(Kitco News) China has significantly stepped up its gold purchases from Russia amid a Western ban on Russian gold following its invasion of Ukraine.
China imported $108.8 million worth of Russian gold in July. That is a 750% jump from the previous month’s total of $12.7 million and an increase of 4,800% from $2.2 million reported during the same month a year ago, Russian media RBC reported citing Chinese customs data. The data listed included raw and semi-finished forms of gold.
More buying from China comes after the U.S., Britain, Canada, Japan, the EU, and Switzerland banned Russian gold exports following Russia’s invasion of Ukraine.
Earlier in August, it was reported that Russia is looking into its own international standard for precious metals after getting banned by the London Bullion Market Association (LBMA). And it could have a fixed price in national currencies. 
The country’s Finance Ministry said it was “critical” to create the new Moscow World Standard (MWS) to “normalize the functioning of the precious metals industry” and have an alternative to the LBMA.
Following Russia’s invasion of Ukraine, the LBMA also suspended its accreditation of Russian precious metals refiners, barring them from selling new products in London. The suspension was made official on March 7.
According to the Finance Ministry, Russia was the second highest gold producer by volume in 2021, with gold output rising by 9% to 343 tons. The precious metals industry in Russia accounts for around $25 billion a year. Continue reading →

Physical silver bars continue to drain from COMEX and London warehouse stockpiles. Lower spot prices are contributing to this.

Larger investors who hold deliverable bars aren’t throwing in the towel and dumping them back into the market. Instead, they continue to stack, much like retail investors buying the smaller coins, rounds and bars.

An attempt by Reddit users to create a “silver squeeze” in early 2021 marked the beginning of the year-and-a-half long trend of steadily declining bar inventories. The grassroots movement was an attempt to break the crooked price discovery scheme in silver.

Buyers were encouraged to purchase silver and take possession. The hope was that the tiny inventory supporting a mountain of paper derivative metal would disappear. Shorts would have to bid more and more for available bars in order to exit their positions and end the pain.

The buzz around the “silver squeeze” faded from the headlines over a year ago, but the draining of inventory continues.

As available stocks decline, the prices paid for deliverable bars in the cash market keep getting higher versus paper silver futures.

The mismatch in prices between the two markets is way outside of normal and should serve as a warning.

Buyers are paying up to get physical metal, and they are bearing the cost of storing large bars.

So far, traders on the short side don’t seem bothered by these troubling underlying fundamentals.

The past few months have been profitable for those making leveraged bets on lower prices.

What makes this setup interesting is that it is the speculators, not the commercial banks, who are heavily short. (Perhaps traders went to the Hamptons this summer and the trading algorithms they left on autopilot aren’t programmed to watch inventory levels.)

Futures market speculators are also not too quick on the uptake — generally speaking. Bullion bankers have a long history of total domination against them in futures trading.

Normally it is bankers and commercial hedgers who are short and specs who are long. The current positioning may be backward, but you can expect the winners will be the same people – those classified as the large commercial traders.

Commercial traders tend to position themselves correctly ahead of the next trend – and right now they are positioned for the silver market to turn up. Continue reading →

The price of silver hit a peak over $26.50 on March 8. It spent about a month and a half breaking down, and then the bottom fell out. It’s currently down from that peak almost 8 bucks.

Breaking Down Fundamental Silver Prices

However, the opposite has been happening to silver’s scarcity. First, let’s look at a chart of the silver market price and the silver fundamental price.

The market price is down a lot since that peak, but the fundamental price has moved sideways (ignoring the two spurious drops) and is now the same as on March 8.

Now let’s look at what the silver basis and silver cobasis are showing.

There has been a big run up in the cobasis (i.e. the measure of scarcity), since August 8. It has hit almost zero, which is the line of demarcation of backwardation.

This chart, by the way, shows the continuous basis and cobasis. This is not the near contract (i.e. December, which hit a cobasis near 1% on Thursday). The continuous basis is a smooth 6-month average duration synthetic contract, not subject to the volatility caused by contract expiry, which often manifests as temporary backwardation.

Our remarks? We haven’t seen a cobasis like this, in at least 7 years.

LIBOR Rates and Silver

But it’s bigger than that. Much bigger. That’s because the interest rate is higher now, than it has been since November 2008. Now, LIBOR is on a tear. Then, it was collapsing.

            Source: securitybenefit.com (who uses data from the Federal Reserve System)

To carry metal, a bank’s first step is to borrows dollars. Then it buys the metal and sells it forward. So, the basis is closely tied to the interest rate (we are still using LIBOR as an indicative rate).

When the interest rate is moving, we may find it more useful or more revealing to look at a chart which takes interest rates into account. It turns out that we do have such a chart. It is the lease rate*, which is LIBOR – forward rate (forward rate is a different way of looking at the basis).

*Note: Not to be confused with Monetary Metals’ true gold and silver lease rates, which are the rates investors earn when they lease gold and silver with us.

Here is the silver lease rate graph.

The lease rate, which is another way of looking at scarcity, is higher than at any time since the thick of the global financial crisis, in October 2008.

At that point, silver was trading under $10. And 2 ½ years later, its price quintupled to about $50.

The lease rate, LIBOR – GOFO, is based on arbitrage in the commercial bullion markets, again it has nothing to do with the interest rate Monetary Metals pays silver owners on their silver.

Silver Scarcity and the Future

Will that happen again soon? We don’t know (and neither does anyone else). But we can say with certainty that its scarcity has become serious.

This could be resolved two different ways. One, there could be selling of physical metal combined with a let up in buying. Two, the price could shoot up.

We think this is a good time to place a bet on silver.

Bet or no bet though, you can always earn interest on silver, (and gold) by opening a Monetary Metals account.

We will continue to keep a close eye on silver as the current situation unfolds.

© Monetary Metals 2022 Continue reading →

August 25, 2022  by SchiffGold  0   0Gold: Recent Delivery MonthGold has seen the largest delivery volume in 2022 with 33,593 contracts delivered so far and 244 remaining in open interest. Since 2020, only December and February last year recorded larger volumes.Figure: 1 Recent like-month delivery volumeUnlike past months, the large volume was not really driven by mid-month net new contracts. Activity was well below recent months with only 1,935 contracts opened for immediate delivery. It should be noted that this figure was negative up to 8 days past first notice so there was definitely still strength mid-month.Figure: 2 Cumulative Net New ContractsFrom a dollar volume perspective, this month was more than $1.1B larger than last August but still well below the records from summer 2020.Figure: 3 Notional DeliveriesAnother major event this month was the record net delivery of contracts from the banks. The previous record was set in April in the wake of the Ukraine/Russia conflict. This month is nearly 30% higher with 8,340 contracts in net delivery volume. BofA is still a big player as they buy back about half of the metal they delivered out last month.Figure: 4 House Account ActivityIt’s very possible that banks are becoming more active as their inventory dwindles. As noted in the stock report, gold has been leaving Comex vaults at an unprecedented pace. While the last few days have seen inflows into Eligible, the removal from Registered is striking. Since May 1st, 4.17M ounces have left Registered. Nearly 13% of that occurred in the last two days alone as 540k ounces left (see below).Figure: 5 Recent Monthly Stock ChangeGold: Next Delivery MonthJumping ahead to September shows elevated open interest. It is currently below both March and May of this year, but those months showed exceptionally high open interest at this point in the contract. Furthermore, both March and May were influenced by the conflict in Ukraine. The elevated open interest this month does not (yet) have a clear driver.Figure: 6 Open Interest CountdownThe chart below shows deliveries for the last several minor months. Delivery volume has been quite elevated. The action in minor months can be heavily influenced by mid-month activity. Thus, regardless of the open interest at First Notice next week, it will be a few weeks before the full delivery volume will be known.Figure: 7 Historical DeliveriesSpreadsJumping out to the October contract shows the market in strong Contango, higher even than the August contract at a similar point. The current spread between October and December is nearly $10.Figure: 8 Futures SpreadsThe strong contango in the futures curve is one reason the spot market flipped from backwardation to contango at the beginning of the month (shown below). The analysis last month highlighted the market in strong backwardation for an extended period. Once August went into delivery, the futures contract went from August to October. The spot market flipped but the spread is already coming down quickly. The backwardation last month could be one reason for the heavy physical activity noted above. It will be interesting to see if the spread for October drops into negative territory over the next few weeks.Figure: 9 Spot vs FuturesSilver: Recent Delivery MonthSilver is still not seeing the same strength as gold. Delivery volume in August is the smallest for a minor month going back to January 2021. With only 74 contracts open, August will finish well below average.Figure: 10 Recent like-month delivery volumeLower mid-month activity is one reason for this drop. As shown below, only about 330 contracts were opened for immediate delivery. This is about 25% of the volume seen in February contract of this year.Figure: 11 Cumulative Net New ContractsThe banks are also not nearly as active. BofA restocked its delivery volume out last month (606 vs 600), but the other banks combined are only delivering 235 contracts this month.Figure: 12 House Account ActivityThis August will be the weakest dollar volume since August 2018 with only $105M delivered, less than half the amount from last August.Figure: 13 Notional DeliveriesOne area where silver continues to impress is the drain on Registered. Outflows continue from Registered with 2.77M ounces out on the most recent day. Registered is down more than 65% since the all-time peak in December 2020. At the current pace, Registered will be empty within a year!Figure: 14 Recent Monthly Stock ChangeSilver: Next Delivery MonthSeptember silver is starting to show signs of life! With 4 days to go, September has at least entered the pack. A lot will still happen in the next few days, but recent activity could be a good sign given where the contract stood a few weeks ago.Figure: 15 Open Interest CountdownLast month finished quite weak so it would be good to see a turnaround.Figure: 16 Historical DeliveriesThe market is still in strong contango but has been dipping down as the contract approaches First Notice.Figure: 17 Roll CostWhile the futures market remains in contango, the spot market is in solid backwardation. The market is in the strongest backwardation since silver first saw its massive price spike back in summer 2020.Figure: 18 Spot vs FuturesWrapping upThe gold price clearly does not reflect all the activity going on under the surface. The demand for physical is really starting to materialize with no clear catalyst (e.g., Covid lockdowns or Ukraine/Russia war). The Comex data is important because it will likely be the first place to show stress in the gold/silver market.The price is currently contained by an unlimited paper supply that can always be created to meet paper demand. The COTs report shows that this isn’t even needed as Managed Money has gone cold on gold. Things start to change when physical supply cannot be found to meet physical demand. The data is pointing to this as a real possibility in both gold and silver. The outflow of metal combined with the increased delivery volume in gold points to something happening underneath the surface while the paper futures market still plays the same old game. Buckle up! Things could get very interesting in the months ahead!Figure: 19 Annual DeliveriesData Source: https://www.cmegroup.com/Data Updated: Nightly around 11PM EasternLast Updated: Aug 24, 2022Gold and Silver interactive charts and graphs can be found on the Exploring Finance dashboard: https://exploringfinance.shinyapps.io/goldsilver/Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today! Continue reading →

(Kitco News) The U.S. dollar has been the main culprit holding gold back this summer, but Wells Fargo still projects the precious metal to end the year above $2,000 an ounce.
Despite this week’s gains, gold is still trading below $1,800 an ounce as markets await Federal Reserve Chair Jerome Powell’s keynote speech at the Jackson Hole symposium on Friday. At the time of writing, spot gold was trading just above the $1,752 an ounce level, up 0.22% on the day.
If not for the U.S. dollar index at 20-year highs, gold would be around $150 higher than its current trading levels, Wells Fargo’s real asset strategy head John LaForge told Kitco News.
“I’m still shocked that gold doesn’t want to move. The U.S. dollar is what’s holding gold back. Gold would have been closer to $1,900 if not for the move in the dollar,” LaForge said on Wednesday. “Gold is still that chameleon asset. For six months, it’s moving with real rates. And just when you figured that out, it’s moving with the dollar. And just when you figure that out, it’s moving with some crisis. For something so muted, it’s amazing how often it switches teams.”
Wells Fargo’s year-end target remains $2,000- $2,100 an ounce, but if the U.S. dollar keeps surprising on the upside, that target could be unachievable.
Over the summer, the dollar has become the popular safe-haven play as other economies struggle with more problematic inflation and growth concerns. And the U.S. dollar could hold on to its strength for the next six months, according to LaForge.
“Our base case is that the U.S. will enter a recession somewhere in October or November, which will last until the middle of next year. Typically the dollar loses strength when signals say we are coming out of recession. So, if our base case is correct, you could see the dollar start acting weaker in Q1 of next year in anticipation of that,” he described.
Until then, the dollar will keep acting as that defensive asset.
For gold, a recession doesn’t necessarily mean a bad thing. But it all depends on the kind of recession the U.S. will see. A mild one could be beneficial for the gold price, LaForge noted.
On the inflation side, Wells Fargo does not see price pressures falling back to the Federal Reserve’s 2% target. Longer-term inflation looks closer to 3%-4%.
Following Jackson Hole and the Fed’s September meeting, the U.S. central bank will stick to much more measured rate hikes of around 50 basis points, following a set of 75-basis-point jumps. But its overall priority will remain with battling inflation, LaForge said.
“They are not going to change much. You might hear a word or two at Jackson Hole. But no doubt that the number one concern will be inflation. We only had one print that showed that maybe we peaked,” he stated.
Another asset play on LaForge’s radar is the crypto space after its fourth bear market. “I’d argue we reached the point with crypto where it has matured enough to prove there is value there,” he said.
The last major speed bump for this market is regulation. And that could clear up within the next year, which will impact the price. “At this juncture, regulation is the number one thing. There are systems that the government wants to control. And money is a big one. There’s a bit of a fight going on,” LaForge said.
Regulation needs to be light enough to allow critical characteristics like independence and decentralization to remain at the core of crypto.
“What’s looming in the next couple of years is the government coming in and regulating. The question is, how much? Do they take a light-glove approach as they did with the internet or a heavy-handed one? You have the example of the internet being regulated lightly. But that was with information and communications, which is important, but arguably not as important as money,” LaForge highlighted. “If regulation is light-gloved, this is a whole new asset class. And we’ll know that within the next year, and we’ll start seeing it in the price.” Continue reading →