But where could this 'venue' possibly be? 40.7m oz is 1,266 tonnes of physical. That is 4.9% of global annual production.
For the last few months, Andrew Maguire has been saying that the Fed and Canadian Central Bank are the only gold/silver net shorts in town. Canada famously sold all its gold in the 90s and the Fed has (equally famously) never been audited. Who knows what they really hold?
What if the Fed and the Canadians have been sitting on a few thousand tonnes of silver that has not been disclosed? In 2000, silver was $5/oz. at that time 1,000 tonnes was roughly $160m, which in terms of a Central Bank balance sheet gets lost in the roundings of 'other assets'. They would not have had any obligation to disclose it separately.
If this is where the physical is coming from, it actually simplifies your idea. Instead of buying, 'cheaply', on 'another venue', (I have problems with the idea that anyone would be selling cheaply and I have no idea where such a venue might be) The Fed and Canadian Central Bank are simply selling from their previously undisclosed stock.
Instead of "other venue" perhaps I should say "non-comex/lbma venue". Any "other venue" would include all other exchanges, metal brokers, banks or your local coin shop ... the whole kit and kaboodle. If you buy from any of those entities, the first thing they do is look at the comex/lbma price to determine their bid/ask as comex/lbma is, for now, the price setter.
IMHO comparing a transaction size to mining supply is a red herring. Why? Because mine supply is a puny amount relative to vaulted silver and transactions are settled by vaulted silver. I wrote a piece on that a couple years ago ... mine supply is like a garden hose running into 25 Olympic swimming pools.
Frankly, someone selling in millions of ounces is not buying it in dribs and drabs... it would be far too much effort AND it would all have to be in the form of good delivery bars. Plus we know LCSs recently were overstocked and we also know there were no 'off market' sellers, earlier this year, when Reliant was trying to buy 3,000 tonnes (so they bought it on COMEX and took delivery). Yet in the last 6 months, an HSBC 'customer' has (very strategically) dumped 1,000 tonnes.
The relentless selling does not appear to be a commercial act (HSBC would have known about Reliant), much more likely, it is a political act (price suppression/capping) and if Andrew Maguire is right in saying the selling has come from US/Canada, then the only real option left is that they are selling from stock to try and control the market.
This is not fanciful, there are some very large historic transfers that we know about. For example, 25 June 1968:
"The Treasury Department today transferred 165,000,000 fine troy ounces of silver to the stockpiles established pursuant to the Strategic and Critical Materials Stock Piling Act."
I can't immediately find reliable info of current holdings.
The US has been dumping oil from the strategic reserve, why not silver as well? Currently, silver is not classified as a 'strategic' or as a 'critical' resource, so there is no issue in selling whatever (or whenever) they want.
>mine supply is a puny amount relative to vaulted silver
Thank you for noting that. Can you link to your previous piece? I have tried to find accurate figures on that recently, and best I could arrive at was that vaulted silver at about 32,000 tonnes ( 1 billion oz) is about equal to the sum of amount mined annually 25,800 tonnes in 2023 plus recycled Ag 5,500 tonnes.
I agree with your thesis that there will be a rush for physical at the day of reckoning. However, let's split hairs on physical vs paper trading. Regarding London spot ... I've never thought of spot sales as true physical transactions since it is unallocated and metal is rarely moved from the vaults. After reading your piece, apparently offsetting intraday volume isn't subsequently cleared resulting in the 10:1 ratio. That also smells like paper trading.
To further fuzz up the distinction between physical and paper ... consider comex traders like Wells Fargo's house account who buy and sell A LOT of physical metal but have kept their cumulative net change at zero for years. They flip metal during the delivery period which is a providence only for the unlevered trader. Physical inventory in the vault is essentially a requisite to short during this period. They never (or rarely) add or remove physical so this type of trading is just a step over paper trading as the net inventory change is zero. I'd guess about half to 2/3 of comex metal is flipped as such (although not at the frequency of Wells).
So what's a pure physical trade? I stand for delivery and remove it from the vault. It's gone from the market.
I'm saying spot isn't much more than another form of a claim check. Any futures contract is the same as both could theoretically be used to take their metal and go home. As you say, that'll work as long as they decide to remove metal before the rush for physical is much advanced.
COMEX futures contracts allow for cash settlement according to the COMEX Rule Book.
A London spot contract is an immediate ownership contract and the LBMA states bar delivery is demand date + 2 days Loco London. There is no mention of cash settlement in the LBMA's Guide Book although we do not have the OTC contracts.
London spot contracts can be delivered anywhere in the world on agreement between the parties.
However, we can see the 5B to 8B oz of spot/cash contract positions that these contracts far exceed available vaulted refined silver.
You've absorbed an absolutely inconceivable amount of information. You've inspired folks. You should be and feel proud.
You are also a thorn that They earned.
Hey look!! JPM is stacking. Ha!
But where could this 'venue' possibly be? 40.7m oz is 1,266 tonnes of physical. That is 4.9% of global annual production.
For the last few months, Andrew Maguire has been saying that the Fed and Canadian Central Bank are the only gold/silver net shorts in town. Canada famously sold all its gold in the 90s and the Fed has (equally famously) never been audited. Who knows what they really hold?
What if the Fed and the Canadians have been sitting on a few thousand tonnes of silver that has not been disclosed? In 2000, silver was $5/oz. at that time 1,000 tonnes was roughly $160m, which in terms of a Central Bank balance sheet gets lost in the roundings of 'other assets'. They would not have had any obligation to disclose it separately.
If this is where the physical is coming from, it actually simplifies your idea. Instead of buying, 'cheaply', on 'another venue', (I have problems with the idea that anyone would be selling cheaply and I have no idea where such a venue might be) The Fed and Canadian Central Bank are simply selling from their previously undisclosed stock.
Instead of "other venue" perhaps I should say "non-comex/lbma venue". Any "other venue" would include all other exchanges, metal brokers, banks or your local coin shop ... the whole kit and kaboodle. If you buy from any of those entities, the first thing they do is look at the comex/lbma price to determine their bid/ask as comex/lbma is, for now, the price setter.
IMHO comparing a transaction size to mining supply is a red herring. Why? Because mine supply is a puny amount relative to vaulted silver and transactions are settled by vaulted silver. I wrote a piece on that a couple years ago ... mine supply is like a garden hose running into 25 Olympic swimming pools.
Thanks Michael.
Frankly, someone selling in millions of ounces is not buying it in dribs and drabs... it would be far too much effort AND it would all have to be in the form of good delivery bars. Plus we know LCSs recently were overstocked and we also know there were no 'off market' sellers, earlier this year, when Reliant was trying to buy 3,000 tonnes (so they bought it on COMEX and took delivery). Yet in the last 6 months, an HSBC 'customer' has (very strategically) dumped 1,000 tonnes.
The relentless selling does not appear to be a commercial act (HSBC would have known about Reliant), much more likely, it is a political act (price suppression/capping) and if Andrew Maguire is right in saying the selling has come from US/Canada, then the only real option left is that they are selling from stock to try and control the market.
This is not fanciful, there are some very large historic transfers that we know about. For example, 25 June 1968:
"The Treasury Department today transferred 165,000,000 fine troy ounces of silver to the stockpiles established pursuant to the Strategic and Critical Materials Stock Piling Act."
I can't immediately find reliable info of current holdings.
The US has been dumping oil from the strategic reserve, why not silver as well? Currently, silver is not classified as a 'strategic' or as a 'critical' resource, so there is no issue in selling whatever (or whenever) they want.
>mine supply is a puny amount relative to vaulted silver
Thank you for noting that. Can you link to your previous piece? I have tried to find accurate figures on that recently, and best I could arrive at was that vaulted silver at about 32,000 tonnes ( 1 billion oz) is about equal to the sum of amount mined annually 25,800 tonnes in 2023 plus recycled Ag 5,500 tonnes.
Thanks Michael.
HSBC appears to be one of the banks begging for silver at the Shanghai Futures Exchange.
https://jensendavid.substack.com/p/silver-liquidity-on-the-shanghai
Interesting times.
I agree with your thesis that there will be a rush for physical at the day of reckoning. However, let's split hairs on physical vs paper trading. Regarding London spot ... I've never thought of spot sales as true physical transactions since it is unallocated and metal is rarely moved from the vaults. After reading your piece, apparently offsetting intraday volume isn't subsequently cleared resulting in the 10:1 ratio. That also smells like paper trading.
To further fuzz up the distinction between physical and paper ... consider comex traders like Wells Fargo's house account who buy and sell A LOT of physical metal but have kept their cumulative net change at zero for years. They flip metal during the delivery period which is a providence only for the unlevered trader. Physical inventory in the vault is essentially a requisite to short during this period. They never (or rarely) add or remove physical so this type of trading is just a step over paper trading as the net inventory change is zero. I'd guess about half to 2/3 of comex metal is flipped as such (although not at the frequency of Wells).
So what's a pure physical trade? I stand for delivery and remove it from the vault. It's gone from the market.
I'm saying spot isn't much more than another form of a claim check. Any futures contract is the same as both could theoretically be used to take their metal and go home. As you say, that'll work as long as they decide to remove metal before the rush for physical is much advanced.
COMEX futures contracts allow for cash settlement according to the COMEX Rule Book.
A London spot contract is an immediate ownership contract and the LBMA states bar delivery is demand date + 2 days Loco London. There is no mention of cash settlement in the LBMA's Guide Book although we do not have the OTC contracts.
London spot contracts can be delivered anywhere in the world on agreement between the parties.
However, we can see the 5B to 8B oz of spot/cash contract positions that these contracts far exceed available vaulted refined silver.
Non-price setting venue = Black market?
In this context I mean any other venue ... because other venues (for now) take comex/LBMA as the price setter.