Category Archives: Silver

The euro has dived to its lowest level against the dollar in 20 years, underlining the sense of foreboding in the 19 European countries that use it. (Michael Probst / Associated Press)The euro has fallen below parity with the dollar, diving to its lowest level in 20 years and ending a one-to-one exchange rate with the U.S. currency.It’s a psychological barrier in the markets, and the slide in values underlines the sense of foreboding in the 19 European countries that use the euro as they struggle with an energy crisis caused by Russia’s war in Ukraine.Here’s why the euro’s slide is happening and what impact it could have:What does euro and dollar parity mean?It means the European and U.S. currencies are worth the same amount. While constantly changing, the euro has dropped just below a value of $1 this week.A currency’s exchange rate can be seen as a judgment on economic prospects, and Europe’s have been fading. Expectations that the economy would see a rebound after turning the corner from the COVID-19 pandemic have been replaced by recession predictions.More than anything, high energy prices and record inflation are to blame. Europe is far more dependent on Russian oil and natural gas than the United States to keep industry humming and generate electricity. Fears that the war in Ukraine will lead to a loss of Russian oil on global markets have pushed oil prices higher. And Russia has been cutting back natural gas supplies to the European Union, which EU leaders describe as retaliation for sanctions on Russia and weapons deliveries to Ukraine.Energy prices have driven inflation in the Eurozone to a record 8.9% in July, making everything from groceries to utility bills more expensive. They also have raised fears about governments needing to ration natural gas to industries such as steel, glassmaking and agriculture if Russia further reduces or shuts off the gas taps completely.The sense of doom increased as Russia reduced the flows through the Nord Stream 1 pipeline to Germany to 20% of capacity and said it would shut it down for three days next week for “routine maintenance” at a compressor station.Natural gas prices on Europe’s TTF benchmark have soared to record highs amid dwindling supplies, fears of further cutoffs and strong demand.“If you think Euro at parity is cheap, think again,” Robin Brooks, chief economist at the Institute of International Finance banking trade group, tweeted Monday. “German manufacturing lost access to cheap Russian energy & thus its competitive edge.”“Global recession is coming,” he said in a second tweet.When was the last time a euro was worth less than a dollar?The euro was last valued below $1 on July 15, 2002.The European currency hit its all-time high of $1.18 shortly after its launch on Jan. 1, 1999, but then began a long slide, falling through the $1 mark in February 2000 and hitting a record low of 82.3 cents in October 2000. It rose above parity in 2002 as large trade deficits and accounting scandals on Wall Street weighed on the dollar.Then as now, what appears to be a euro story is also in many ways a dollar story. That’s because the U.S. dollar is still the world’s dominant currency for trade and central bank reserves. And the dollar has been hitting 20-year highs against the currencies of its major trading partners, not just the euro.The dollar is also benefiting from its status as a haven for investors in times of uncertainty.Why is the euro falling?Many analysts attribute the euro’s slide to expectations of rapid interest rate increases by the U.S. Federal Reserve to combat inflation at close to 40-year highs.As the Fed raises interest rates, the rates on interest-bearing investments tend to rise as well. If the Fed raises rates more than the European Central Bank, higher interest returns will attract investor money from euros into dollar-denominated investments. Those investors will have to sell euros and buy dollars to buy those holdings. That drives the euro down and the dollar up.Last month, the European Central Bank raised interest rates for the first time in 11 years by a larger-than-expected half-percentage point. It is expected to add another increase in September. But if the economy sinks into recession, that could halt the European Central Bank’s series of rate increases.Meanwhile, the U.S. economy looks more robust, meaning the Fed could go on tightening — and widen the rate gap.Who wins?American tourists in Europe will find cheaper hotel and restaurant bills and admission tickets. The weaker euro could make European export goods more competitive on price in the United States. The U.S. and the EU are major trade partners, so the exchange rate shift will get noticed.In the U.S., a stronger dollar means lower prices on imported goods — from cars and computers to toys and medical equipment — which could help moderate inflation.Who loses?American companies that do a lot of business in Europe will see the revenue from those businesses shrink when and if they bring those earnings back to the United States. If euro earnings remain in Europe to cover costs there, the exchange rate becomes less of an issue.A key worry for the United States is that a stronger dollar makes U.S.-made products more expensive in overseas markets, widening the trade deficit and reducing economic output, while giving foreign products a price edge in the United States.A weaker euro can be a headache for the European Central Bank because it can mean higher prices for imported goods, particularly oil, which is priced in dollars. The ECB is already being pulled in different directions: It is raising interest rates, the typical medicine for inflation, but higher rates also can slow economic growth.This story originally appeared in Los Angeles Times. Continue reading →

(Kitco News) With all eyes set on Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium on Friday, JPMorgan expects the next rate increase to be the last big hike of the tightening cycle. JPMorgan CEO Jamie Dimon also warns that “something worse” than a recession could be coming.
The last time the Fed could surprise markets with an oversized rate hike would be at its upcoming September meeting, JPMorgan Chase & Co. strategists said in a note Monday.
“We expect another outsized Fed hike in September, but post that, we would look for the Fed not to surprise the markets on the hawkish side again,” they wrote strategists.
The end of the aggressive tightening pace could help risk-on assets recover during the second half of the year.
In the meantime, Dimon shared his outlook on the economy in a client call earlier in August. And it was quite uncertain.
“What is out there? There are storm clouds. Rates, QT, oil, Ukraine, war, China. If I had to put odds: soft landing 10%. Harder landing, mild recession, 20%, 30%. Harder recession, 20%, 30%. And maybe something worse at 20% to 30%,” Dimon explained. “It is a bad mistake to say ‘here is my single point forecast.'”
Goldman Sachs also shared its take on the impact of global monetary policy tightening in a note Monday, stating that major economies won’t experience recessions over the next 12 months.
“Their resilience supports our forecast that no major economy will enter a monetary policy-driven recession over the next year,” economists led by Jan Hatzius wrote in the note. “Coupled with the persistence in inflation and its drivers, this resilience suggests some upside risk to terminal rates among the later hikers relative to current market pricing.”
One of the reasons behind the forecast is the state of the labor markets, which are still going strong.
This week’s big catalyst is Fed Chair Powell’s keynote at the Jackson Hole titled ‘Economic Outlook,’ which is scheduled for Friday.
Markets remain divided on whether the Fed will hike rates by 50 or 75 basis points at its September meeting. The CME’s FedWatch Tool shows a 56.5% probability of a 50bps hike and a 43.5% chance of a 75bps increase.
The FOMC meeting minutes from July showed that Fed officials agree on the need to slow down the tightening cycle eventually. Still, they believe the Fed needs to see how its rate hikes impact inflation. Continue reading →

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Silver supplies will be depleted and industrial demand will “suck up all the silver that’s available,” over the next ten years, causing silver prices to rise, and making it the best investment in decades, according to David Morgan, Founder and Author of The Morgan Report.

“If you’ve got a long time horizon, like ten years or more, I can’t think of something that would be better than a silver investment,” he said. “Silver will shine at some point… but it’s probably going to take a natural corner… a natural corner is when industry alone sucks up all the silver that’s available and there isn’t any left.”

Morgan told David Lin, Anchor and Producer at Kitco News, that the silver supply could run out within a few decades.

“The [U.S. Geological Survey] said that silver would be the first element on the periodic table that would be in such short supply, and that was a few years back,” he said. “Just the industrial side alone is probably going to take all the silver available at some point in time.”

Supply Crunch

Commodities like base metals have fallen in price over the year, with copper down 18.4 percent and lead down 8.3 percent. Morgan suggested that silver, which is often a biproduct of base metal mining, will suffer supply-wise from a fall in the price of base metals, since there would be less incentive to mine.

“Seventy-percent of silver is a result of base metal mining,” he explained. “If that is down, and down noticeably, then that takes a great deal of silver supply off the market.”

Morgan stated that rising energy costs would limit silver mining as the world’s oil reserves are depleted.

“We are at, or maybe just past, the energy cliff,” he said. “I’m a big believer in the peak oil situation. What we’re seeing is inefficiencies in the fracking sector. There are very few places that fracking makes sense from an economic standpoint. And then you’re seeing depletion that’s taking place rapidly throughout different parts of the world… that means higher oil prices.”

Demand Surge

Pointing to growing industrial usage of silver, in areas from photovoltaics to semiconductors, Morgan said that applications of silver in industry will continue to grow, squeezing the available stock.

“The Silver Institute put on their pie chart that the solar uses in 2019 was about 9 percent of the silver industry, and now it’s probably around twelve, and that’s going to continue to increase,” he said. “You may recall that there was a statement made by the U.S. Mint that there was a worldwide silver shortage, and that came from the Mint Master of the U.S. Mint. He quickly retracted that statement. I don’t think there is a worldwide silver shortage. It’s just that if you look at what the mint is producing now, they’re not able to keep up with demand whatsoever.”

Morgan added that there are no good industrial substitutes for silver.

“Nothing reflects light as well as silver, and nothing conducts electricity as well as silver,” he said. “Most silver applications are absolutely essential and irreplaceable. There is no substitute.”

To find out Morgan’s short-term price target for silver, watch the video above.

Follow David Lin on Twitter: @davidlin_TV

Follow Kitco News on Twitter: @KitcoNewsNOW Continue reading →

August 18, 2022  by SchiffGold  0   0On net, central banks globally have been adding gold to their reserves. Through the first half of 2022, central banks expanded gold holdings by 270 tons.National Bank of Poland Governor Adam Glapiński summed up the reason central banks hold gold. Gold is the ‘most reserve’ of reserve assets: it diversifies the geopolitical risk and is a kind of anchor of trust, especially in times of tension and crises.”A spokesperson from the Hungarian central bank said gold increase financial stability and strengthens market confidence. In keeping with the historical role of gold, it remains one of the safest instruments in the world, which, even under normal market conditions, exposes its stability and confidence.”The Polish central bank has been one of the big buyers in recent years, along with Hungary, Kazakhstan, Uzbekistan, Turkey, and India.So, which countries hold the most gold?Here are the top 20 gold hoarders in the world based on the most recent data from the World Gold Council.The United States. – 8,133.5 tonsGermany – 3,355.1 tonsItaly – 2,451.8 tonsFrance – 2436.6 tonsRussia – 2298.5 tonsChina – 1948.3 tonsSwitzerland – 1,040.0 tonsJapan – 846.0 tonsIndia – 768.8 tonsThe Netherlands – 612.5 tonsTurkey – 457.7 tonsTaiwan – 423.6 tonsKazakhstan – 383.9 tonsPortugal – 382.6 tonsUzbekistan – 363.9 tonsSaudi Arabia – 323.1 tonsUnited Kingdom – 310.3 tonsLebanon – 286.8 tonsSpain – 281.6 tonsAustria – 280.0 tonsThe IMF holds 2,814.0 tons of gold. It would rank third in the world if it were a country. The European Central Bank holds 504.8 tons of gold, ranking it 12th among countries.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) Zimbabwe, which has been trying to tame inflation by selling gold coins, is now going a step further. It wants to incentivize the nation’s biggest gold miners to produce above the state-planned targets.
Back in July, Zimbabwe’s central bank started selling gold coins to get inflation under control by providing a store of value to the country’s plunging currency and giving the population an alternative to the U.S. dollar.
One week after kickoff, the country saw strong demand, with the country’s central bank selling 1,500 gold coins and planning to release 2,000 more. 
Large miners are now being encouraged by the government to produce more gold. And those who exceed their targets can receive 80% of the payment for the additional output in foreign currency, Bloomberg quoted Deputy Mines Minister Polite Kambamura as saying. The current payment plan is a 60-40 split between foreign and local currency payments.
The country’s gold miners see a larger share of foreign currency earnings as a benefit to sustain their operation costs. Gold exports are currently the third top foreign currency earner, followed by platinum and remittances.
To help the mining industry out, Zimbabwe has selected two local lenders to provide $1 billion worth of funding over the next five years.
Production increases are already being planned by some gold miners, including state-owned Kuvimba Mining House Ltd., which is looking into a fivefold increase in production at its Shamva Gold mine by 2023.
Zimbabwe’s gold output is already up 47% this year, with the government looking for gold mining to account for a third of 2023’s overall mining industry targeted $12 billion revenue, according to Kambamura.
The deal with gold coins
The gold coins being minted and sold by the central bank are one troy ounce 22-carat gold coins called ‘Mosi-Oa-Tunya.’ The name means “Smoke that Thunders,” referencing Victoria falls. Each gold coin has a serial number and can be purchased with local currency, the U.S. dollar, and other foreign currencies.
The price is set based on the international price of gold and production costs. The owners of the gold coins can convert them into cash or trade them whenever needed. The gold coins could also be used for transactional purposes and as a security for loans.
The government’s plan is to use these coins to lower the demand for U.S. dollars following the collapse of the Zimbabwe dollar. Surging inflation and currency devaluation have made things difficult for Zimbabwe’s population. The country’s annual inflation surged 256.9% in July from 191.6% the previous month.
In response to the crisis, Zimbabwe’s central bank was forced to more than double its policy rate from 80% to 200%, a new record.
Zimbabwe also announced plans to adopt the U.S. dollar as legal tender for the next five years to stabilize the country’s exchange rate. But there is a severe shortage of dollars. This is the second time in more than a decade that Zimbabwe is legalizing the greenback as legal tender. Continue reading →

(Kitco News) Russia is proposing 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 is “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.
“The basis of this new structure will be a new, specialized international precious metals brokerage headquartered in Moscow, which will rely on the MWS,” the Finance Ministry said in a letter quoted by Russian media.
Russia is also proposing to fix prices of precious metals in the national currencies of key member countries or via a new monetary unit — such as the new BRICS currency proposed by Russia’s President Vladimir Putin.
The price-fixing committee would include central banks and other large banks from the Eurasian Economic Union (EEU). Member states of the EEU are Russia, Kazakhstan, Belarus, Kyrgyzstan, and Armenia.
The idea would be to make membership attractive to big gold players like China, India, Venezuela, Peru, and other South American countries.
According to the letter published by the Finance Ministry, the creation of such an organization would quickly destroy the monopoly of the LBMA and ensure the stable development of the precious metals industry in Russia and around the world.
It was also clarified that the proposal for the new standard did not originate from the Finance Ministry but was received from market participants.
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. Russia is also one of the three largest producers of platinum, palladium and rhodium. The precious metals industry in Russia accounts for around $25 billion a year.
Following Russia’s invasion of Ukraine, the LBMA suspended its accreditation of Russian precious metals refiners, barring them from selling new products in London. The suspension was made official on March 7.
The Finance Ministry said that the action paralyzed Russia’s precious metals activities and was a critical negative factor.
This contradicts what many analysts have dubbed a largely symbolic move by the LBMA. Continue reading →

Gold and silver deliveries on the Comex have surged since March 2020. While delivery volume in 2021 and 2022 are below the massive amount seen in 2020, overall volume is very elevated compared to pre-Covid levels.This analysis focuses on gold and silver within the Comex/CME futures exchange. See the article What is the Comex? for more detail. The charts and tables below specifically analyze the physical stock/inventory data at the Comex to show the physical movement of metal into and out of Comex vaults.Registered = Warrant assigned and can be used for Comex delivery, Eligible = No warrant attached – owner has not made it available for delivery.Current TrendsDelivery activity is tracked monthly and recently showed a major surge in volume for August gold.A “delivery” on the Comex means that a trader is short a futures contract but (presumably) holds physical metal at the Comex with a warrant assigned. This warrant is reassigned to a long contract holder when they “take delivery” by making their intentions known and then posting the full amount of the contract based on the bar weight (not all bars are exactly 100oz).Current margin requirements are $6,500 for every 100 ounces of gold (about 3.5%). Thus, when someone takes delivery, they post the remaining $173.5k and the warrant becomes theirs, but the metal stays within a Comex vault. To take physical delivery, the warrant holder must then arrange to load out the metal. Otherwise, the metal stays within a Comex vault, and the holder is charged storage fees.While Comex deliveries have been very elevated for over two years, most of the metal was going back and forth within the Comex vaults. There was not a major extraction of metal. In fact, at the beginning of Covid, a dislocation in the market brought a massive surge of inventory into Comex gold vaults (see figure 1 below), even while delivery volume was breaking records.In 2021, gold did start physically moving out of the vault, albeit from much higher stock levels. After a decent amount was extracted, there was then an inventory surge during the Ukraine/Russia crisis to replenish stock. However, that surge has been completely undone and inventories are now well below where they were before May, though well above pre-Covid levels. Since May 2022, total inventories are down 17.7% and down 24.9% since February 2021. The past few months have seen a major acceleration of gold leaving the Comex. This is shown below with the big spike down on the right side.Figure: 1 Historical Eligible and RegisteredSilver is also seeing a major change in inventory. Unlike gold, the metal has not yet started leaving the Comex system in droves, but the amount of Registered has fallen off a cliff (Registered is metal available for delivery). Silver Registered is down 41% since March 15, 2022, and down 65.7% since Feb 4, 2021, which was the start of the Reddit Silver Squeeze last year.This is a massive drawdown in metal available for delivery. For now, the metal is staying in the Comex vaults, but if gold is a leading indicator, metal might start leaving Eligible in a big way. As can be seen below, the amount of Registered has fallen to 16.6%, down from 40% in 2020. This is the lowest ratio since June 2017.Figure: 2 Historical Eligible and RegisteredGoldZooming in on the month-over-month change shows the acceleration in metal leaving the vault. 3.7M ounces were added in March and April. Since then, 6.6M ounces have left the Comex system. Current outflows have exceeded the outflows during the height of the squeeze in 2021.Figure: 3 Recent Monthly Stock ChangeThe daily activity since the last stock report shows a very steady outflow of metal from both Registered and Eligible. This has not been one or two days of big outflows; it has been a relentless removal day after day. Last Friday was the only day of net inflows over the last month.Figure: 4 Recent Monthly Stock ChangeSilverAgain, the action in silver is a bit more nuanced. Investors are taking delivery and then moving Registered metal to Eligible. They are taking it out of the available supply for delivery but are still keeping it in the Comex system. If the current pace keeps up, eventually that silver will start to leave the system.Figure: 5 Recent Monthly Stock ChangeThe daily activity is a bit more erratic in silver than in gold. July saw a very continuous outflow of Registered, but since August started the outflows have been in Eligible with Registered remaining fairly flat.Figure: 6 Recent Monthly Stock ChangeThe table below shows the changes over more standard time periods.GoldIn the last week, Eligible lost 3.4%!Over the last month, gold has lost 8.8% of total stock, spread evenly between Eligible and RegisteredOver the last year, total inventory is down 16.5% with Registered down 19.6%More than half the YoY net outflows in gold have occurred in the last month!SilverSilver Registered is down by 11% in the last month aloneThe last week has been very quietOver the last year, Registered has lost over 50M ounces or 48.5%A repeat of the last year would see Comex Registered fully exhausted!Figure: 7 Stock Change SummaryThe next table shows the activity by bank/Holder. It details the numbers above to see the movement specific to vaults.GoldOver the last month, outflows have been spread across all the vaultsMalca and Manfra have been hit particularly hard, losing +24% eachOver the last year, Malca and Manfra have lost 53% and 30% respectivelySilverSilver MoM saw only one vault increase inventories with 5 vaults shedding more than 5% of inventoryFour vaults lost over 1m ounces in the last monthOver the last year Brinks, JP, and Manfra have collectively lost over 36M ounces ($720M)Figure: 8 Stock Change DetailPledged gold (a subset of Registered), has come down some after setting a new record back in July. Pledged is Registered but not available for delivery, which means gold has lost an additional 900k ounces of available delivery supply since March when you include Registered.Figure: 9 Gold Pledged HoldingsGold entered backwardation last month for three consecutive weeks until the August contract was replaced with the December contract. It has now entered the strongest contango since September 2020. In 2021, the conversion from August to December resulted in a spread increase less than $1. In 2022, that same contract conversion flipped the price almost $20!Figure: 10 Recent Monthly Stock ChangeWhile gold is back in contango, silver remains in heavy backwardation. This is the longest such period of continual weekly backwardation since 2013Figure: 11 Recent Monthly Stock ChangeHistorical PerspectiveAvailable supply for potential demandAs can be seen in the chart below, the ratio of open interest to total stock has fallen from over 8 to 1.45. In terms of Registered (available for delivery against open interest), the ratio collapsed from nose bleed levels (think Nov 2019 where 100% stood for delivery) down to 2.7 in the latest month. The recent fall in the ratio is from open interest falling faster than the physical supply. This is not unexpected though; it is much easier for the paper supply to fluctuate compared to the physical supply.Figure: 12 Open Interest/Stock RatioCoverage in silver is weaker than in gold with 13.45 open interest contracts to each available physical supply of Registered (up from 8.2 at the end of April). The ratio has been driven up by a recent increase in open interest, along with the continued movement out of Registered.Figure: 13 Open Interest/Stock RatioWrapping UpComex deliveries should not be confused with load-outs where metal actually leaves the vaults. For perspective, the August gold contract has seen 3.25M ounces of gold delivered. Ironically, this is close to the 3M ounces that have left the vault over the last month. Over time, the divergence is greater with 17.2M ounces being delivered since December and only 4.2M ounces leaving the vault during the same period.That being said, the increased delivery volume over the last 2+ years has translated to a lot more metal leaving the Comex. While Delivery volume is still close to near-term averages, the amount of gold leaving vaults has accelerated rapidly in recent weeks. With total gold inventories down almost 20% since May, this could be the early stages of a bank run, or in this case, a “vault-run”.If someone were to describe the early stages of a collapse in Comex confidence, it would look exactly like this. A few years of elevated deliveries back and forth sloshing around. Metal starts leaving the vault slowly but steadily. Inventories get thin, and the banks restock but not enough. Then a little more fear sets in and the exodus accelerates.Everyone knows there is more paper gold than physical gold, but most traders are fine with this as long as they can get the USD exposure to the gold they want through margins and futures. However, there is clearly a second set of actors in the market who are not after highly leveraged bets on short-term future gold prices. These actors understand the value of gold and silver as the true wealth and currency of the world. The data shows that these investors may be losing confidence in the system and are extracting their metal while they still can.As paper trading continues, the price of gold and silver remains suppressed in a fractional reserve system. With an infinite supply of paper shorts available, true price discovery is much harder. The real investors are taking advantage of the artificial suppression in prices, and cashing in their paper for metal.Data Source: https://www.cmegroup.com/Data Updated: Daily around 3PM EasternLast Updated: Aug 15, 2022Gold and Silver interactive charts and graphs can always 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 →