Silver Market Update
- Silver price rallies are sold off on fake news reports and manipulated market events.
- Physical silver is being withdrawn from COMEX and London vaults.
- Global demand for silver is exploding, especially for solar panels.
- Silver supply isn't keeping up with demand.
- The gold-to-silver ratio is historically high, indicating potential for a silver price surge.
- Central banks are buying record amounts of gold, while Western investors are neglecting precious metals.
- The US financial system is on shaky ground, and gold is likely to outperform the stock market.
- Silver prices could see a 400x increase in the long term, similar to what happened in the 1970s.
- Owning physical silver is a good hedge against inflation and a potential market crash.
- Historical data suggests silver is undervalued compared to the stock market.
And here over the last 9 months on a weekly silver spot price chart.
You can see typical price sell offs on phony NFP jobs reports, fiat Fed rate cut decisions, CPI lie data dumps, and COMEX silver futures contract expiry weeks.
The physical sucking sound is still heading east.
Since the start of 2021, the COMEX gold pile has fallen by over half peak to latest trough.
The London stored gold supposedly held for unsecured gold ETF shareholders has seen an -800 ton drawdown all this while on net Central Banks have been buying record volumes 2022, 2023, and in Q1 2024 thus far reported.
Similar story in western silver exchange reserves leaving to tune of 100 million oz since 2021.
That's the size of all the silver bullion the Hunt Brothers stacked in the 1970s into Jan 1980. Gone, pulled from the COMEX last 3 and a half years.
The London stored silver supposedly held for unsecured silver ETF shareholders has seen a -8000 ton pull job. That's over -257 million ounces gone from London in the last three and a half years. That is well over the combined amounts of silver bullion The 1970s Hunt Brothers and the late 1990s Warren Buffet's Berkshire Hathaway stacked. Most of it likely went off to India and China.
But why?
Oh I don't know, how about record global demand for silver like these representative blue bars exploding higher year after year and the yellow annual silver supply bars not keeping up.
Hence raiding and scraping the COMEX and City of London for silver float.
And of course raiding gettable unsecured western gold piles for emerging central banks over the last 3.5 years especially.
Later in this week's Bullion Market Update we will cheerlead specifically for silver and its 2nd half of this 2024, examining possibilities using past spot gold silver ratio breakout analogs from the last 25 years to extrapolate potential moves to come in spot silver.
We'll also talk about seemingly ancient US financial history where the price of silver did a 400X multiple. And yea I am being facetious. There are still elderly people in their 90s today who lived through that entire 400X silver price move.
We'll look at how you might dare determine fair value for silver in such a wild bull market ride.
First let's swing over to Asia to hear from UBS and their acknowledgment that their 2024 gold price forecast was way too low, and have now rerated it for $2600 oz spot gold before the year ends.
And meanwhile UBS' high net worth investment clients have less than 1% allocation to gold and precious metals globally on average. Have a listen.
A few more years, huh?
That may prove to be an understatement unless we quickly rerate spot gold a handful of multiples, we are well off where the last time gold gave this global full fiat currency regime to a full accounting by manic spot price escalation in Jan 1980.
Supposedly this week, the 50 year petrodollar agreement between the US and Saudi Arabia ended. That 1974 agreement has often been pointed at one of the major planks used in flooding the world with fiat dollar denominated debt IOUs, otherwise know as US Treasuries, Bills, and Notes.
Google trends reflects that internet searchers had next to no clue about this, you can see the all time search spike on the right hand side over the two decades of Google search data.
Meanwhile in the 2008 GFC the Middle East like many nations in the emerging market world have been net buyers of official gold bullion.
I got a bridge to sell you, if you think this is all the gold that Saudi Arabia has.
This week, well known conservative economist Judy Shelton began pounding the twitter gold bug corner with her new book and said that the US Gold Reserve pile needs to be unleashed in the form of newly issued US gold bonds.
Maybe another time we'll get into her pitch, but I want to show how truly far off the rails we are from the old Jan 1980 level.
US Official Gold Reserves haven't changed since 1980 and at the time the then spot value of all the gold the USA claims to have covered in value 40% of the then outstanding debt piles of the US Treasury.
In order to do that now, either the spot gold price or the size of our supposed 8,133 metric tonnes of gold would need to multiply by a factor of 16 times.
Keep the 8,133 metric tonnes and simply reprice gold at 38,000 oz in other words.
You got people around the world buying into units of digital Bitcoin at about double that fait figure, the psychological road to sums that large for spot golf have already been paved by rationalizations most never thought possible prior.
US government spending, much of it deficit spending, is now nearly half of the entire GDP. Working for the government is about the only hiring sector in a bull market for now.
Do we not have an inkling yet how this debt avalanche is going to end?
The spot silver and gold markets were a mixed bag with gold leading higher and silver staying relatively flat on the week's spot price trading.
The spot silver price finished flat at $29.53 oz bid while the spot gold price closed up over thirty bucks at $2,332 oz bid.
The spot gold silver ratio climbed to briefly pierce 80 intra-week closing at 78.
Before we get into further analysis of the spot gold silver ratio in the 21st Century.
Let's have a brief look around the slow but surely failing US bank and US stock market bubble sectors.
Heads up, the phony facade's coming down.
Those are US regional banks trading again like trash this week.
Understandable the FDIC admits they have over $1/2 trillion in unrealized losses on their books still.
Bank loans from the stigmatized discount window are up, and yes $6 billion is admittedly in bank bucket shop balance sheets, often emergency bank lending rising higher often front runs bank failures galore that follow a la 2007 into 2008.
The major tech and largest cap stocks are having a bubble rally moment, meanwhile small caps, about half of them are technically zombie companies and the largest employers of the collective bunch.
About 1/4th of the beloved record nominal price setting S&P 500 is a handful of overpriced companies on virtually any sober metric you choose.
I'm sure AI and GPUs will save the economy from the garbage fundamentals I just flashed before your eyes.
The bloated S&P 500 and the spot Gold Price have a 1:1 parity date ahead in our futures. The 200 day moving average of the bloated S&P 500 is sitting just over $2,400 and rising. Where they will meet again, tough to say, but gold outperforming and being worth well more in spot price than the nominal S&P 500 index is what promises to follow for some time.
Onwards to silver in relation to its potential growing demand from the solar panel sector. The largest growth sector for industrial silver demand is not going away, in fact it is set to explode in the projected decade to unfold.
China is the leader, and the outrageous premiums they continue to happily pay above western spot price quotes is just evidence they need silver for solar and other critical industrial applications.
They are not the only nation in search of silver laced solar panel build outs. We got solar panel industry projections calling for a fiver fold in silver laced solar capacity by the year 2035. Good luck getting enough silver if spot prices don't ramp markedly higher.
Turning now to the spot Gold Silver Ratio breakdown from a few weeks ago. Basically if you look at the entire 21st Century spot Gold Silver Ratio history, whenever this technical breakdown occurs, spot silver got on a rapid performance tear.
Christopher Aaron of iGoldAdvisor posted this wonderful chart illustrating just that.
Citing the last 5 technical breakdowns of the spot Gold Silver Ratio in this 21st Century. And how they were all followed by large moves higher in the then silver spot price.
He simply took the averages of the last five times this occurred and extrapolated them onto the current silver market's potential if history were to rhyme. My sole contention with the timeline is simply the sheer amounts of spot price interventions we are constantly forced to endure in the long term silver bull camp.
But at some point, the Western world will wake up to what is happening and stop giving away silver float dirt cheaply to the east and begin betting on it as potential out-performer of gold. Whether that happens as quickly as this year or later. Well, place your expectations and long term bets I suppose.
In the long pull as Bunker Hunt liked to say, I'd suggest simply outright owning silver bullion for the long coming haul of this building bullion bull market.
For it is within 90 years old's lifetimes that silver did do a 400 bagger in its nominal spot price.
The 1933 low of 25¢ oz coincided with the still all-time highest spot Gold Silver Ratio ever hit, reaching over 132 at the time.
It was only late COVID March 2020 when the spot GSR ballooned to over 128 and silver spot dipped to to just under $12 oz
My point in all this is how would anyone holding silver over that 1933 to 1980 era have any idea how to judge whether silver was undervalued, fair valued, or overvalued.
Well historical financial data would help.
And thanks to Nick Laid of GoldChartsRUs.com for updating this S&P 500 divided by spot silver ratio chart covering the last 124 years of US financial history. We can garner a clue.
There is the 1933 to 1980 move for silver. Basically you could have ignored silver pretty much until they took it out of our circulating coinage. Jumped from the then overvalued US Stock market and rode it down to one tube per share threshold.
Basically a level almost reached during the 2011 silver bull market. A time when 20 oz of silver would afford you the entire S&P 500 share.
Here are a couple more charts illustrating that 20 oz silver for the S&P 500 era last enjoyed during the 1975 to 1985 timeline.
If you don't think financial history repeats then you probably don't know much about financial history.
If you like the idea of owning silver bullion over the bloated US stock market at the moment, you face the real potential of holding and eventually more than 9 folding your S&P 500 stock market buying power as this bloated boomer bubbles gives way to mark to market reality and a curse stock market era in the decade unfolding and coming.
That is a bet I am making and my time horizon is long bullion, and very patient.
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.
