Andy Schectman, Co-founder of Miles Franklin, a precious metals firm with over $9 billion in sales, outlines the epic moves ahead in the gold and silver markets.
- Is rehypothecation in precious metals shares leading to price distortion?
- Are the numbers in the gold and silver markets being misrepresented?
- How important is the Shanghai gold market to global demand?
- What could be the impact of gold export ban by China?
If you go to the Shanghai Gold Exchange website, for four weeks in a row, starting on the second week of March, we see commercial banks showing up and it's on their website. We see commercial banks showing up at the Shanghai Gold Exchange and first, it was Deutsche Bank and then HSBC and then JPMorgan and then Standard Chartered. Now, I guess what I really feel is that in particular, the gold and silver markets, but mostly silver seem to have been trading and playing by a new set of rules.
...and when you have these massive short positions, where there's 290 million ounces of silver traded per day on the LBMA and silver on COMEX is 1700% rehypothecated, you end up with some distortions in price.
Schectman continues:
"You cannot export gold out of China. Only Silver. Four commercial banks who are very short in silver just happen to show up the second week of March [through the first week of April.] Look at the Shanghai silver stockpile since the second week in March, since the day that Deutsche Bank showed up. They are falling...they are being bled down to 700 tons right now, the lowest they've been in years. My feeling is the commercial banks went there, hat in hand, and said, "We're in trouble. We've been bled dry. We have naked shorted so much that if we don't get silver, this whole game is going to blow up."
This would have not been done quid pro quo. Something would have been done to get that. And I think it's very obvious that when you see these banks show up, and to the day the [silver] inventory starts to bleed down, knowing that you cannot export gold out of China, only silver, why were they in Shanghai? Why? What does it mean?
- With a dwindling supply of silver on several key exchanges, will the price surge?
I think what we see with silver is a draining of the world's exchanges by the most sophisticated investors on the planet and a market that the LBMA has. I think some very interesting things happening with it right now and when you realize that the LBMA trades 290 million ounces of silver per day, right?
Most of it being naked in terms of nothing behind those contracts but commercial bank's ability to create paper, it starts to get interesting.
- Are the global commodities markets being cornered by deep-pocketed investors?
- Is the global supply of available silver so low that a price advance is imminent?
- Will the Russian sanctions backfire against Western policymakers?
- Why is silver selling at $4 per ounce higher in Shanghai?
About the author
Chris Waltzek is host, executive producer, writer/editor, best-selling author, webmaster, sound engineer and computer guru at GoldSeek.com Radio.
He earned his bachelors degree in Business Economics and holds a dual MBA in Business Economics & Information Systems. Upon graduation he worked as the firm-wide Industry Analyst at one of the nations largest law firms, Jones, Day, Reavis, Pogue. Chris is currently a Ph.D. student in Management / Finance at NCU.
