Declining above ground inventories of physical silver and the ratio paper claims against those stocks is going parabolic. When the music stops, do you want to be holding real silver in your hand or a fraudulently-issued paper claim on silver?
I happened to notice yesterday that premiums for silver eagles have been creeping higher recently. The mint is on allocation for 1 mm coins per week, I believe it is, and I’ve been told from a few sources that the mint could easily sell a lot more.
I’m starting to warm up to the idea that the fraudulent silver price fix on the LBMA a couple weeks ago marked the final “capitulation” of the nearly 5-year price pullback in silver and 4+ year pullback in gold. We have yet to hear a satisfactory explanation from the LBMA for the exceedingly odd price behavior of silver seconds before the a.m. London silver price was set on January 28th.
I believe that event marked the “last gasp” effort by the highly corrupt LBMA bullion banks to shakedown the physical silver market in order to get their hands on as much physical silver as possible at as cheap of a price as possible. I believe, not uniquely by the way, that the synthetic short interest (paper derivatives shorts) in silver is even worse than for gold, which we know is at least 100:1.
Big banks hate losing money and will do anything – legal or illegal – to avoid losing money or to minimize losses. I saw this first-hand and peripherally participated in activities designed to minimize losses when I worked on Wall Street in the 1990’s. Everything is worse now in that regard and the people who are supposed to enforce the laws and oversee trading activities at these banks are now in on the corruption.
With that as the preface, I believe silver is beaten down and cheap relative to gold and any other investment alternatives and I think buying silver now – at it’s current price – will prove to be the trade of the decade.
Right now gold is outperforming silver on up-days BUT silver outperforms gold when the metals sell off. Typically gold will outperform silver in the early stages of a big bull market move. Gold current outperformance vs. silver is reflected in retail activity, as noted by Doc at Silver Doctors and some other bullion dealers to whom I spoken about the market recently, in which sales volume of gold coins is outpacing volume in silver.
But this will soon crossover as gold appreciates in price and waves of new buyers flock to silver rather gold because it feels better to buy more ounces of silver than gold. Silver is poor man’s gold and always has been for 1000’s of years. When this dynamic kicks in, the gold/silver ratio will drop quickly from its current 78x. I suspect before this bull market is over, the GSR will drop well below 20, if not 10.
We saw this in 2011, when silver began to go parabolic before the western Central Banks had seen enough and began to throw 100’s of tonnes of paper gold and silver at the market in order to not only prevent the metals from moving higher but to beat down the price on gold and silver to their current levels. In the bull move from late 2008 to April 2011, the GSR dropped from 100 to 32.
Eric Dubin and “Doc” hosted me for their weekly metals and markets podcast last week. We discuss a range of topics but focus on the precious metals. Note: I mention a new emerging junior exploration silver miner that I featured in a recent issue of my Short Seller’s Journal. Anyone who subscribes to the SSJ and mentions that they heard about it on the Silver Doctors podcast will receive a copy of that back-issue when they subscribe:
“What caused me to almost fall off my chair when I read that article (San Francisco Fed President John Williams gave a speech in which he stated that he Fed would raise interest rates 3-5 times in 2016 and asserted that the economy “is in good shape”) was when he said the economy was doing fine. I’m not really sure what data he’s looking at or if he’s being completely disingenuous for the sake of being a cheerleader on the economy…We would have to sit down with him in private and show him the data and say, “what are you really looking at here, John, because your statement makes you look like a complete idiot to everyone out there who knows the truth.”
“Anyone who wants to buy precious metals now and they understand the reason why and they want to convert their fiat currency into precious metals – buy as much silver as can…silver is extraordinarily cheap outright and its extraordinarily cheap vs. gold.”
What we’ve got now with Central Banks and their financial repression with zero interest rates and destruction of fiat currencies, they’re destroying the inherent nature of capitalism itself: the inherent nature of the accumulation of capital by the productive middle class – this is all being destroyed...one way or another, the world is going to go back to gold and silver [as the primary form of currency] – it’s just a matter of time. – James Turk on the Shadow of Truth
Gold and silver appear to have found their final bottom in the nasty 4-plus year price correction that began in May 2011. Too be sure, this “correction” was largely a product of Central Bank intervention which was implemented to prevent gold and silver from signalling to the world that Governments globally, especially the U.S. Government, are in the process of destroying middle class wealth through the incessant debasement of paper currencies.
Since late July/early August, gold has moved up over 9% from its bottom ($1085, futures basis) and silver is up 14.5% from its bottom ($14.07, futures basis). Of course, it remains to be seen if this is going to be more than a dead-cat bounce before the metals head back to re-test their bottom or set new lows, but specific market signals are suggesting that there’s a strong probability that the precious metals have embarked on the the long-awaited resumption of their secular bull market.
One of the primary signals is the persistent price “backwardation” observed in the London gold market since 2013. As Turk explains in the podcast:
Backwardation shouldn’t happen in the gold market. The arbitrage opportunity should take it away. But we saw it 1999 for a couple of days when gold was its low and we saw in 2008 for a couple of days when gold reached its low then. We’ve seen backwardation more often than not since January 2013 when the Fed’s QE3 program started.
While backwardation occurs when there’s a shortage of physical gold available for immediate delivery on a “wholesale” basis – i.e. very large quantities – it also reflects that fact that investors prefer to hold onto the gold they have in possession rather than lend it to the market in exchange for the market’s promise to re-deliver that gold in the future at a lower cost to the investor.
In addition to backwardation, Mr. Turk discusses some other indicators which are signalling the likelihood of much higher gold/silver prices going forward plus his views on the “re-monetization” of gold – i.e. the market’s push to insert gold into the global financial system as a currency (it’s always been used as an asset). Or, as Mr. Turk prefers to say, “the re-currencyzation” of gold:
There’s always a higher risk in fiat currency than there is in gold because gold can not be created out of thin air like paper currency can be created out of thin air. – James Turk, Shadow of Truth