Physical gold and silver shortage

[pmbug]

...
Now, a spike in so-called lease rates in London this week signals that an increasingly frenetic global hunt for bullion is under way as major dealers seek to shift metal to the US before any tariffs are imposed.

Lease rates reflect the return that holders of bullion in London’s vaults can get by loaning their metal out to other buyers on a short-term basis. Normally, the returns on offer sit close to zero, but this week they’ve surged to historic levels, with profits on one-month lease rates exceeding 3.5% on an annualized basis.

That’s the highest level since at least 2002, and it signals surging demand for metal in London’s vaults. There have been similarly extreme moves in the silver market, and some analysts and traders warn that there may not be enough freely available metal to meet dealers’ needs.
...

https://www.bloomberg.com/news/articles ... in-london/

[Lemon Thrower]

Silver is still well below its ATH of $49.51. Gold is around $2700, about $90 below its ATH.

[pmbug]

Correct. The article is highlighting the stress in the paper market system. The threat of Trump's tariffs are causing a surge of importation in physical metal. The shorts in the COMEX are facing a big problem with EFP premiums. The importation surge is stressing the LBMA. There isn't sufficient metal to satisfy the demand presently. I posted more about this issue here (starting at post #91 and running through the end of the page):

https://www.pmbug.com/threads/silversqu ... ost-121232

[Cu Penny Hoarder]

How many times have we heard the "shortage" BS story over and over again?

If there were a TRUE shortage PM prices would be going sky high with all the speculators jumping in.

Even when there is a real shortage (very rare), it always gets settled somehow or corrects itself in about 1-2 months, then back to business as usual.

[68Camaro]

Shortage is relative. You can still call a temporary narrowing of the market a shortage. It's not the same as the greater long term physical supply shortfall that many of us think of a "real" Shortage that does not see a recovery for years, if ever. But I understand using the term. Just like a Shortage of eggs. We have a Shortage of eggs, in the moment. Long term, they will hatch more laying chickens and overcome that Shortage. It's still there though.

[Lemon Thrower]

and premiums are not moving so this is just propaganda about the so-called physical market in London that is never settled with physical.

[youtube]http://youtu.be/vWz9VN40nCA?si=5wH2wsCumMz5EW8D&t=48[/youtube]

[Recyclersteve]

How many times have we heard the "shortage" BS story over and over again?

If there were a TRUE shortage PM prices would be going sky high with all the speculators jumping in.

Even when there is a real shortage (very rare), it always gets settled somehow or corrects itself in about 1-2 months, then back to business as usual.

If silver were to rocket higher (say 50-100%) in short order, I’d actually consider selling short the silver exchange traded fund in the stock market (Symbol: SLV). When it rockets higher, I don’t really ever remember it staying sharply higher for long.

This reminds me a bit of when the stock Gamestop (Ticker: GME) went SHARPLY HIGHER, but then came back down very sharply. By the way, the movie Dumb Money was about GME. Watch the trailer and you might want to see the movie. I saw it probably 4-5 times, at least. I’m a former stock broker (was in the biz almost 20 years) and found it fascinating.

[pmbug]

GS ASSIGNS 10% PROBABILITY TO 10% EFFECTIVE TARIFF ON #GOLD BEING INTRODUCED WITHIN THE NEXT 12 MONTHS. MARKET IS PRICING LOWER PROBABILITY-JUST ABOVE 10%-OF A 10% US TARIFF ON GOLD.
-based on efp changes vs actual price differential if it happened.

If they tariff gold that would be very price disruptive. Higher.
@profitsplusid

Silver is much higher
@ArcadiaEconomic

https://x.com/Sorenthek/status/1881312664921481227

The market isn't fully pricing in the risk of a tariff. If Trump actually pushes through a tariff on gold/silver it's going to cause some chaos in the paper markets.

[Cu Penny Hoarder]

and premiums are not moving so this is just propaganda about the so-called physical market in London that is never settled with physical.

Yes, that's one thing I forgot to mention. Premiums tell you all you need to know.

[Lemon Thrower]

Perhaps becaue we don't actually import much gold and silver? We already produce a decent amount domestically, well in excess of what is "consumed," and the rest is stored in a vault. Does it matter if that vault is in London, Switzerland, or NYC?

I don't think there will actually be many tariffs. I think the threat of tariffs is just a tool to get countries that are sticking us with their criminals, mental patients, gang members, and fentanyl, or countries that are free riding and not paying their fair share of defense costs, to act appropriately.

Here is an article discussing tariffs in connection with Mexico. Regardless of how you feel about the policy issues, the article does a good job of demonstrating the weight that tariff rhetoric has on the issue.
https://www.zerohedge.com/geopolitical/ ... ation-plan

[pmbug]

[68Camaro]

Hmmmm. It's an interesting observation. One that may later prove to be the canary in the gold mine...

[shinnosuke]

Isn't the narrative that a shortage is good? Then the price of gold will rise, and we can finally tell cousin Ralph to shut up at the family Thanksgiving get-together. You know how Ralph loved to poke fun at us for believing in good ol' gold instead of credit default swaps or other fancy-pants derivatives. Ralph always seemed too dense to do so well at that NY stock brokerage like he did.

[pmbug]

Reuters (no paywall) report:

London bullion market players are racing to borrow gold from central banks, which store bullion in London, following a surge in gold deliveries to the United States on speculation of potential import tariffs there, two sources familiar with the matter said.

The minimum waiting time to load gold out of the Bank of England, which stores gold for central banks, has reached four weeks, one of the sources said. In normal times, the release time is a few days or a week.

The BoE declined to comment when asked about the queue.
...
"The key with the BoE is that they are not a commercial vault so not prepared to handle the onslaught of gold borrowing banks are requesting from the central banks," said Robert Gottlieb, an industry expert and former head of precious metals at Koch Supply and Trading.

The size of so-called Loco London free float, the amount of gold readily available to the London OTC market stored in London, has fallen after the jump in supplies to New York.
...

More:
https://www.reuters.com/world/uk/london ... 025-01-29/

[Lemon Thrower]

I don't think this has anything to do with imagined tariffs but rather the BOE itself.

That said, gold is closer to $2800 than $2700 today and silver is over $31 again (finally)

[68Camaro]

This is another case of a "shortage" not being so much of an actual shortage as a possible case of a central bank claiming they have X amount of gold reserves when they either don't, or else have committed them to someone else (leased or sold) without disclosing it. I don't buy an argument that a bank vault can't figure out how to ship their product when requested.

[Lemon Thrower]

This is another case of a "shortage" not being so much of an actual shortage as a possible case of a central bank claiming they have X amount of gold reserves when they either don't.

EXACTLY

[pmbug]

The London Bullion Market Association (LBMA) said on Thursday it is liaising with CME Group and US authorities on the significant premium of COMEX gold to the London market.
...

https://www.mining.com/web/lbma-liaisin ... d-premium/

What exactly are they "liaising" about?

[pmbug]

LBMA held a webinar this morning. I listened in. I posted notes on what I got out of it here:

https://www.pmbug.com/threads/bank-of-e ... ost-123954

[pmbug]

Silver: Bank says “There are increasing Risks of a Short-Squeeze” in London

ANZ (Australia and New Zealand Banking Group) is one of the largest financial institutions in the Asia-Pacific region, operating in 33 markets with over 180 years of history. As a major player in global financial markets with extensive operations throughout Asia, ANZ has unique insights into both Western and Eastern precious metals demand, particularly in the gold and silver markets.
...
ANZ is unique in that they have a foot in both parts of the world. Being linguistically western and geographically eastern, they can provide more timely observations on Asian gold and silver demand.

More importantly, as we shall see here, they are somewhat less constricted in their ability to make frank statements about the supply/demand situation as it pertains to LBMA without sounding like Cassandras. The shortage of silver availability is real. It is persistent and there is likely no help coming for short players without higher prices.

1- Summary/Overview: Transatlantic Dislocation

On March 18th, ANZ Bank published their periodic Precious Metals report. This particular one seemed far from routine and made a point of focusing on Silver. It specifically emphasized physical market stress, supply dislocations, and investment demand in its analysis.
...

More:
https://www.scottsdalemint.com/articles ... etf-surge/

[68Camaro]

There is so much going on with the silver market that it is difficult for an average joe to accumulate the right set of factual data in a timely enough manner to allow for a correct interpretation of what is happening in real time. In hindsight we can usually understand it, but that is of limited value for any kind of trading purposes.

After having been outwitted and out maneuvered by the big players time and again, I'm left with these convictions: 1) there is (generally) and has been (for many years) a supply deficit (production + scrap) relative to demand, 2) both industrial use (which tends to destroy a certain amount of production as non recoverable silver trash) and investment (coin and small bar) demand have been increasing with no signs that will reverse for any length of time, 3) while it is my belief that silver is way undervalued, that belief can be challenged over a long enough time by forces with far greater powers and vision that trying to trade the market is highly risky for a small investor and more prone to failure than not, 4) but, I believe (proven so far, in my case, over 16 years of activity) that a long term "buy the dip and hold - limited selling" approach will eventually show big rewards.

But extreme patience (still more) is required.

[pmbug]

LBMA is running low on free float (available vaulted inventory). #silversqueeze is ramping up again on social media (X, Reddit, etc.). Folks are planning on buying PSLV on March 31 to try and fight the shorting tamp downs that are keeping PSLV's premium to NAV under the threshold that allows (forces?) PSLV to buy London Good Delivery silver bars (which are becoming unobtanium).

[68Camaro]

Hamm. If you own PSLV might be a good day to sell (and maybe buy back later).

[68Camaro]

But I'm struggling to understand how buying PLSV forces Sprott to do anything. They already own the silver in the fund and afaik they haven't announced a new expansion of the offering (new shares). It's not like SLV.

[pmbug]

But I'm struggling to understand how buying PLSV forces Sprott to do anything. They already own the silver in the fund and afaik they haven't announced a new expansion of the offering (new shares). It's not like SLV.

As I understand it (and I'm not an expert on PSLV prospectus/management), Sprott Assent Management can issue new units of the trust (and subsequently buy LGD silver bars to back the new units that are sold) when the premium to NAV exceeds a certain threshold. Trading activity on PSLV over the last couple of weeks has seen massive intraday shorting activity whenever the premium to NAV rose too much. #silversqueeze peeps want to squeeze the short trading desk on the last day of the month and quarter.