Having emerged this week from my bunker where I’ve been hiding since my last report in January when I predicted World War III (economic not military), I find the UK Government has launched a “get-prepared-for-emergencies” website recommending stocking up on and maintaining essentials such as Battery or wind-up torch; Portable power bank; Battery or wind-up radio; Spare batteries; A first aid kit; Hand sanitiser; Bottled water and last but not least, Non-perishable food. I can confirm that these are all essential.
So what have I missed while hunkered down in my bunker?
Millions of ounces of gold and thousands of tonnes of silver moved from London and Zurich to New York and then back again. At the peak of the movements, gold in New York traded at a premium of USD50/oz over London, before collapsing. It is more than just a rumour, that the bullion banks pocketed over half a billion dollars between them on this little escapade.
The Investment banks may or may not be evil, but their involvement is to make money (some would allege to launder money). They are not there to fulfil the dreams of market users, or provide a public service. Many can’t even take House positions thanks to compliance and regulation; though the regulations imposed on them to create transparency and protection for consumers, has had the opposite effect.
Less heralded but of more interest, Platinum lease rates have tightened up and there is now a shortage of ingot in London and Zurich; but more on this later.
But I digress. Returning to my original statement, the old adage of “sell in May and go away” applies to many markets, not just precious metals. However, this year precious metals jumped the gun and had its big selloff the first week of April, with only a small dip in mid-May. Since then we have seen a strong come back in Silver and an even stronger one in Platinum. While Platinum is in firmer charting territory with the last high in 2021, silver hasn’t been this high since 2011. Coincidentally both highs occurred in April of those years.
While gold will always be a lifelong safe haven and store of wealth, but in the mid term (5 years) Silver and Platinum have the potential to outperform gold as an investment.
Currently, gold is not only at an all-time price high, it is also at an all time high in real terms as Central Banks increase their gold holdings.
Central Banks are building up their gold reserves for a dozen or more reasons. These reasons mostly apply equally well to private individuals as well as funds and institutions:
Survey evidence on factors influencing the decision of central banks to hold gold
Silver
Has been on a bullish trend for three years now, gaining nearly 90% in that period, so simple 30% p.a. (A straight 50% since January 2024). Since the dip in April, silver has gained a straight 19%; mostly since the start of June, while gold has achieved a “meagre” 7%.
Is this just another false dawn for silver? Possibly, but despite some dips,
the trend is still upwards and between here and USD 42 we are in no mans land. Given that these cycles are pretty much spot on 105 months and we’re 33 months into this cycle, we have another six years to run.
The question is how far?
It depends how fast we run! If we maintain the rate so far, we should see USD 92 (I know this is very disappointing to those of you that believe that silver should be USD 500 but for a Masonic conspiracy. Be content with a net 300% return!).
But, if we extrapolate the current accelerating trend, we could break the magic USD 100. Despite the jump in the gold price due to “incidents” in the Middle-East, Silver is still out-pacing gold.
Platinum
If this is a false dawn for silver, what about Platinum? Over the past five years we have seen many false starts, despite the dwindling supply surplus.
Back in October I wrote about parity with Palladium being bullish for Platinum, with Platinum eventually moving ahead of Palladium. Though initially this was achieved by Palladium going down, rather than Platinum going up; but since then, Platinum has gained USD300 and a USD 200 premium to Palladium.
What is different this time?
Physical Industrial demand is for Platinum in “sponge” form (powder), but the metal is traded and liquidity is therefore provided, in ingot form. Over the last few weeks borrowing costs of ingot have rocketed as a shortage of ingot in the liquidity pools in London and Zurich have dried up. So much so, that US organisations that refused to handle any Russian ingot, despite pre-2022 Russian ingot still being Good Delivery and Platinum as a metal not being sanctioned in Europe or the US, have now suddenly started accepting pre-2022 Russian ingot again. The outcome of all this added to the non-sanctioned sponge leaking out of Russia, has seen sponge trading at a discount of USD18/oz to ingot, though this has now come back to USD 8/oz discount as demand for any form of physical platinum is absorbing sponge stocks too.
When this occurred in Palladium five years ago we saw the price shoot up from USD 900 to nearly USD 3,000. The consensus among traders attending London Platinum Week in May, was that the Platinum price should be in the range of USD 2,000 – 2,200; but that’s just for this year.
If that’s the market view, it could just be self-fulfilling, but given where we are in the cycle and what is happening globally, USD 4,000 is realistic, but USD8,000? You never know.
But wait!
There is more to this story. The Guangzhou Futures Exchange (GFEX) is due to commence trading physical Platinum any day now. While it is nominally a futures exchange for hedging price risk for Chinese manufacturers, we know from other Chinese futures exchanges that it will be used mostly by investors and speculators (despite regulations and certain laws against such actions). The fact that the contracts can be physically settled in ingots, suggest that they expect investor buying rather than Industrial buying.
Is this where all the ingots are going?
Well, back in my Bullion Banking days, I was involved in preparing for the launch of the Shanghai Gold Exchange. I had been supplying roughly a few hundred kilos a month of Gold to official channels in China, but in the months leading up to the launch of the Shanghai Exchange in December 2002, this had accelerated to ten tonnes per month of fresh 999.9 gold kilo bars.
I probably could have supplied more if I could have got my hands on them. This coincided with gold breaking back up above USD 300/oz.
Thank you Mr Trump
Only history will tell if Trump’s economic policies have been a success or a failure, but whatever, his policies have been great for precious metals. Though it is interesting that he claims that thanks to him, the price of eggs have fallen by 400%.
This would mean that a dozen eggs that cost $10; you would now be paid $30 to take them away (this did happen with oil a few years ago). In reality the price of eggs have fallen by a whopping 40%, but this is mostly due to higher imports to fill the shortage caused by Avian flu.
So, once more I will leave you with the words of the last US Presidents to introduce 60% Tariffs on Canada and 20% Tariffs on most other countries:
“We have gold because we cannot trust governments.” US President Herbert Hoover
