Silver- A case for a mechanical correction happening faster than you think
Hey all,
Notably, there have been expectations the past few weeks or so with COMEX registered bullion being unable to meet deliveries this month, thus causing a run on the exchange and plummeting the price of the paper. Clive Thompson has talked about this at length; he's a former Swiss metals derivatives trader, and an interview from 3-4 days ago attached includes his explanation of a paper price correction.
[https://www.youtube.com/watch?v=tf7YxTrxJ-E](https://www.youtube.com/watch?v=tf7YxTrxJ-E)
However, as shown by today, the inverse has happened.
[https://www.kitco.com/charts/silver](https://www.kitco.com/charts/silver)
https://preview.redd.it/79mnjvy1w5mg1.png?width=955&format=png&auto=webp&s=448ca25486d781357016b12c76aef7b16574b457
[](https://preview.redd.it/why-i-personally-believe-the-comex-crash-narrative-was-v0-d0mg7338h5mg1.png?width=955&format=png&auto=webp&s=fbd45892987986dad9d38e7ed406d7176b9d1354)
Silver has inverted expectations, and the paper is actually meeting the physical demand for metals. Another YTber I enjoy, Fei Yen, provides real time silver prices in China, which matches the current arbitrage difference also mentioned in [https://goldsilver.ai/metal-prices/shanghai-silver-price:](https://goldsilver.ai/metal-prices/shanghai-silver-price:)
https://preview.redd.it/ec7tvfg7w5mg1.png?width=1080&format=png&auto=webp&s=32d95fea45307dc89fa754cf867b92d15d25a706
[](https://preview.redd.it/why-i-personally-believe-the-comex-crash-narrative-was-v0-u9iay61wh5mg1.png?width=1532&format=png&auto=webp&s=30c89228f71d928d742eaa2a3973000b1fe0077d)
Here is a recent video from yesterday that covers the increasing Shanghai silver costs relative to COMEX:
[https://www.youtube.com/watch?v=nBTLCKzvsxw&t=561s](https://www.youtube.com/watch?v=nBTLCKzvsxw&t=561s)
Now, why do I bring up the arbitrage difference, and the failed COMEX delivery failure thesis?
I think that fundamentally, the price of silver is being driven by export restrictions and the decoupling of silver from currency in 1964.
The current combined COMEX inventory can be found here: [https://datatrack.trendforce.com/Chart/content/1545/comex-inventory-silver](https://datatrack.trendforce.com/Chart/content/1545/comex-inventory-silver)
[](https://preview.redd.it/why-i-personally-believe-the-comex-crash-narrative-was-v0-9zj2lvnsj5mg1.png?width=846&format=png&auto=webp&s=e3b4f0e412ff69a515db0d4b304cba62829589c8)
https://preview.redd.it/zxtv6nz8w5mg1.png?width=846&format=png&auto=webp&s=69beb833f18b4997af9e32c4f91c0229aa8c936f
And sure, it's plummeted from its highs, but there is still 350M in reserve. I can't easily find the registered vs unregistered silver in COMEX (or even LBMA, for that matter) but it's still substantially higher than in 2023, when the AI craze was at full force. This brings up 2 points:
\- COMEX can fulfill contracts with silver- it just may take more time for the unregistered bullion to be refined further to be registered
\- The industry demand narrative may be overblown- either solar power companies, NVIDIA & chip makers aren't pumping out GPUs/TPUs/solar panels, or they're buying a ton of silver and leaving it at COMEX w/ contracts for delivery to be used later industrially.
Addressing the second point further, the end of subsidies for solar panels and other renewables have caused Western adjacent companies to crash:
https://preview.redd.it/7u105f1bw5mg1.png?width=698&format=png&auto=webp&s=2e46a0210688b1032ce7e6d53321ce4f43690655
[](https://preview.redd.it/why-i-personally-believe-the-comex-crash-narrative-was-v0-pevmxvx8l5mg1.png?width=698&format=png&auto=webp&s=901ffb14af53e54817276ef8734299285ec01251)
NVIDIA and AI adjacent companies have been blowing up due to private equity toxic debt and circular spending, but likewise given the cancellation of datacenters, silver demand for industrial use should be realistically waning:
https://preview.redd.it/cpublm9cw5mg1.png?width=900&format=png&auto=webp&s=0c8f47ff490e0573782f856947114dd2dda296f0
[https://x.com/DonMiami3/status/2012761147137528101?s=20](https://x.com/DonMiami3/status/2012761147137528101?s=20)
Silver was removed in 1965 under the Coinage Act:
[https://en.wikipedia.org/wiki/Coinage\_Act\_of\_1965](https://en.wikipedia.org/wiki/Coinage_Act_of_1965)
People were still hoarding silver due to the melt value of the coins being worth more than face, and preventing circulation (Gresham's law- bad money chasing out good). As such, silver became untethered from fixed values and became more of a value store, similar to gold. Price suppression was fairly easy by COMEX and the US Treasury- the treasury dumped their silver stockpile in the 1960s, and COMEX's paper derivatives obfuscated the true price, even creating rules like Silver Rule 7 to kill price discovery.
Gold didn't suffer the same price suppression due to the decision to hoard gold in Fort Knox & other vaults, and the US Treasury pegged a fixed value to it making it harder for COMEX to obfuscate the true price: [https://www.fiscal.treasury.gov/reports-statements/gold-report/21-02.html](https://www.fiscal.treasury.gov/reports-statements/gold-report/21-02.html)
Unfortunately for COMEX, the alternative against fiat is precious metals. The instability about the current administration is forcing a beeline towards PMs, like gold and silver, by BRICS- India and China essentially control the majority of the world's PMs, when considering retail holdings:
[https://www.ibef.org/news/india-holds-34-600-tonnes-of-gold-3-1x-the-value-of-current-equity-holding#:\~:text=Indian%20Economy%20News-,India%20holds%2034%2C600%20tonnes%20of%20gold%2C%203.1x,value%20of%20current%20equity%20holding&text=India%20held%20a%20cumulative%2034%2C600,to%20a%20Morgan%20Stanley%20note](https://www.ibef.org/news/india-holds-34-600-tonnes-of-gold-3-1x-the-value-of-current-equity-holding#:~:text=Indian%20Economy%20News-,India%20holds%2034%2C600%20tonnes%20of%20gold%2C%203.1x,value%20of%20current%20equity%20holding&text=India%20held%20a%20cumulative%2034%2C600,to%20a%20Morgan%20Stanley%20note)
[https://www.thehindubusinessline.com/markets/gold/indias-25000-tonne-household-gold-stock-emerges-as-key-economic-shock-absorber/article70479749.ece#:\~:text=India's%20household%20gold%20stockpile%2C%20which,a%20time%20of%20global%20uncertainty](https://www.thehindubusinessline.com/markets/gold/indias-25000-tonne-household-gold-stock-emerges-as-key-economic-shock-absorber/article70479749.ece#:~:text=India's%20household%20gold%20stockpile%2C%20which,a%20time%20of%20global%20uncertainty)
The demand for gold and silver has grown to be so outrageous by BRICS as the US materially enforces its trade routes (Venezuela, potentially Iran and Greenland) that the premiums remain significantly inflated vs the West. Import and export restrictions in China have added further pressure to push these prices higher. Bolstered by the fact that the US Treasury is printing billions of dollars every month in a failed attempt to stimulate spending & investing:
[](https://preview.redd.it/why-i-personally-believe-the-comex-crash-narrative-was-v0-6xmj9pwap5mg1.png?width=1362&format=png&auto=webp&s=9e715f83d407647fb05da1da8e8e54d7f6d56d43)
[](https://preview.redd.it/why-i-personally-believe-the-comex-crash-narrative-was-v0-8jrqukbup5mg1.png?width=1324&format=png&auto=webp&s=371662ded86612a9c61054047c4f998289074458)
https://preview.redd.it/ptn030xew5mg1.png?width=1080&format=png&auto=webp&s=4925eb04200c61cd21516fe6669057c4bfacd248
https://preview.redd.it/6i4t91qfw5mg1.png?width=1080&format=png&auto=webp&s=4cd15cef20ef6d72712bd9272b83944f60c1f07a
[https://fred.stlouisfed.org/series/WALCL](https://fred.stlouisfed.org/series/WALCL)
[https://fred.stlouisfed.org/series/M2SL](https://fred.stlouisfed.org/series/M2SL)
What we are seeing is a mechanical repricing of silver vs fiat based from primarily monetary value. Restricted inflows and outflows of precious metals between the East and West, and the complete decoupling of silver from currency (no pegs) are hastening the repricing.
Now, what does this mean for paper prices?
COMEX & LBMA, while massive exchanges, are not treasuries and cannot peg prices. Paper MUST mechanically follow true price regardless of whatever assets are on hand to sell. This is why COMEX spot prices continue to increase regardless of restrictions for exchanging paper contracts based off of margin (which is what COMEX has tried to do for the past 6 months, prior to the Hunt Brothers).
If COMEX decides to pull another Silver Rule 7, keep in mind that the rule did not actually claim to price silver to $0/oz, but it restricted new long positions and force margin requirements up to nearly 100%, breaking the Hunt Brother leveraged manipulation. The current environment is such that there are significantly fewer reasons to leverage silver positions- governments are buying silver as a means to hedge against the declining US fiat dollar and demand true delivery. COMEX has no option but to concede with true pricing- so long as it holds significant reserves to honor obligations, which it should be able to do forseeably.
Ultimately- given the current macroeconomic trends of the US moving towards hyperinflation to avoid defaulting on its debt and to attempt to reindustrialize through investments, silver must mechanically increase as BRICS et al. look for stable asset to value their own currencies and protect their wealth. The substantial amount of PMs owned by BRICS should have led to lower prices relative to the West (lower demand due to larger supply), but the persistent premium indicates that price increases are driven by fiat fears.
I remain very bullish on silver, and expect it to approach a gold/silver ratio (GSR) closer to the actual ratio found in the Earth's crust of 17.5:1, which is relatively close to the GSR throughout antiquity:
https://preview.redd.it/17w95qrgw5mg1.png?width=536&format=png&auto=webp&s=78fd07c49d0429ed489bc2f94857a6c0c32e71ee
[](https://preview.redd.it/why-i-personally-believe-the-comex-crash-narrative-was-v0-d83lnzcht5mg1.png?width=536&format=png&auto=webp&s=b8822fef1cdf60900f99975462ea57d0a7f50f5e)
Anyways, good luck to all of us.
Also, gold and silver have a market cap greater than the rest of the US stock market combined, so this should be relevant:
https://preview.redd.it/1dbq0q1tw5mg1.png?width=392&format=png&auto=webp&s=55520baa72d77512dd8d554bafd334b4a63036d5