silver are

represented in paper contracts. This is not consistent with the real supply and demand situations

in the physical bullion market. The price of bullion has been falling for four years in the future

markets despite the demand increase for possession of the actual metal and supply challenges.

In a demand and supply graph, the horizontal axis represents quantity while the vertical

axis represents price. The demand curves slope downwards to the right direction, the quantity

required raises as the price decreases. Where the supply and demand curves intersect determines

the price of the commodity.

DEMAND AND SUPPLY 3

Graph from from http://www.paulcraigroberts.org/2015/07/27/supply-demand-gold-silver-

futures-markets-paul-craig-roberts-dave-kranzler/

A change in the required quantity or the supplied quantity results to a shift along the

curve given. A change in supply or demand means a shift in the curve. For instance, a raise in

demand (a rightward shift of the demand curve) results in a change along the curve of supply (a

raise in the supplied quantity). Changes in income, and tastes and preferences for a particular

commodity result in a shift in the demand curve. For instance, if the currency is expected to lose

value, gold and silver demand will increase. This is a rightward shift.

The changes in resources and technology can make the supply curve to move. New

discoveries of gold and mining technology improvement can result in rightward shift of the

supply curve. Exhausting the already discovered gold mines would result in reduced supply. This

is a leftward shift.

Two things can make the price of gold to reduce. Its demand can reduce. This will make

the demand curve to shift to the left. The intersection with the supply curve will be at a lower

price. The reduction in demand leads to fall in the supplied quantity. The reduction in demand

means that less gold is required at every price. The graph below shows that.

DEMAND AND SUPPLY 4

Graph from from http://www.paulcraigroberts.org/2015/07/27/supply-demand-gold-silver-

futures-markets-paul-craig-roberts-dave-kranzler/

There could also be an increase in the supply. This means there could be a rightward shift

in the supply curve. The intersection with the demand curve will occur at a lower price. The

supply increase results in raise in the required quantity. A raise in supply means that great gold

quantities are readily available at any price.

Graph from from http://www.paulcraigroberts.org/2015/07/27/supply-demand-gold-silver-

futures-markets-paul-craig-roberts-dave-kranzler/

DEMAND AND SUPPLY 5

In summary, reduction in gold price can result from a decrease in its demand or by its

increased supply.

A reduction in demand or a raise in supply has not been observed in the physical markets

for gold and silver. The bullion price has been reducing as the demand for real bullion increases

and its supply has faced problems. A rising price is being indicated from the observations in the

physical market. However, in the future markets where almost all the contracts are transacted in

cash money and not bullion, the price has been observed to be reducing.

For instance, on July 7 2015, the U.S Mint announced that, as a result of significant rise

in demand, Silver Eagles was sold out. This is one-ounce silver coin. The Mint said that it had

suspended sales until the following month, August. The coins’ premiums, which is the price of

the coin that is above the silver price rose. However, silver price decreased by 7 percent to the

least level that year as at that month. That was the second time in a period of 9 months that the

Mint had failed to maintain the market demand resulting to suspension of sales.

Clearly, it can be easily noted that the physical metals demand is very high. The ability to

satisfy the demand faces a lot of challenges. The bullion prices have however continued to fall

consistently. This can only occur due to manipulation. This occurs because their prices are

determined in the future markets and not in the physical market. In the future markets,

transactions are settled by bullion unlike the physical markets where they are settled with cash.

It is not possible to say that the regulatory authorities do not know the fraudulent

manipulation being done on the prices of bullion. The observation that no measures being taken

shows that laws are not being followed in the US financial markets.

DEMAND AND SUPPLY 6

References.

Roberts, P. C. (2016, March 15). Demand and Supply of Gold and Silver. Retrieved May 23,

2016, from http://www.paulcraigroberts.org/2015/07/27/supply-demand-gold-silver-

futures-markets-paul-craig-roberts-dave-kranzler/

Shifts Shown Graphically. (n.d.). Retrieved May 23, 2016, from

http://www.econport.org/content/handbook/Equilibrium/shifts-graph.html

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