Market Update
- Silver and gold prices rose this week, with the biggest gains coming after positive US jobs data.
- Copper shortages are looming as COMEX inventory levels dwindle. China and Russia's copper isn't accepted for COMEX delivery.
- Analyst predictions for gold vary greatly. Invesco expects flat performance, while The Daily Gold sees potential for a significant increase.
- Central banks are increasingly buying gold, with India and Poland recently adding to their reserves.
- Silver is likely headed for a fifth consecutive year of supply deficit due to high demand, especially in the solar industry.
- Rumors about a large company taking delivery of COMEX silver were false. The actual recipient is unknown.
- Eastern investors tend to allocate a larger portion of their wealth to gold compared to Western investors.
- Historically, gold has outperformed bonds as a long-term investment.
- SD Bullion will be releasing a video next week discussing the long-term implications of these trends.
- The focus will be on a 12-year outlook, rather than the short-term view of some analysts.
It was a busy week in positive price action for both silver and gold. The most bullish moves were today following this morning's US jobs report data.
You can see the algorithmic tug of war that popped off as the data hit this morning in the spot silver price.
After the predictable stop loss shake out attempt failed. It was pretty much up for the remainder of the trading day to close higher for the week in both silver and gold.
More on their respective weeks of trading action in a few minutes.
This week, we're going to examine reports of COMEX copper shorts panicking as physical copper warehouse inventory levels touch lows not seen since the 2008 Global Financial Crisis here in the USA.
We'll also look around the world to see who is the current physical copper gorilla of the world. Spoiler alert, it ain't London.
Chartists were out banging the drum on the highest quarterly close for gold, and a decade long high quarter price close level for silver recently achieved. Such bullish chart formations often attract momentum longs into markets.
Silver solar demand reports are getting so pervasive and aggressive in future demand forecasts now, it seems to be causing some silver market commentators to make errors in reporting on what is happening in the COMEX delivery market.
We'll try and clear up a rumor that is false but was reported by many this week as if it were factual.
Some central banks reported buying gold bullion officially this June 2024, 4 tons for Poland, 9 more tons for India.
This gold bullion reserve buying over sovereign bonds trend is just ramping up, and we will preview a coming update next week over just how tectonically important central banks front running fiat financialized western investors truly is long term.
We'll also examine just how flat footed western are positioned for the remainder of this year 2024 juxtaposed by average eastern investor poll data.
All this and more coming up after this short break.
The spot silver and gold markets finished the holiday shortened week with strength.
The spot silver price closed the week at $31.21 oz bid while the spot gold price closed just under $2400 oz bid.
The spot gold silver ratio fell to 76 on the week.
Year to date, both silver and gold have performed well in fiat US dollar terms.
But the fundamental drivers for both are still not reflected bullish enough, yet.
As demand for physical silver in industrial applications is myriad, second only to crude oil in applications in the commodity market.
It is silver's ongoing robust solar demand that seems to be driving most headlines at the moment.
The silver market is likely again to be in supply deficit this the 5th year in a row. Such reporting always leads to onlookers wondering where all the excess silver demand is being met from.
The United States for instance consistently demands about 3Xs more silver per year than she mines and or refines from recycled silver sources.
So of course one is led to look at the dwindling unsecured silver ETFs mainly housed in the seemingly lawless City of London and in the COMEX silver warehouses for clues.
Registered COMEX silver piles, those which are supposedly available for physical delivery have been persistently rising for the first half of 2024.
This week, nearly 5 million ounces were withdrawn leading many including myself wondering who is taking delivery in such volumes?
The issue is the COMEX silver markets are very opaque with commercial banks typically trading for either their house or on behalf of clients. So details are sparse almost always, and rumors are rife.
For instance this week, many erroneously reported that PTG Division of SG America took delivery of over 5 million ounces of silver off the COMEX by concluding that the SG stood for a company involved in solar cell manufacturing.
The problem with publicly reporting such a theory is not only the lack of actual evidence, but the conclusion that PTG Division of SG America is a solar panel manufacturer at all. PTG Division of SG America is all over the CME Group's Issues & Stops Year to Date 2024 report involved in derivative trading in virtually every market COMEX NYMEX makes, including derivatives on bonds and interest rates.
Not a solar company. SG America stands for Societe Generale, a massive french commercial bank who stood for over 5 million oz of silver delivered off the COMEX, for who knows what specific reasons involved.
Following up on the COMEX copper shortage stories of late. We can see the premium spike of COMEX copper prices climbing again vs London Metals Exchange copper prices of late.
The problem for the dwindled and tiny physical copper COMEX inventory levels to come is that neither Chinese nor Russian copper brands are acceptable for delivery against COMEX copper contracts. And they combined make up more than 70% of the supposed copper inventories remaining in the LME.
So in other words, like nearly 90% of the world's remaining copper inventories on exchanges can't be through-putted via the COMEX, because China and Russia are bad. So good luck electrifying USA, USA, USA.
Let me take this moment to remind you that while the long term view is surely still bullish copper, what we are walking into is a long term store of value crisis. And in that world, gold and silver historically get the creaming bids into mani phases.
Moving on to the eastern world, specifically India as 43,000 investor households were polled to understand what percentage of their liquid net worth consists of gold allocations. It ranges by net worth levels, but it is close to 20%.
Interestingly if we simply backtest full fiat currency era data from 1970 until 2024, we find the best allocation to gold in one's liquid net worth has ranged around that percentage allocation.
Don't think too hard about this though, Invesco, an asset manager with over $1.6 trillion in AUM has publicly declared that gold is currently too expensive and they therefore have 0% allocated to gold for the coming 12 months.
Apparently they'd rather be exposed to overpriced US stocks, sovereign and corporate bonds markets.
Commodities you wonder? None exposure for them as well.
Their 12 month forecast calls for the S&P 500 to basically be flat, 125 basis points in rate cuts (hence their bond bullishness near term), and partial weakness in the fiat US dollar globally.
They claim spot gold will be $2,200 oz to come July 2025.
Jordan Roy-Byrne of The Daily Gold's gold bullion bull market analog present versus past doesn't jive with Invesco's outlook.
Judging by the black line beginning in October 2023, and dotted dash line average of gold bulls of the past. Come this time next year spot gold threatening $2800 oz would be more in line with performances past.
Jordan also astutely points out that Gold vs the typical 60% stocks / 40% bonds portfolio dogma has a varying history of under and over performance making the case that an era of gold outperformance is about to kick off again.
Surprisingly to most normies, gold in place of bonds has been a better long term performer.
And we are about to kick off a coming decade or two where that becomes the norm and a fireable offense if an asset manager doesn't pivot in time.
Central Banks are already front running this in record official gold bullion reserve buying size.
India and Poland buying more gold last month is just another example of the ongoing trend both in the west and east by central banks.
Next week, I will be traveling but I will still release a video on Friday as per usual as we take a longer term view of what this all means in the Big Picture, and no not 12 months out like silly Invesco. More like 12 years out because like Indians and astute central banks, we know bullion is a constant long term position of anyone looking to maintain purchasing power long term regardless of what counter-parties come and go in the meantime.
That will be all for our weekly SD Bullion Market Update.
And as always to you out there, take great care of yourselves and those you love.
