Debt Ceiling Fiasco as New Whales Buy Gold & Silver Bullion

While things might appear calming down in the silver market as spot prices retreat, in the second half of this video we will get into some recent silver whale sightings that suggest supply demand waters are only going to get more turbulent to come.

But we will begin this week with some incredible long term gold bullion related charts that strongly suggest. This time is and will turn out different, especially considering the sheer size and scope of what appears to be setting up. A world in which trillions upon trillions of devaluing fiat currencies and major asset classes bow to escalating gold bullion values.

Tavi Costa of Crescat Capital tweeted the following important gold vs US debt chart stating,

"Investors often use the 1940s period as a compelling historical analogy to today given the severity of the current US debt to GDP problem.

However, there is one major distinction that is often ignored.

During that time (around World War II), the US dollar was effectively tied to gold prices, making the metal an unfeasible investment alternative.

Today, with prices unpegged, it is highly probable that capital will divert away from US Treasuries and flow into gold.

This becomes particularly crucial at a time when the government is about to issue a flood of debt instruments into the market after ultimately extending the debt limit.

If the rationale for owning US Treasuries today is solely based on the premise that the system cannot endure substantially higher interest rates, then gold is a far superior choice.

It’s a neutral asset with no counterparty risk that also carries centuries of credible history as a safe haven and monetary alternative."

Important to remember also, that the USA is presently no longer in the catbird seat as it was following WW2 where we enjoyed having our manufacturing base and infrastructure still intact. Getting to rewrite the rules of the then global monetary and financial game according to our then dominant will. And while we currently still claim to have a hefty unaudited stack of gold bullion, it's important to know that the eastern world is where physical gold price discovery power is inevitably heading.

With increasing fiat US dollar denominated debt loads to come using basic arithmetic and government projections, and the Bank for International Settlements and many many other major government central banks actively working on new retail and wholesale CBDC trade settlement systems to transition us into a world that will become way less fiat US Dollar intermediated and demanded in trade. 

The ongoing trend of foreign central banks opting for gold bullion over bonds is likely to only quicken moving forward.

This week Financial Times asked their readers the following question.

The new gold boom: how long can it last?

Well, through the lens of human history, I'd pose the question differently.

The fiat financialized everything bubble: how long until it all bows to gold?

In terms of major fiat currencies, since the last time the US defaulted on its post WW2 monetary agreement, they already have.

Unsurprisingly the authors of this FT article exhibit more gold illiteracy than I care to read to you out loud. 

What I will show you are two important charts and data deceptions used to maintain the illusion that the world is not sleepwalking into the likely largest gold bullion mania phase we've ever been collectively a part of together all at once.

First, they at least got the central bank gold bullion buying data correct this time, and showed readers again that collectively global central banks bought more official gold bullion last year than at any time in recorded history.

Next the deception using increasingly rigged US government price inflation data since 1980 to give the impression that gold is somehow relatively expensive versus where it went in 1980. Not even mentioning that virtually every other asset class in the world is in a bubble of relative value versus this precious metal governments are now buying at all time record clips.

You see in 1980, the US government had its beloved fiat US dollar fully accounted for by a gold mania phase they could no longer control. Instead of then going back on a pseudo gold standard we decided instead to fiat financialize and outspend the Russians leading us to the debt ceiling quagmire we get to hear about seemingly each and every year

Depending upon how you measure it, we are the world's biggest debtor empire of all time and since we are unlikely to default in nominal terms, we will likely do so in relative real value terms instead yet again. 

According to the way we used to measure price inflation pre-1980, we have been running annual price inflation closer to ten percent per year for decades.

So instead of this clownishly low US government rigged CPI data of then $850 oz in Jan 1980 worth only some $3500 oz in fiat US dollar today.

The pre-1980 price inflation data scream many many multiples higher than that. Something like 8 times larger in fact.

You know what they say about the power of compounding interest? 

Well, similar can be said for the ongoing robbery of compounding underreported price inflation data.

He who understands it and takes action ahead of time earns real value gains back. They who don't pay in real terms whether they take no action or wait way too late in the game to do so.

As this world's monetary and structural reset plays out, going for the gold bullion ahead of time like central banks are increasingly doing in record volumes, will likely prove to be a sound choice long term.

The spot silver, gold, and platinum prices all sold off this week as we saw relative fiat US dollar strength and an increase in market expectations the fiat Federal Reserve will be raising rates again in the near future. As core PCE price inflation data for last April came in surprise, not surprisingly, higher than expected.

The spot silver price closed this week at 23.31 bid while the spot gold price closed at 1,946 oz bid price. The spot Gold Silver ratio went as high as 85 intra-week only to tighten down to 83 with a pip squeak silver rally to close this week's trading action.

The global community is increasingly recognizing that Russia, poised to become the world's largest gold mining nation, possesses the ability to independently market its Siberian gold mining output without relying on the West.

Turns out the United Arab Emirates doesn't care all that much about US sanctions against Russia, rather they increased their net buying of gold bullion mined from Russia by a factor of about 58 times in 2022 versus in 2021. Sure they got much of that gold at a discount and they took full advantage of the situation.

The citizens of Russia, are increasingly de-dollarizing their personal long term savings as well with increasing purchases of gold bullion becoming more commonplace. Having rid the old 20% VAT on gold bullion buying within Russia, citizens scooped up 50 metric tonnes through November of last year 2022. 

I expect these trends will continue as internally Russians buy more gold mined within her borders and Russia sells nearly all its remaining gold output to middle east and eastern nations like China and India to come.

Now onwards to the various silver whale sightings this week. 

One being a major institutional silver inflow into an ETF that actually goes out and procures the real things.

The other being a major economic power that is buying silver to likely ramp up solar power infrastructure at sizes and scales that is predicted to surpass the USA's entire collective solar panel fleet in existence in merely this year 2023 alone. 

First, that major financial institutional inflow into the Sprott PSLV closed-end silver fund.

Blackrock, the sponsor of an unsecured JP Morgan custodian ETF called SLV, recently went and became the largest shareholder of PSLV having recently bought over $170 million dollars worth of shares. While that sounds like a lot, it is a pittance for an asset manager the size of Blackrock with nearly $10 trillion in assets under management. But that amount of fiat currency flowing into the minuscule silver market is noteworthy as a sign that more may be coming sooner than later.

And why would it not?

The world has so much capital flowing into solar panel projects this year and to come. Not to mention the ridiculously sized silver supply deficits that are projected to be coming later this decade into the next.

Basically if the silver solar panel determined world wants more silver you better get buying at a discount now, cause with projected deficits like that, it won't be so ridiculously cheap later on.

Maybe this is partly why this week we saw reports from China that the largest ever silver bullion outflow from the Shanghai Futures Exchange occurred early this week. An outflow of over 4.6 million ounces in one day likely buying the recent spot price dip, perhaps helping to begin fulfilling the silver industry rumor that China is now beginning to build rotating double-sided more silver dependent efficient solar panels. 

Reported by Bloomberg this week, China is building more solar panel power capacity this year than the entire USA has in total at the moment.

Makes sense that China would have to begin raiding its own silver futures exchange, given that the registered pile of COMEX silver just dipped to close this week below 30 million ounces. That low amount would only last just over a week with silver bullion withdrawals from China of the size we saw this week in Shanghai.

That will be all for this week's SD Bullion Market Update.

Happy to see based on real time internal sales data, that SD Bullion customers have also been buying this spot price dip. These silver cowboy rounds have been flying off the shelves to many of your silver stacks out there.

Thank you for your business.

And as always to you out there, take great care of yourselves and those you love.

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James Anderson
James Anderson
Senior Market Analyst & Content

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. You can pick up Jame's most recent, comprehensive 200+ Page book here at SD Bullion.

Given that repressed commodity values are now near 100-year low level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now, before more unfunded promises debase away in the coming decades...