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$AG: Insanely massive bull run theory....
$10.86
https://www.reddit.com/r/Wallstreetsilver/comments/q2eq4v/insanely_massive_bull_run_theory/
https://new.reddit.com/r/Wallstreetsilver/comments/q2eq4v/insanely_massive_bull_run_theory/
https://new.reddit.com/user/captainscottty/comments/q2hhsu/insanely_massive_bull_run_theory/
Insanely massive bull run theory
r/Wallstreetsilver
•
Posted byu/easyethd
4 hours ago
Insanely massive bull run theory
Probably not an original thought, and I know that the blatant manipulation has driven silver bulls up the wall for years, but I believe the price suppression, while there is clearly a shortage of all goods and inflation ramping up, is the major catalyst that’s going to get silver to not only 100 but into the 100s in a much shorter timeframe than expected.
The supply vs demand issue has been made very clear by people in the know, and many respectable economists are saying that this may very well be one of the largest crashes/recessions that the modern world has ever seen. I believe them. Everything is primed for the silver market to explode and outpace all other commodities.
There are great points made when it is said that people get into silver for the wrong reasons; that it’s a store of value and that it is suppose to hedge against a falling dollar, not a get rich quick scheme. I do believe that to be true as well, but at this point, owning physical and a few miners are the best plays in the market imo & still extremely undervalued.
I own 500+ oz & counting, as well as leap year calls on AG. Keep stacking, & f$ck the feds. Night.
#AG: ADDING TO MY SILVER NUGGETS.... $11.23
The @FMSilverCorp team was at the 2021 #Silver Symposium in Coeur d'Alene, Idaho. Thanks to all the shareholders who stopped by our booth for a corporate update. It's great to be back at conferences seeing everyone! #TripleDigitSilver @keith_neumeyer $AG $FR.TO #BuyPhysical $PSLV pic.twitter.com/RgiR7AeTyl
— First Majestic (@FMSilverCorp) September 29, 2021
Looks like it’s time for me to buy some of this stock again. 
And when I flip it - I’ll be buying some more of their silver coins.
Fantastic play here, IMO.
$AG
#AG: "Physical Demand Will Completely Overwhelm Supply"... GO CaNNa
And How Silver Could Wind Up Over $270
https://www.zerohedge.com/markets/physical-demand-will-completely-overwhelm-supply-and-how-silver-could-wind-over-270
https://quoththeraven.substack.com/p/physical-demand-will-completely-overwhelm
"Physical Demand Will Completely Overwhelm Supply" And How Silver Could Wind Up Over $270
BY TYLER DURDEN
SATURDAY, SEP 11, 2021 - 09:20 AM
(Submitted by Quoth the Raven from QTR's "Fringe Finance" at http://quoththeraven.substack.com)
This is Part 1 of a two-part interview with Andy Schectman, President & Owner of Miles Franklin Precious Metals, a company that has done more than $5 billion in sales. Andy is a world-renowned expert in the field of precious metals and took the time to answer some pressing questions I had about the possibility of a real silver squeeze, the precious metals market, the Fed, and the future of money worldwide. He has been a frequent guest on my podcast, as well.
Q: Hi Andy, thanks for joining me. Is a silver squeeze really even possible given the massive size of the silver market? In layman's terms, how could it happen?
A: More silver is being consumed than is being mined each year. Last year, approximately 850 million ounces were mined globally, with a demand of over one billion ounces. The industrial demand for silver is surging in an increasingly digital world, with new applications every day in green energy and battery powered vehicles.
At the same time annual global mine supply is declining and industrial demand is increasing, a global renaissance in monetary demand is upon us. This is happening while a handful of large Wall Street bullion banks have manipulated the price of monetary metals for decades, allowing some of the biggest money in the world to accumulate massive amounts of physical gold and silver at subsidized prices.
The physical demand filters down from the top. Over 300 million ounces of silver were removed from the Comex market in 2020 by some of the most sophisticated and well healed investors in the world. Settlements on the Comex are usually mostly in dollars. The Comex was not set up to be a source of physical delivery. This is no small development. In years past, this amount would represent roughly a decade’s worth of silver deliveries. In addition, Comex deliveries in 2021 are now on pace to better the 2020’s delivery numbers. When all of this is added to record global retail physical demand in coins and bars - physical demand at some point and probably sooner rather than later, will completely overwhelm supply.
In geological terms, silver is found in a form called epithermal, meaning it is found very near the surface. This means that most of the big deposits were found years ago, even before the advent of enhanced imagery. In fact, only 30% of global mine supply comes from primary silver miners, while 70% comes as a byproduct of mining other metals such as copper and zinc.
In summary, the demand for physical silver is greater than the supply - the amount being mined each year. And it’s expanding. At the same time, silver is in the cross hairs of a new class of “deep pocket” investors, from hedge funds to home offices. And the “retail” demand is on the rise as well. As an example, our business at Miles Franklin is up between 300% - 400% and it is 95% silver. This new, large demand is, in part, being funded by savvy investors taking profits on stocks and Bitcoin.
Most commodities have one primary source of demand, like copper – which is solely and industrial metal, and gold, which is mostly a monetary metal. Silver is in demand by both industry and investors. At some point they will be in competition with each other. That point is not far off. So yes, I think a squeeze is not only possible but actually highly probable.
Q: Andy, you've been in the precious metals business for decades. Where would you pin the true price of silver and gold right now?
A: Much higher! Due to the relentless market manipulation, there is no accurate way to find honest price discovery. So far, supply and demand of physical silver has had little effect on the paper prices set on the Comes. It is impossible to determine the true, unmanipulated price.
When you factor in money creation and inflation, plus the rise in all commodities, gold at $3,000 seems on the low side to me. Of course, this is just a subjective guess.
Silver is perhaps the most undervalued asset on the planet and in my opinion, it presents the buying opportunity of a generation. The silver to gold ratio is currently 75 to 1. It takes 75 ounces of silver to “buy” one ounce of silver. Yet only seven ounces of silver are coming out of the ground for every one ounce of gold. In other words, at a 7 to 1 ratio, silver is nearly 11 times undervalued in its relation to gold. Further if you divide the current price of gold ($1,800) by 7, the current global mining ratio, you get a silver price of $270. With $3,000 gold, a minimum number I expect to see sooner than later, you get $428 an ounce.
Q: One of the things I just wrote about was China potentially backing its new digital currency with gold. Do you think China would consider backing the digital Yuan with gold? What would the ramifications be for the price of metals and the FX markets?
A: Yes, I think that is their plan. I think they will back the new digital Yuan in a nonconvertible fashion. I don’t think you will be able to trade in a digital yuan for a piece of gold, but I do believe gold backing is ultimately highly probable. The Chinese do sell gold-backed yuan bonds that can be converted into physical gold on the Shanghai Gold Exchange.
(MoneyWeek’s estimate of Cumulative gold potentially held in China is the black line)
https://cdn.substack.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F9704b2c8-7480-4a98-ad18-71a7f1ea7883_638x491.png
According to the most recent estimates, the Chinese have 38,000 tonnes of gold. Broken down, 20,000 tonnes are owned by the state and 18,000 tonnes are owned by the people. That is almost 5 times as much as the 8133 tonnes the United States supposedly owns.
Further, the new Chinese Belt, Road and Rail Initiative, connecting Asia and Africa and 70% of human population, is the most ambitious infrastructure project in human history and the new Digital Yuan will be the currency of choice for this project. This in effect introduces a new settlement currency to 7 out of 10 people in the world. Gold backing of their new digital Yuan with validation of the holdings on a distributed ledger would immediately create demand and credibility for the Digital Yuan. In one form or another, I believe that is exactly what will happen. You don’t want to own dollar denominated assets when that happens.
For access to part two of this interview coming next week and all of my content, become a subscriber here.
More About Andy Schectman
Prior to starting Miles Franklin, Ltd. in 1989, Andrew became a Licensed Financial Planner, specializing in Swiss Franc Investments and alternative investments. At Miles Franklin Ltd., a company that has eclipsed $5 billion in sales, Andrew has developed an operation that maintains trust, collaboration, and ethical behavior, superior customer service and satisfaction to better serve their clients. He is responsible for overseeing the firm’s operations and business functions; including strategy and planning, account management, finance, and new business.
Any of my subscribers interested in contacting Andy can reach him personally at andy@milesfranklin.com, as long as you noted that you were given that e-mail address by me.
DISCLAIMER:
I own physical silver, PAAS, PSLV and a number of other metals equities. None of this is a solicitation to buy or sell securities. It is only a look into my personal opinions and portfolio. These positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe.
MORE DISCLAIMER:
These are not the opinions of any of my employers, partners, or associates. I get shit wrong a lot. If I am here listing things I got right or things I think will happen in the future, note that there are likely twice as many things I got wrong over the same period of time. I’m not a financial advisor, I hold no licenses or registrations and am not qualified to give advice on anything, let alone finance or medicine. Talk to your doctor, talk to your financial advisor or your therapist. Leave me a alone and do your research elsewhere. If you can find somewhere to rate this Substack one star, please do so as to save future readers from the misery of my often wholly incorrect prognostications.
#AG:.."SILVER"..GETTING REAL CLOSE NOW....$12.75
$23.50 SILVER 08-14-2021
http://www.kitcosilver.com/
http://www.kitco.com/images/live/silver.gif
Bottoms Up Apes! The funs about to begin!!
"The Sunday open price smash was so clearly criminal that the banks can only pull that trick once a decade or so (remember the 2011 silver bull market weekend assassination)"....
https://new.reddit.com/r/Wallstreetsilver/comments/p49ok3/the_silver_bottom_is_in_now_for_the_fun_part/
Ted Butler wrote a nice article after the Sunday drive by shooting of silver and gold by the Comex criminals.
https://silverseek.com/article/bad-ugly-and-good
After ripping the bankster and CFTC criminals he talked about why he is so bullish moving forward. The biggest reason was that the short position of the 4 and 8 largest traders on the Comex was at multi year lows. He expected that trader commitment report after the Sunday Comex crime spree would result in a major additional reduction in the bankster short position. Strong silver rises are almost always preceded by large reductions in bankster shorts (surprise surprise).
https://www.cftc.gov/dea/futures/other_lf.htm
The CFTC report is out and as predicted they was a large reduction in the short position of especially the top 4 shorts.
The bankster criminals have pushed the silver price down since the silver squeeze began with the intention of reducing their short position by squeezing the leveraged technical funds out. Already at multi year lows the top 4 bankster shorts reduced their short position by a huge 15% in one week.
The relentless price reduction that the banks engineered to reduce their short position was in the face of a massive increase in physical investment demand created by the WSS silver squeeze movement and the most silver bullish macro economic conditions imaginable.
The source of silver to meet the huge increase in physical demand could only come from one place the bankster vaults. The banks have been bleeding silver this whole time since the silver squeeze started. They already proved they lie about their inventory in the LBMA.
The silver smash Friday the 6th resulted in silver backwardation between the London physical price and the September Comex contract. This backwardation lasted all week until the Friday pop in price yesterday.
Backwardation is very unusual indicating serious stress in the market. Strong demand especially in the London physical market after criminal comex price smashes suggests that there is no room for a repeat of the bankster smashing tricks at least anywhere near these prices.
The Sunday open price smash was so clearly criminal that the banks can only pull that trick once a decade or so (remember the 2011 silver bull market weekend assassination) .
Despite the top 4 banksters reducing their open interest by over 7 thousand contracts total open interest went up by almost 8 thousand contracts. On the short side the idiot tech funds opened over 9,000 new short positions. The idiot tech funds will add fuel to the fire as they will be forced to cover as the price of silver rises!
The banks have spent months since the squeeze started reducing their short position on the Comex. Why would they be reducing their short position if silver was plentiful. Why would they slam silver at the least liquid time of the week when there was no one at the trading desks. They know that the price of silver has to rise to stop from bleeding out all their silver. Butler thinks they will be very reluctant to add to their short positions going forward. He even believes they may continue to try to cover, buy, more contracts on the coming price reversal.
After the Tuesday trader commitment report open interest went up by 3 thousand both Wednesday and Thursday. Those we the days that the Bureau of Lying Statistics released their fantasy CPI and PPI numbers. Despite an all time record high PPI on Thursday silver was smashed over .40 cents. The banks have to control the narrative to protect the dollar. Did banks add to shorts those couple of days? Maybe but on Fridays large rise of nearly 3% open interest dropped by almost 3000 contracts.
Normally open interest rises on large up days as the banks sell to cap the price rise. Since technically silver looks pretty ugly it is likely banks were actually the buyers on Friday. This is possibly confirmed by the end of the week long backwardation by Fridays close.
Going forward if the banks aren't willing to add to their Comex short position then the price has nowhere to go but to the moon!! as who else will be selling given the macro conditions and the extreme physical shortfall! Remember GME! The bankster can't possibly come close to covering as long as we keep stacking!
Bottoms Up Apes! The funs about to begin!!
https://preview.redd.it/2rco2mf4tbh71.jpg?width=350&format=pjpg&auto=webp&s=f2148bd3577a85834789d55b4a71cc568bc672df
$AG: THANK YOU "NWO" 1 KG SILVER $886 TODAY...
http://www.kitco.com/images/live/silver.gif
#AG: GOOD DAY TO ADD... $13.10
Gold & Silver Worked Lower Overnight And Then Hammered On The Release Of A Booming July Jobs Report
https://www.silverdoctors.com/headlines/world-news/gold-silver-worked-lower-overnight-and-then-hammered-on-the-release-of-a-booming-july-jobs-report/
https://www.silverdoctors.com/wp-content/uploads/2021/08/GcSi1Min8621-2-1024x588.jpg
The Chart Huggers will have to go back to their drawing boards…
(by Half Dollar) I’m not sure why we need a jobs reports anymore if we have a President who can’t stop talking about the millions upon millions of jobs that the Federal government is going to create with the now called “Bipartisan Infrastructure Deal”?
Of course, this is Newspeak, which is a different language than Plain-Old English, so when any “elected” “leader” or career public “servant” is talking about creating millions of jobs, they’re actually talking about destroying millions of jobs.
Regardless, it’s truly amazing just how much the irony is lost on so many:
https://t.co/83CYqyiktW
When I arrived in office, it had been a long time since the federal government had worked hard for working people.
We’re changing that every day. pic.twitter.com/83CYqyiktW
— President Biden (@POTUS) August 1, 2021
https://www.bls.gov/news.release/empsit.nr0.htm
Or pathetic.
Take your pick.
That said, the latest Employment Situation Report, commonly called the Jobs Report, has just been released for the month of July, 2021, and since the Fed is going to let inflation “run hot” in order to focus on the employment part of its so-called “dual mandate”, which I’m not even really sure why if everybody is just going to be working for the Federal government from here on out, each future Employment Situation Report is going to be the most important report, ever.
Here’s a breakdown of the official numbers for July:
Total employment rose by 943,000
Unemployment rate declined by 0.5% to 5.4%
Labor force participation rate was little changed at 61.7%
Average hourly earnings rose by: $0.11
From the report (bold added for emphasis and commentary):
Total nonfarm payroll employment rose by 943,000 in July, and the unemployment rate declined by 0.5 percentage point to 5.4 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in leisure and hospitality, in local government education, and in professional and business services.
If the economy is re-opening, why is every month’s job gains in leisure and hospitality “notable”?
Shouldn’t it be “Expected jobs gains occurred in leisure and hospitality”?
Meh.
I don’t even think I’ll dive into the numbers this month, for I did have a nice breakfast, and it would be nice if I could keep it down today.
Besides, it looks like it’s going to be a long day as gold & silver were worked lower overnight, and then the precious metals were “sold” once the report hit the tape:
The MSM Propagandists will surely spin this month’s job gains as signs of a strengthening US economy, and as such, if you were sick of the “taper talk”, well then, you might just want to put in another order for some Pepto and Tums before prices go up again.
Developing…
#AG: The Silver Bull Is Not “Transitory”...!
https://www.silverdoctors.com/silver/silver-news/the-silver-bull-is-not-transitory/
It’s currently sitting near its 50-year lows. For what it’s worth, silver would have to rise by a factor of 63 times just to match its level at its $50 peak in 1980.
The Silver Bull Is Not “Transitory”
It now may be a great time to be bullish on silver. It’s quite clear that silver tends to…
by Peter Krauth via Streetwise Reports
http://www.streetwisereports.com/article/2021/07/06/the-silver-bull-is-not-transitory.html
https://www.streetwisereports.com/images/money-silver-pixabay9-15-20-900.jpg
Transitory. That’s something we’ve been hearing a lot lately.
At its latest FOMC meeting the Fed naturally decided to keep the fed funds rate target at 0.25%.
It also decided not to mess with the $120 billion monthly bond buying program to help “support the flow of credit to households and businesses.” Par for the course.
Meanwhile inflation numbers of the previous four months have been anything but typical. The Fed’s favored Personal Consumption Expenditures Price Index has soared: in February it was 1.6%, March 2.4%, April 3.6% and in May 3.9%.
But headline CPI recently came in at 5%, reaching a 10-year high.
These recent months of elevated and increasing prices may have been exacerbated by price plunges due to the COVID-19 pandemic. But those were for a few months, and their effects should already have dissipated. And yet, they haven’t.
In fact core inflation, which excludes volatile energy and food prices, recently touched 3.8%, its highest in 30 years.
The Fed is looking increasingly wrong in its assessment that the inflation numbers we’ve been seeing are transitory. That means investors would do well to seek shelter from inflation-protection assets. And as I’ll show, for multiple reasons, chief among them is silver.
Silver is Cheap Vs. Stocks
It’s always informative, and sometimes eye-opening, to look at asset prices in relation to other assets. It usually provides good perspective on relative pricing. In that vein, there’s little more surprising than to see just how cheap silver remains relative to the S&P 500 ratio.
The following chart shows the long-term ratio of silver to the S&P 500.
https://www.silverdoctors.com/wp-content/uploads/2021/07/pk17721.jpg
S&P / RATIO SILVER 0.007
It’s currently sitting near its 50-year lows. For what it’s worth, silver would have to rise by a factor of 63 times just to match its level at its $50 peak in 1980. While this might sound sensational, my point is these conditions have existed in the past. This alone suggests explosive potential upside as the stock market matures and likely corrects, while silver continues to climb.
Physical Silver Demand Remains Elevated
Of course, protection from inflation and uncertainty are great reasons to buy and own silver. And as I described above, inflation appears to be coming back with a vengeance. In any case, many investors are hedging against the risk that it becomes entrenched.
In the past 15 months, prices for physical silver are higher than normal. That’s because demand for physical products has remained elevated, leading to sustained high premiums over the spot price. And that’s if you can even get your hands on them. Many of the most popular coins and bars have been persistently out of stock. Premiums are typically 40% or higher, which is nearly triple normal levels.
What’s more, in its recent World Silver Survey 2021, the Silver Institute is forecasting continued strength this year. It expects physical demand to climb by 26% after a very strong 2020. In fact, it foresees overall demand, from all sectors, to be up by 15%, nearly doubling supply growth of 8%.
One area of note is demand from flexible electronics. The Silver Institute indicates demand for silver in printed and flexible electronics is about 48 million ounces annually. It forecasts demand will rise to about 74 million ounces in 2030, absorbing 615 million ounces of silver in this decade alone.
As technology becomes increasingly commonplace in our daily lives the world over, printed and flexible electronics are likely to play a bigger role. Consider that wearable electronics like smartwatches, appliances, medical devices and a host of internet-connected devices are exploding in use. Sensors for light, motion, temperature, moisture and motion all make use of printed and flexible electronics.
So, it’s natural that the electronics subsector promises to be the fastest growing demand for industrial silver usage.
Silver’s Seasonal Outlook is Bullish
Another indicator that now may be a great time to be bullish on silver is its seasonal trend.
The following is a 45-year chart, from 1975 to 2020, which averages the annual silver price tendency.
https://www.silverdoctors.com/wp-content/uploads/2021/07/pk27721.jpg
From this, it’s quite clear that silver tends to mark a mid-year low right at the end of June. And from that point on, on average, the silver price enjoys a strong third quarter.
How to Play Silver Now
In my view a basket of silver stocks is a great way to approach the high potential of this sector right now. One of my favorite options to accomplish this is the ETFMG Prime Junior Silver Miners ETF (NYSE:SILJ). With over 1 billion in assets and average daily volume over 1.5 million shares, SILJ offer plenty of liquidity to enter and exit at will.
Its top ten holdings represent over 63% of overall assets. And these include Hecla Mining (NYSE:HL), Pan American Silver (TSX:PAAS; Nasdaq:PAAS), First Majestic Silver (TSX:FR; NYSE:AG), MAG Silver (TSX:MAG; NYSE:MAG), Yamana Gold (TSX:YRI; NYSE:AUY), Hochschild Mining (LSE:HOC), SSR Mining (TSX:SSRM; Nasdaq: SSRM), SilverCrest Metals (TSX:SIL; NYSE:SILV), Turquoise Hill (TSX:TRQ; NYSE:TRQ) and Endeavour Silver (TSX:EXK; NYSE:EXK). NYSE:FFMGF
In the end, the Fed is all about managing expectations, not about tell us what we should really expect. Therefore, actively hedging for inflation with a silver miners ETF such as SILJ looks like a great option with a lot of potential upside.
One thing is certain; silver is in the early days of a massive bull market. That’s why in the Silver Stock Investor newsletter I provide my outlook on which silver stocks have the best prospects as this bull market progresses. One stock in the portfolio is up 50%, and several more are up over 30% since the start of 2021 alone. Many offer 5x to 10x return potential in just the next few years, especially as silver heats up.
Remember, silver’s been rising on balance for the last couple of years, and looks primed to rally strongly on the back of multiple drivers.
The key takeaway is that silver’s bull market is anything but transitory.
–Peter Krauth
Peter Krauth is a former portfolio adviser and a 20-year veteran of the resource market, with special expertise in precious metals, mining and energy stocks. He is editor of two newsletters to help investors profit from metal market opportunities: Silver Stock Investor, www.silverstockinvestor.com and Gold Resource Investor, www.goldresourceinvestor.com. In those letters Peter writes about what he is buying and selling; he takes no pay from companies for coverage. Peter has contributed numerous articles to Kitco.com, BNN Bloomberg, the Financial Post, Seeking Alpha, Streetwise Reports, Investing.com, TalkMarkets and Barchart, and he holds a Master of Business Administration from McGill University.
#AG: TIME TO ADD.. 16.01
https://stockcharts.com/c-sc/sc?s=AG&p=D&b=5&g=0&i=t2185644822c&r=1624190250398
Wow. Great job, Capt, with the translations! I sense the paper markets will be coming to an end soon. Honest weights and measures will be restored. What the herd doesn't realize is that the honest, or "true" value of silver/gold will send them into shock mode.
Interesting how folks used to laugh at Mr. Sinclair years ago, when he said gold was going to $1,650/oz. and beyond.
Translation: "You are forcing us to obtain more gold to back our unallocated gold."
Translation: "If you go through with this, it won't just end the paper game in London - it will affect every part of the gold market across the entire world. If make us get rid of our unallocated gold, we won't be able to make money and we'll be finished."
#AG: CHECK THIS OUT SLIM,..BASEL III...
BOMBSHELL: LBMA Admits that Basel III Would Kill Unallocated Gold and Lead to Higher Prices!
https://www.lbma.org.uk/articles/lbma-responds-to-prudential-regulation-authority-consultation
https://new.reddit.com/user/captainscottty/comments/ns1uzf/bombshell_lbma_admits_that_basel_iii_would_kill/
SPOILER: THERE ARE SOME HUGE BOMBSHELLS IN THIS LETTER/REPORT!
This was not getting the attention is deserves, so I'm doing a quick write-up to get the word out. There are some screaming bombshells in this report that all apes should know about as banks are dragged, kicking and screaming, into a post-Basel III world.
The LBMA and World Gold Council have explained, in their own words, why Basel III would end the paper game as we know it.
In their own words:
"LBMA and World Gold Council jointly respond to the Prudential Regulation Authority’s consultation paper on the implementation of Basel Standards.
"This response focuses on the application of the Net Stable Funding Ratio (NSFR) and the unintended consequences that the NSFR would have on the precious metals market."
You can download this research letter yourself from the LBMA website. I've posted a screenshot of the relevant section here, which I will translate into plain language below.
"The Basel Committee on Banking Supervision (BCBS) NSFR standard is designed to oblige banks to finance long-term assets with long-term money and thus avoid the liquidity constraints and failures witnessed during the 2007-2008 global financial crisis."
Translation: "You are forcing us to obtain more gold to back our unallocated gold."
"However, the BCBS standard does not expressly exclude from bank NSFR calculations the unallocated balances of precious metals held on balance sheet by the LPMCL clearing banks as a result of clearing and settlement activities nor recognise that gold does behave as a currency when providing a gold loan or borrowing against gold."
Translation: "You should change the standards to treat unallocated gold as gold itself." (It's understood here that because there isn't enough gold to back their unallocated gold, they will have to significantly pare down their unallocated gold, i.e. end the unallocated shell game.)
"Indeed, had the BCBS considered the treatment of unallocated balances in the clearing and settlement system, or had information to understand how gold is treated in a financing transaction, we believe that these unallocated balances would have been expressly excluded from the NSFR calculations, and gold would have been treated in the same way as currency, in the appropriate transactional context."
Translation: "Unallocated gold is just as good as actual gold, and if you were smart like us, you'd know that."
"An 85% RSF charge would: Undermine clearing and settlement – The required stable funding for short-term assets would significantly increase costs for LPMCL clearing banks to the point that some would be forced to exit the clearing and settlement system, which may even be at risk of collapsing completely. [Emphasis mine.]
Translation: "If you do this, unallocated gold will be far less profitable and the whole unallocated game could collapse."
"An 85% RSF charge would: Drain liquidity – The required stable funding would dramatically increase costs for remaining LPMCL members taking gold on deposit to be held as unallocated metal relative to the cost of providing custody of allocated metal. This would prevent LPMCL clearing banks from holding unallocated metal and drain essential liquidity from the clearing and settlement system. These unallocated balances are the only material source of liquidity in the clearing and transaction financing systems. Without this liquidity, there would be a material deleterious effect on the global precious metals market."
Translation: "Unallocated gold is liquid, so you're going to kill the liquidity if you kill the unallocated gold, and you don't want that, now do you?"
"An 85% RSF charge would: Dramatically increase financing costs – The required stable funding would penalise LBMA members who hold unallocated balances of precious metals. This would increase the cost of short-term precious metals financing transactions as stable funding costs are passed through to non-bank market participants. Such cost increases would impact miners, restrict refining and raise the costs of an inelastic key input to industrial and consumer goods. This includes some essential medical equipment and technologies required to reduce pollutants (such as catalytic converters)."
Translation: "Because we won't be able to fix metals prices, there will be volatility in prices when sourcing and delivering metal. This will raise metal prices for industry and consumer goods." (It's no mistake that they're emphasizing an increase in price due to volatility and "illiquidity", i.e. a market that isn't flooded with paper "supply." Also, note that bit about catalytic converters - this will affect more metals than just gold.)
"An 85% RSF charge would: Curtail central bank operations – Fewer LPMCL clearing banks may curtail central bank deposit, lending and swaps in precious metals. These operations are essential to offset the costs of storing gold reserves and generating income. In addition, this provides important liquidity to the market."
Translation: "If you get rid of us, good luck screwing with the gold price. You won't be able to lease it to us to dilute supply and control the gold price."
"The effects of an 85% RSF charge would not just be limited to the London OTC market, but would be felt globally across the entire gold value chain. While London acts as the default settlement location for most global OTC spot transactions, the precious metals market is international. An undermining of the clearing and settlement system, reduced market liquidity, significantly increased financing costs and curtailed central bank activity would fundamentally alter the structure and attractiveness of this market."
Translation: "If you go through with this, it won't just end the paper game in London - it will affect every part of the gold market across the entire world. If make us get rid of our unallocated gold, we won't be able to make money and we'll be finished."
#AG: The End Of Paper Gold & Silver Markets...?
The conclusion is that unless the BIS has an ulterior motive to trigger a chaotic financial reset of some sort, it is a case of regulators not understanding the market consequences of their actions.
https://www.zerohedge.com/commodities/end-paper-gold-silver-markets
The End Of Paper Gold & Silver Markets
Tyler Durden's Photo
BY TYLER DURDEN
SATURDAY, MAY 22, 2021 - 09:20 AM
Authored by Alasdair Macleod via GoldMoney.com,
https://www.goldmoney.com/research/goldmoney-insights/the-end-of-paper-gold-and-silver-markets
This article looks at the likely consequences of the Bank for International Settlements’ introduction of the net stable funding requirement (NSFR) for bank balance sheets, insofar as they apply to their positions in gold, silver and other commodity markets.
If they are introduced as proposed, banks will face significant financing penalties for taking trading positions in derivatives. The problem is particularly important for the London gold market, as described in last week’s article on this subject. Therefore they are likely to withdraw from providing derivative liquidity and associated services.
This article delves into the consequences of the NSFR leading to the end of the London forward markets in gold and silver. Replacement demand for physical metal appears bound to rise, and an assessment is therefore made of available gold not tied up in jewellery and industrial uses. An analysis of gold leasing by central banks, leading to double ownership of physical gold, is included.
The conclusion is that unless the BIS has an ulterior motive to trigger a chaotic financial reset of some sort, it is a case of regulators not understanding the market consequences of their actions.
https://assets.zerohedge.com/s3fs-public/styles/inline_image_mobile/public/inline-images/Breather%20%281%29.gif?itok=-Wy5at7a
Introduction
Last week I explained why as they stand the new Basel 3 regulations will make it uneconomic for banks to continue to run bullion trading desks. The introduction of the net stable funding requirement (NSFR) means that mainland European banks, of which ten are LBMA members including the Swiss, will have to comply with the new regulations from the end of June, and all UK banks, in effect the entire banking membership of the London Bullion Market Association (LBMA) will have to comply by the year-end. There are 43 LBMA members listed as banks, and on Comex there are currently 17 with long and 27 with short positions in the Swaps category, which represent bullion bank trading desks in the dominant futures contracts. So being similar, the Comex numbers must broadly replicate those operating in London. It is therefore reasonable to assume that if the LBMA’s banking membership ceases dealings in unallocated bullion, then very few will continue to deal on Comex — the LBMA crowd having ceased taking trading positions.
We are discussing not gold or silver but their derivatives. But there is a problem borne out of the LBMA’s insistence that it involves bullion, albeit unallocated, and not derivatives. The distinction could be important, depending on how the UK regulator applies the NSFR rules. This is because in the calculation of required stable funding, gold consumes 85% of available stable funding while gold liabilities contribute no available stable funding at all. The effect is to impart a negative factor into a bank’s overall net stable funding calculation, making unallocated gold trading hopelessly uneconomic in terms of deployment of total funding capital. The alternative, which does not appear to be under the LBMA’s consideration, is to admit that the whole unallocated gold trading business has nothing to do with gold bullion but is in fact gold derivatives; in which case capital funding penalties under the NSFR would be broadly limited to imbalances between derivative liabilities and derivative assets.
Consequently, it appears that an allocation backstop of 85% of available stable funding (ASF) must be swallowed in the case of gold, which does not appear to be the case if the LBMA confesses to the paper charade.
There are in London, in effect, two markets conflated into one, but they must not be confused. The unallocated market, otherwise known as dealing for forward settlement, is the product of bank credit expansion, not as the LBMA claims, physical metal whose bar origins, weights and fineness are not recorded for convenience’s sake. Perhaps the LBMA would like to let us know where they think it’s all stored; it’s certainly not in LBMA vaults, where after deducting headline figures for custodial gold the float reduces to as little as a few hundred tonnes. Unsurprisingly, the Bank for International Settlements lists these transactions as over-the-counter derivatives for statistical purposes, so we know how they are regarded by the international regulator.
Physical gold held on behalf of customers is never recorded on bank balance sheets. If a bank owns physical gold in its own vault, an independent vault, or allocated to it by another bank acting as custodian with its own vaulting facilities then that appears as an asset on its balance sheet. In that case, it can hedge out the price risk with a matching liability for a zero price-haircut within Basel 3 rules. But this has nothing to do with the NSFR calculation.
Clearly, unless the NSFR calculation is amended at the last moment, following its introduction the character of bullion markets will become markedly different. Gone will be roughly $600bn of paper gold, while presumably some of the paper demand released will migrate to physical metal. There is also the question of how outstanding imbalances will be resolved. This article assesses the consequences.
Unknown motives and politics
It is difficult to understand why the Financial Stability Board, under whose aegis the Basel Committee on Banking Supervision has produced Basel 3, seems intent on destroying derivative markets for gold, silver and also for other commodities. That will be the consequence of the introduction of the NSFR calculation in these markets. As the supreme authority overseeing fiat currencies, the Bank for International Settlements, which oversees the FSB, has no love for gold. One can explain the desire to do away with it: as the riskless form of money, it has been at the centre of monetary affairs for ever and the desire to do away with it must be overwhelming for neo-Keynesian modernists. But if that is the case, then it will be a serious misjudgement, because as this article reveals, the consequence of withdrawing paper supply is likely to drive the gold price significantly higher, along with silver and a host of other important commodity prices. Furthermore, this delayed act, first published in 2014, now comes at a time of rapidly rising commodity prices, reflecting the unprecedented acceleration of global money-printing in 2020, which ironically proves the importance of sound money — gold.
Already, tight, gold silver and commodity markets cannot accommodate a migration out of defunct paper into physical metals and energy without massive price rises to defuse the unsatisfied demand unleashed by this action. Perhaps the regulators at the FSB know this. If they do, then we can only conclude it is a deliberate attempt at a reset of all commodity markets. Bank corruption, particularly in precious metals has been rife: major banks have been regularly fined and continue to manipulate and spoof these markets, fines being seen as little more than a cost of doing business. These are systemic risks a regulator should address. But to assume the FSB is shutting down these paper markets to curb this behaviour exhibits a touching faith in its altruism.
Another popular theory is of an even wider financial reset. The BIS is coordinating research into central bank digital currencies, which if adopted cuts out the commercial banks altogether. In theory, it would allow central banks to more effectively target stimulus and do away with the destabilising cycle of bank credit. The ultimate aim could be to demote and then remove commercial banks from the financial system entirely, in which context the closure of derivative markets by regulatory means makes some sense.
Quantifying gold derivatives
We know from the Bank for International Settlements’ statistics that at the end of the second half of 2020, gold forwards and swaps totalled $530bn, which at the then price of $1898 was the equivalent of 8,685 tonnes of gold in paper form. But other than a triannual survey, the next being due in 2022, according to the BIS this figure is culled from dealers, mainly banks, in only twelve jurisdictions. With respect to commodities and foreign exchanges, these twelve jurisdictions have been found to capture roughly 80% of the total, so grossed up the gold tonnage rises to an equivalent of 10,806.
The LBMA positions are just part of the BIS total. The LBMA only records monthly settlements in London (Loco London) reported by the four clearing members that own and operate London Precious Metals Clearing Limited. They deal solely with LBMA members. The daily average settlement for December 2020 was recorded at 18.9 million ounces, or 588 tonnes. This is only one eighteenth of the BIS figure quoted above. The first thing to note is that daily settlements are not the same thing as outstanding obligations. Furthermore, the BIS statistic includes swaps and forwards not recorded in London nor, for that matter, are they necessarily settled through the LPMCL. But even taking these factors into account the difference between the BIS and LBMA figures still need further explanation.
In an analysis for Hardman & Co published in January 2020, Paul Mylchreest identified two other sources of turnover not included in the LBMA figures: trade between LBMA members and non-members, and central banks dealing in unallocated gold.
Now let us assume that the new Basel regulations have the effect of bringing unallocated bank trading in gold to an end. From the value of outstanding OTC contracts recorded by the BIS adjusted for the trends of its triannual surveys, we can take it to be about 10,800 tonnes. Assuming LBMA members on their own account run relatively minor net positions in the context of this enormous figure, we can assume this outstanding balance is mostly split between central banks, other non-LBMA users of the unallocated market, and OTC trades recorded in other centres.
We have no idea what the central bank position is at any one time, but it would be surprising if they took long positions. Instead, they can be expected to attempt to bolster market confidence in fiat currencies, and in particular the US dollar by selling gold. And by shorting paper gold, they also would seek to encourage physical supply by shaking out weak holders in ETFs. That being the case, not only has the central bank cohort no reason to be long of gold derivatives, but if they have positions, they are almost certainly short. The only likely exception is when a central bank which has leased gold sold into the market might hedge the price risk of not getting it back.
The ending, therefore, of London’s forward settlement market would remove an artificial supply of gold, which we can estimate to be the equivalent of over 10,800 tonnes of gold. To this we should add the net short Swap position on Comex, comprised of bullion bank trading desks, which is currently 486 tonnes. From the main sources of derivative supply, we can therefore see roughly 11,300 tonnes of paper gold supply being withdrawn from the markets if the bullion bank cohort ceases trading in derivative gold. We should now examine the position of central banks further.
Central bank leasing — yet to be resolved
In 2002, Frank Veneroso, a respected analyst, concluded that central banks had leased anything between 10,000—16,000 tonnes of gold at that time — the upper figure being about half of global central bank gold reserves at that time. He gave his reasoning at a speech in Lima on 17 May that year. Central bank leased gold was being sold into the market for dollars, which as part of a carry trade were being reinvested by banks in US Treasury bills and the like, the cost of finance being a gold lease rate of one or two per cent, for a yield of six or seven. Veneroso concluded that much of the gold was repurposed into jewellery and had effectively disappeared from the market.
Between the 1980s and the turn of the millennium, gold had been in a bear market, so the general public, including investing institutions, were either genuine sellers (which was in limited physical quantities) or hedging and speculating on the short side using derivatives. This enabled the bullion banks to hedge out the price risk on gold that would have to be eventually returned to central banks by going long for forward delivery relatively cheaply. But at the time of Veneroso’s speech, gold was $325, having risen from about $255 over the previous fourteen months.
Conditions were changing from a long-established bear market, which favoured gold leasing activity, into the beginning of a new bullish phase. Leasing and even undeclared sales then became a tool for central banks to supply physical liquidity to the gold market, either to rescue bullion banks from being badly squeezed or simply to suppress the price.
The leased gold might not have always left the vaults of central banks in the main gold dealing centres, as Veneroso assumed. However, during the period covered by Veneroso’s analysis, I regularly lunched at The Banker’s Club opposite the Bank of England’s rear entrance in Lothbury. On most days, security vans could be observed entering and leaving the Bank’s premises, transporting physical gold to and from the Bank’s vaults. So perhaps Veneroso was right about physical being sold and delivered into the market, at least to some degree.
In March 2008 gold breached $1,000 for the first time. It would have been impossible for central banks to recover their leased gold by then, because Chinese and Indian demand was beginning to suck physical gold out of Western markets at an alarming rate, in any case significantly faster than any replacement by available mine and scrap supplies. It might appear that leased gold could then have been returned to central banks during the 2012—2015 bear market, but again, Chinese and Indian demand continued to absorb most of the available physical released by any ETF sales and other sources of physical supply.
Alternatively, there would have to have been substantial selling of Western-owned stockpiles, and there is no evidence of that. The best one can say is that in some years, notably 2013, there was some ETF liquidation, but not in the quantities required to resolve the leasing problem. By way of confirmation, in 2014 I was told by one of the large Swiss refiners that they were working double shifts seven days a week turning 400-ounce LBMA bars into 1 kilo 9999 bars, the new Chinese standard. Some of the LBMA bars arrived in a poor condition and obviously had not been touched for decades, scraped out from the darkest recesses in deep-storage vaults. Furthermore, customers from the Middle East were submitting LBMA bars for refining into the new 1 kilo standard and taking them back to be re-vaulted in that form. Not only did this indicate that they were aligning themselves with China’s growing gold presence, but they were definitely not selling. Clearly, the 40% decline in the gold price between September 2011 and December 2015 led to substantial unrecorded increases in physical demand, cleaning out Western vaults. It would not have been possible for central banks to regain their leased gold.
There was, perhaps, further circumstantial evidence of the leasing problem, when Germany decided to withdraw her earmarked gold from the New York Fed’s vaults. The desire to do so was publicly justified on the basis that Germany’s gold no longer needed to be stored abroad, because the threat of a Soviet invasion had been removed by the collapse of communism. But given that the suppression of gold involved leasing and gold swaps in significant quantities in order to maintain the dollar’s credibility, was the true reason nothing to do with Soviet presence but that the Bundesbank suspected its gold was being used for this purpose without its permission?
The Bundesbank’s first action was to request to inspect its gold, a request that was flatly refused. Following that refusal, the decision was taken to begin a process of repatriation. Why it was partial is not entirely clear but could be explained if the Bundesbank suspected it wasn’t actually there. There would be nothing to be gained by demanding the return of all of it, but a partial return might at least enable the New York Fed to find some gold from elsewhere and avoid a public crisis. It turned out that after a series of meetings it was agreed to repatriate only 300 tonnes of Germany’s gold over a period of seven years. In fact, it was returned three years early. The Netherlands also sought, and obtained, 122.5 tonnes of her gold repatriated from New York. Austria arranged for the repatriation of some of its gold from London. While some of these repatriations were in the wake of public demands, they were never important enough to trigger them on their own. But they are consistent with substantial quantities being leased and assessments by the central banks repatriating national gold stocks that they are better secured on their own territory.
Since the days, as Veneroso put it, when central bank gold ended up adorning Asian women, leasing procedures, being targeted at providing liquidity and at supressing the gold price, will have changed. Wherever possible, leased gold need not leave the Bank of England’s or the New York Fed’s vaults. A ledger entry, or book entry transfer confirming it is at the disposal of the lessee is all that’s required, and for the payment for the sale of leased gold to be arranged through the appropriate channels. And from there it can be reassigned by another book entry transfer. We saw this in action when GLD, the gold ETF, ended up with the Bank of England recorded as a sub-custodian holding some 70 tonnes of gold last August precisely in these conditions.
In a leasing contract, ownership remains with the lessor. When arranging gold leasing, we can be sure that in recent times the Bank of England will have comforted lessors that their gold never leaves the Bank of England’s vault, so there’s no need to worry about repossession. This would be an operational justification for continuing leasing activities to offset physical shortages in the market. But the question over how much leased gold that has left the Bank of England and the New York Fed in the past remains unresolved, but it is likely to be in significant quantities with Veneroso’s lower estimate perhaps a bare minimum.
The true quantity of monetary gold
It is commonly stated that the above-ground gold stock is 200,000 tonnes. While that may be a reasonable approximation, most of it is not monetary gold in any sense of the definition and is not therefore its monetary supply.
The statist definition of monetary gold is physical bullion held as part of a central bank’s declared monetary reserves. According to the IMF the current total of all such monetary gold is 35,244 tonnes, though as we have seen from the foregoing paragraphs it is unlikely to be all there or unencumbered. But to this we must add gold bullion hoarded and stored by all other parties on the assumption that it is either a more stable store of monetary value than fiat or an insurance against fiat currencies losing purchasing power. It must be in a form immediately available for monetary purposes, being in bar or coin form. Of an estimated 200,000 tonnes of above ground gold, it is generally assumed that 60% is used for other purposes, mainly jewellery but also some industrial purposes, leaving 80,000 tonnes of monetary gold conforming with our definition. After subtracting official monetary gold from the total, we are left with 44,756 tonnes.
In October 2014 I published an article explaining why China had considerably more gold in storage than her declared reserves, and I estimated that by 2002, when the Chinese government removed the ban on personal ownership and opened the Shanghai Gold Exchange, the state could have acquired up to 25,000 tonnes. Much of this gold would have been leased gold sold into the London market. (Veneroso’s statement about ending up adorning Asian women could not have been true for Chinese women, because they were not permitted to own gold until 2002 and Indian imports were severely restricted for some of the relevant time).
That China had accumulated substantial undeclared bullion stocks was confirmed to me anecdotally by experienced China watchers. If we treat that as part of our estimate of monetary gold, and make an allowance for Russia, of perhaps an unrecorded 5,000 tonnes, monetary gold in the hands of everyone else appears to amount to only 15,000 tonnes.
But this figure will have been bolstered by central bank leasing activity, perhaps even doubled, with leased gold appearing to have two or even more owners, and the actual possession being in undeclared Asian hands. It is in this context that the threat to derivative trading from Basel 3 must be viewed. Not only will paper supply estimated at 11,300 tonnes equivalent in unregulated and regulated markets be threatened with removal, but there is an additional unknown figure of central bank leasing and swaps to be unwound. Obviously, there is significant guesswork involved, but if the numbers outlined herein have the slightest validity, the ending of gold derivative markets, if it is permitted to go ahead, will create a major gold crisis, of which the BIS regulators seem blissfully unaware.
Silver
The mechanics behind dealing in the LBMA silver market are the same as for unallocated gold. The LPMCL settlement system is the same, providing access only to LBMA members. The basis of calculating the net stable funding requirement is the same, so silver derivatives suffer from the same balance sheet disincentives. The principal difference is no silver is vaulted at the Bank of England, nor, so far as we are aware, in the vaults of any other Western central bank.
In terms of demand, it is also primarily an industrial metal, and is mostly consumed. According to the Silver Institute, of a total annual demand of roughly a billion ounces that is forecast in the current year, 253 million ounces is identified as investment demand and a further 150 million ounces as ETF/ETP demand. Bizarrely, the report estimates there will be a fall in ETF demand, when it is already rising. And of the supply, only 18.5% is from recycling.
The BIS figure for outstanding silver OTC derivatives is included in “Other precious metals” at $64bn. The same NSFR treatment for all commodity derivatives, including energy, involves an estimated $858bn’s worth. Not only is the introduction of the NSFR disruptive of precious metal markets, but it also threatens to disrupt wider commodities at a time when their prices are already increasing rapidly as a consequence of falling purchasing powers for fiat currencies.
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