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Interesting COMEX Trend: Silver Short Squeeze Appears to Be on Track
Interesting COMEX Trend: Silver Short Squeeze Appears to Be on Track
COMEX is the primary futures and options market for trading metals such as gold and silver. There have been some interesting trends for silver in the COMEX in recent months. More investors are taking delivery of silver. In other words, the short squeeze may still be on track – albeit in slow motion – and this could impact the silver price moving forward.
You will recall that last month, the Reddit investors turned the spotlight onto silver. The hope was to create a short squeeze in the market by buying up physical silver. The price popped temporarily, but it appeared at the time the silver market was just too big for the Reddit Raiders to squeeze. The price dropped back and the spotlight dimmed. But looking at some trends in the COMEX indicates the squeeze might still be on.
A futures contract is a promise to deliver a certain amount of gold or silver at a certain price at a certain time. Speculators play this market, hoping to profit from a price swing. Say you buy a $26 per ounce silver contract and the price of silver rises to $28. The investor can sell the contract and make a few dollars per ounce. Generally, the trades are made on paper. They are made on the promise of that metal and on the knowledge that it exists, but traders rarely take delivery of the metal itself. About 1% of COMEX trades go to delivery.
The following analysis was submitted to SchiffGold and is published for your consideration. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.
The COMEX has shown a major divergence in the silver market in recent months. For context, consider this graph. (Open interest is the total number of outstanding options or futures that have not been settled for an asset.)
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Peter Schiff: The Dollar Is Not Just Going Down; It’s Going to Crash
Peter Schiff: The Dollar Is Not Just Going Down; It’s Going to Crash
As gold was closing in on its all-time record price last week, Peter Schiff appeared on the Claman Countdown and warned about the looming dollar crisis.
Claman set up the interview pointing out that Peter predicted this big move up in gold months ago and asked, “What’s your new prediction about the dollar?”
Peter said it’s not really a new prediction, but perhaps it’s more timely.
The dollar’s not just going down. It is going to crash.”
Prior to the interview, Claman mentioned that the Dow was up, but Peter said there is another way to look at it.
Priced in real money, gold and silver, the Dow is actually down. And what gold is telling you, and silver, is that the dollar is losing value. It’s losing purchasing power.”
The dollar had been drifting lower against other fiat currencies over the past several weeks. At the time of the interview, the dollar index was just a few ticks off its March low.
But I think the dollar is going to keep drifting down until it collapses,” Peter said. “And this is going to usher in a real economic crisis in America, unlike something we’ve ever seen. Because it’s going to force the Fed to choose between saving the dollar, and dumping all the bonds its been buying, letting interest rates rise sharply, forcing the US government to slash spending right now and abandon all these stimulus plans, or just let inflation ravage the entire economy and wipe out a generation of Americans.”
Claman asked Peter what is the trade given what’s coming down the pike. Peter said his advice is “to get out of Dodge.”
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Gold’s Record Price Is All About Currency Debasement
Gold’s Record Price Is All About Currency Debasement
Gold broke its all-time price record on Monday and held above that level throughout the day.
So, what is this telling us?
It’s easier to understand gold’s record-breaking move up if you look at it from the other side of the equation. The dollar is now at its all-time low compared to gold.
In simple terms, the dollar is losing value.
This is a direct result of US government borrowing and spending backed by Federal Reserve money printing.
TD Securities reiterated that dollar debasement is driving gold in a note.
The USD weakens amid massive fiscal and central bank stimulus, a bloating debt pile and a slow growth environment.”
Since the economy crashed thanks to the governments’ shutdowns in response to the coronavirus, the federal government has borrowed trillions of dollars for its stimulus program. The June budget deficit was bigger than all but five of the yearly deficits in history. Meanwhile, the Fed is monetizing a big chunk of that debt through its government bond purchase program. In effect, it is buying up US debt and paying for it with money printed out of thin air.
All of this money creation is inflation. The rising price of gold reflects the inflationary pressure.
As more dollars go into circulation, each individual dollar is worth less, all other things equal. That’s why the price of gold is going up in dollar terms. We have more dollars chasing roughly the same amount of gold. That means it takes more dollars to buy an ounce.
This isn’t mere speculation. Money supply growth hit a new all-time high for the third month in a row in June. The only time we’ve seen money supply growth anywhere near this level was during the inflationary years of the 1970s. In June, year-over-year growth in the money supply came in at 34.5%. That was up from 29.5% in May.
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Curing COVID-19 Won’t Cure the Economy
Curing COVID-19 Won’t Cure the Economy
We have been making the case for weeks that we aren’t heading for a quick recovery. We’ve reported on the number of people of small business owners who don’t think they’ll survive, the increasing number of over-leveraged zombie companies, and the tsunami of defaults and bankruptcies on the horizon. Yes, we have seen some economic numbers that are better than expected, but it’s all a function of a Federal Reserve-induced sugar high. The ugly truth is that given the amount of stimulus that the Federal Reserve and the US government have pumped into the economy, unwinding it all will be mission impossible. All of this certainly raises serious questions about the possibility of a “v-shaped” recovery.
We’re not alone in making this case. In the following article recently published at the Mises Wire, economist Brendan Brown provides some additional arguments and asserts that even if COVID-19 disappeared today, the economy isn’t going back to “normal.”
The opinions expressed are those of Brendan Brown and for your consideration. They do not necessarily reflect those of Peter Schiff or SchiffGold.
Speculative frenzy in the midst of recession is not a new phenomenon. Yet the extent of the “madness” this time might well beat records in the small sample size available from the history laboratory. The combination of extreme monetary radicalism and a receding supply shock has proved to be a potent toxic, impairing mental processes in ways described by the behavioral finance theorists. The pandemic stock “bubble” and resumed hectic demand for risky credit paper provide illustrations.
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Gold Is Security in a Dollar Crisis
Gold Is Security in a Dollar Crisis
Last week, we reported Yale economist Stephen Roach’s warning that “the era of the US dollar’s ‘exorbitant privilege’ as the world’s primary reserve currency is coming to an end.”
Roach isn’t the only person in the mainstream sounding the alarm about the dollar’s demise. In a note published last week, Guggenheim Investments Chief Investment Officer Scott Minerd said that while “there are no signs the world is questioning the value of the US dollar” right now, it’s clear that the greenback is “slowly losing market share as the world’s reserve currency.”
And he said buying gold is the key to offsetting the dollar’s decline.
With the Fed going all-in on financing the government deficit, the US dollar could be at risk to negative speculation of its status as the dominant global reserve currency. Investing in gold may help offset this trend.”
Even before the coronavirus pandemic, Peter Shiff was warning about a looming dollar crisis. During an interview on RT last September, he warned that America’s “fiscal profligacy” was going to sink the dollar.
What has enabled this over the years has been the world’s willingness to hold US dollars as the primary reserve currency and to continue to loan money to Americans and to the US government so we can continue to live beyond our means. We can have enormous government programs that we don’t pay for and we can consume all kinds of goods that we don’t manufacture, and we can live in an economy based on consumption and debt without having to save or produce. The world has done that for us. And I think this is what’s going to come to an end. I think we’re going to see a collapse in the value of the dollar, and when the dollar does collapse, America’s power is going to dissipate.
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Peter Schiff: It’s Not a Crisis Until It Becomes One
Peter Schiff: It’s Not a Crisis Until It Becomes One
Despite Fed Chair Jerome Powell throwing cold water on the prospect of a quick economic recovery last week, there is still a lot of optimism out there. There is also an appalling lack of concern about all of the debt and money printing going on. In a recent podcast, Peter said nobody expects this to lead to an inflation crisis or a dollar collapse. But what can’t last forever won’t. And it won’t be a crisis — until it becomes one.
File this under another sign that we’re not in for a quick economic recovery. Another 3 million Americans filed for unemployment according to last week’s jobs report. Peter asked a pretty poignant question: if things were on the upswing, why would employers who have held on to workers this long let them go now?
They held off this long. Why are they still laying off so many workers? Clearly, employers are not sensing this huge recovery that’s around the corner, because if they did, they would be holding onto these workers. They wouldn’t be letting them go now after they kept them for these last couple of months. Obviously, if they’re laying them off now, they think this is going to be a much more protracted decline and therefore, we’re not going to get the back half of that V.”
Meanwhile, the Federal Reserve’s balance sheet swelled by another $212.8 billion to $6.934 trillion last week, as money supply surged another $198.6 billion. To put that into perspective, when the Fed did QE3 during the great recession, it was expanding the balance sheet by $80 billion a month. We just did over $212 billion in one week. The highest the Fed balance sheet got during the last crisis was $4.5 trillion. We’re now approaching $7 trillion with no end of QE in sight. Peter said this is inflation that is being generated on an unprecedented scale.
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They’re All High on Fed Fairy Dust
They’re All High on Fed Fairy Dust
Everybody realizes the US economy is in a bad spot. But most people still seem to believe it will bounce right back once we deal with the coronavirus.
They’re all high on Federal Reserve fairy dust.
US GDP contracted by 4.8% in the first quarter. It was the first negative GDP reading since a 1.1% decline in the first quarter of 2014 and it was the lowest level since the 8.4% plunge in Q4 of 2008.
And the worst is yet to come.
The Q1 GDP number only captures the first couple of weeks of coronavirus-inspired government lockdowns of the economy. In fact, in January Donald Trump and others were telling us that it was the best economy in the history of the world. That was also in the first quarter.
The first-quarter GDP print came in even worse than expected. Economists were projecting a contraction of 3.5 to 4%. The precipitous and rapid plunge in economic activity not only reflects the impacts of turning off the economy in the midst of coronavirus; it also reveals just how fragile the economy was before the pandemic.
Back in January, President Trump called it the greatest economy in history. Trump continued to talk up the economy during the State of the Union address, taking credit for the “strong” economic growth. At the time, Peter Schiff said nobody should be taking credit for the condition of the US economy. In fact, economic growth wasn’t much different than it was when Obama was president.
The only difference is we had to borrow even more money to achieve the same level of fake GDP growth that we did under Obama. The reality is nobody should be taking credit for the current US economy. The question is who deserves the blame?”
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Gold Is Set to Crash? No Way!
Gold Is Set to Crash? No Way!
The mainstream is a fickle place.
On the one hand, we had Bank of America raising its 18-month price projection for gold to $3,000. On the other hand, some people argue the price of gold could crash later in the year.
Gold is up over 13% on the year, but the yellow metal has seen some price pressure over the last couple of days as various government agencies have started to move toward reopening the economy.
An article published by CCN offers three reasons gold could “crash to earth” in the coming months – none of them particularly compelling.
- A coronavirus vaccine.
- A quick economic recovery
- Deflation and a soaring dollar
The first two reasons both embrace the mainstream narrative that the economy was great before the pandemic and that it will quickly go back to “normal” as soon as governments open things back up again. But there is no normal to go back to. The economy wasn’t normal before the pandemic.
Coronavirus was merely the pin that popped the economic bubble. Everybody is still fixated on the pin, but getting rid of it doesn’t stop the air from coming out of the bubble. A coronavirus vaccine would ease the pandemic, but it wouldn’t do anything to address the malinvestments and debt that were already rampant in the economy before coronavirus reared its ugly head.
In fact, gold was already on an upward trajectory before COVID-19. In 2019, the yellow metal charted its best year since 2010. The price increased by 18.4% in dollar terms. This was in large part due to the Fed’s pivot to loose monetary policy last year. Keep in mind, the central bank was already cutting interest rates, running repo operations and relaunching quantitative easing prior to the pandemic. The response to coronavirus simply put the Fed’s extraordinary monetary policy into hyper-drive.
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Peter Schiff: This Is a Financial Crisis
Peter Schiff: This Is a Financial Crisis
A lot of people in the mainstream still insist this isn’t a financial crisis like we saw in 2008. They say this is just a self-inflicted shutdown of the economy. Since we decided to shut it down, we can decide to start it back up again. Peter Schiff begs to differ. In his podcast, he explains that this is absolutely a financial crisis and it’s going to be worse than 2008.
Stocks fell yesterday (April 15) on dour economic news and the financials led the plunge. In fact, even during the stock market rally on Monday, the financials lagged. Peter called them the Achilles Heel in that Monday surge.
This is significant because the financial sector is the key to the US economy.
They shouldn’t be, but they are, because we have a bubble economy. We have an economy based on credit, based on debt. So, not people spending the money they earned, but spending the money they didn’t earn but they borrowed.”
This becomes clear when you look at the consumer debt numbers. Americans were already leveraged up to their eyeballs before coronavirus spurred a government lockdown of the economy.
What is at the heart of the bubble, other than the Federal Reserve which is pumping all the blood through the body of the economy, but it’s pumping it through the heart of the banking sector. So, when you’re seeing this cardiac arrest in the banking sector, this is a sign that there’s trouble brewing here when the banks are having so much trouble.”
Why are banks in trouble? Because people are defaulting on their loans. In fact, there was already trouble in the subprime markets before COVID-19. Both subprime credit card and auto loan defaults were rising. That will only increase with millions of people suddenly unemployed.
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We’re Not Going Back to Normal
We’re Not Going Back to Normal
Turn the key and the economy will restart.
That’s a myth a lot of people in the mainstream have peddled since governments started shutting down the economy in response to the coronavirus pandemic.
That’s not going to happen. We’re not going back to normal.
In fact, things weren’t “normal” before the pandemic.
As Peter Schiff has been saying, too many mainstream pundits and prognosticators have focused exclusively on the pin and ignored the economic bubble that it popped. They argue that since the economic damage due to the COVID-19 shutdowns was self-inflicted, it’s not a real recession. It’s not a realeconomic collapse. It’s not that businesses are closing because the economy is bad. We just decided to shut them down. Therefore, we can just decide to open everything back up and everything will be fine. But as Schiff said, it’s not that simple.
What matters is that we got a wound. Look, if I grab a knife and I stab myself in the chest, I’m not OK because the wound is self-inflicted. … It doesn’t matter how I got stabbed. What matters is I have a knife in my chest and I’m bleeding. So, I can’t just ignore the wound because I was dumb enough to stab myself.”
I’ve been saying the same thing for weeks. The economy doesn’t stop and start on a dime. Just because Donald Trump snaps his fingers and says, “Go!” doesn’t mean that the crisis ends. The economic damage done to the economy by that knife is deep. In fact, the economy was already suffering from multiple knife wounds long before COVID-19 reared its ugly head.
It appears some people in the mainstream are starting to wake up to reality – sort of. Reuters recently ran an article headlined “With confidence shattered, the road to a ‘normal’ US economy looks long.”
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Central Banks Add More Gold to Their Reserves
Central Banks Add More Gold to Their Reserves
Central banks continued their gold-buying spree in February, although the pace of gold purchases has slowed compared to last year’s near-record purchases.
On net, central banks globally added another 36 tons of gold to their reserves in February, according to the latest data released by the World Gold Council. That was about 33% higher than January’s total.
On the year, central banks have bought 64.5 tons of gold. That compares to 116 tons through the first two months of 2019.
Central bank demand came in at 650.3 tons in 2019. That was the second-highest level of annual purchases for 50 years, just slightly below the 2018 net purchases of 656.2 tons. According to the WGC, 2018 marked the highest level of annual net central bank gold purchases since the suspension of dollar convertibility into gold in 1971, and the second-highest annual total on record.
The World Gold Council bases its data on information submitted to the International Monetary Fund.
Turkey continued to be the biggest gold-buyer. The Turks added another 24.8 tons to their reserves in February.
Russia further increased its stockpile of yellow metal, adding another 10.9 tons to their hoard.
Russia’s quest for gold has paid off in a big way. The Russian Central Bank’s gold reserves topped $100 billion in September 2019 thanks to continued buying and surging prices.
The Russians have been buying gold for the last several years in an effort to diversify away from the US dollar. Russian gold reserves increased 274.3 tons in 2018, marking the fourth consecutive year of plus-200 ton growth. Meanwhile, the Russians sold off nearly all of its US Treasury holdings. According to Bank of America analysts, the amount of US dollars in Russian reserves fell from 46% to 22% in 2018.
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Peter Schiff: People Are Still Too Focused on the Pin and Not the Bubble
Peter Schiff: People Are Still Too Focused on the Pin and Not the Bubble
There seems to be some optimism in the markets that the end of the coronavirus shutdown is getting closer. There is also this resistant myth that the economy will just fire back up at the snap of a finger. Peter Schiff recently appeared on RT Boom Bust along with Christy Ai to talk about the markets and the pandemic. He said people are still far too focused on the pin and not the bubble that it popped.
The US stock market has had some strong rally days recently with this growing optimism that we could be nearing the coronavirus peak. So, has the stock market found its bottom? Peter doesn’t think so.
Too many people are focused on the pin and are ignoring the bubble that the pin pricked. You know, before the COVID-19 shutdown, the economy was long overdue for a severe recession, and the US stock market was long overdue for a bear market. So, I think the COVID virus simply accelerated the onset of both. … So I would not get excited about this rally. I think we still have a long way to go on the downside. And the economy, I think, is going to be even worse.”
Christy agreed with Peter saying this is not the real bounce and we still have a long way drop. She pointed out that earnings still have a long way to fall and there is a massive unemployment tail from the pandemic.
Peter was asked about the response to the government stimulus package signed by President Trump.
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Peter Schiff: What Is the Economy Going to Recover to?
Peter Schiff: What Is the Economy Going to Recover to?
A lot of people still seem to think at some point, Donald Trump will flip a switch and the government will start humming again. As Peter Schiff explained in his podcast Friday that’s not going to happen. The best we can hope for is recovering from a depression to the recession we were going to have anyway.
We got the monthly jobs report for March on Friday. It was bad. But not as bad as what we’re going to see in April.
The economy lost 701,000 jobs last month. That was the first contraction in the labor market in over a decade. The unemployment rate jumped to 4.4%. The monthly job losses were already close to the May 2009 financial crisis peak of 800,000.
Of course, we know from the weekly unemployment applications reported over the last two weeks that this is just the beginning of an epic labor market collapse. Over 10 million Americans filed for unemployment. That 701,000 is going to look pretty good compared to the April number.
As Peter said, it should be pretty apparent that when this is over, we’re not going back to normal.
This is not going to be a quick recovery. People keep talking about this, that’s it’s going to be this quick recovery. We can’t have a quick recovery. And when we recover, what are we going to recover to?”
President Trump continues to spin this fairytale that we had the greatest economy in history prior to the coronavirus. The narrative is he was forced to shut down this booming economy because of the coronavirus. Once the coronavirus threat passes, the economy is just going to start right back up again.
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The Great Government Gold Heist of 1933
The Great Government Gold Heist of 1933
Yesterday marked the anniversary of the great government gold heist of 1933 ordered by President Franklin D. Roosevelt.
On April 5, 1933, the president signed Executive Order 6102. It was touted as a measure to stop gold hoarding, but it was in reality, a massive gold confiscation scheme. The order required private citizens, partnerships, associations and corporations to turn in all but small amounts of gold to the Federal Reserve in exchange for $20.67 per ounce.
The executive order was one of several steps Roosevelt took toward ending the gold standard in the US.
With the dollar tied to gold, the Federal Reserve found it difficult to increase the money supply during the Great Depression. It couldn’t simply fire up the printing press as it can today. The Federal Reserve Act required all notes have 40% gold backing. But the Fed was low on gold and up against the limit. By stealing gold from the public, the Fed was able to boost its gold holdings.
EO 6102 followed on the heels of an order Roosevelt issued just weeks before prohibiting banks from paying out or exporting gold. Just two months after the enactment of EO 6102, the US effectively went off the gold standard when Congress enacted a joint resolution erasing the right of creditors to demand payment in gold. Then, in 1934, the government’s fixed price for gold was increased to $35 per ounce. This effectively increased the value of gold on the Federal Reserve’s balance sheet by 69%. By increasing its gold stores through the confiscation of private gold holdings, and declaring a higher exchange rate, the Fed could circulate more notes. In effect, the hoarding of gold by the government allowed it to inflate the money supply.
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Peter Schiff: Hyperinflation Is the Most Probable Scenario
Peter Schiff: Hyperinflation Is the Most Probable Scenario
March 23 was Peter Schiff’s birthday. It was also the day the Federal Reserve announced QE Infinity. So, Peter spent over three hours hosting a live videocast talking about the latest Fed moves, the potential impact on the economy and answering questions from viewers.
Peter said he was hoping to combat the rampant economic ignorance that is pretty much everywhere.
There’s probably one thing that is spreading right now throughout the country faster than the coronavirus and that is economic ignorance and misinformation. It’s all over the place. It’s gone completely viral … The best thing anybody can do to combat the virus of ignorance is to turn off their television sets or their computers and don’t listen to anything that is being said in conventional media, whether it’s a news-related channel or a financial channel, I can virtually assure you that every single thing that you’re hearing is wrong.”
Peter hammered on a number of central themes you won’t hear discussed in the mainstream. For one thing, the Federal Reserve and the US government are repeating the mistakes of 2008.
Peter reminds us that as the crisis unfolded in ’08, he warned that the policies of bailouts and monetary stimulus were a mistake and that they would lead to a bigger crisis in the future.
Well, welcome to the future.”
He also emphasized that this isn’t about the coronavirus. The virus pricked a bubble that was inflated long ago. The economic chaos we’re seeing today started long before the virus reared its ugly head.
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