Andy Schectman: Gold Rallies Again After Clearing $2100 Level | Arcadia Economics
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Is that how markets are supposed to react? Is that how bull markets are supposed to go? Or is it more like the price of gold, which is slowly and methodically the tortoise going higher and higher and higher every single year for the last several. Well, hello there, my friends. Chris Marcus here with you for Arcadia Economics as we continue on another trading week, which. Nice to have Andy Shekman in here for the retail physical silver report, where I guess we’ve been talking about gold quite a bit lately as well, because certainly we have some exciting times in the gold market because over the last three days we’ve seen quite a rally.
And here, as we record on Tuesday, up yet again to the 21 38 level in the gold futures contracts, silver rallying as well, not quite as much, but up to 24 31. So, Andy, quite a lot to dig into some exciting times, especially for people who’ve been vested in gold for a long time. So welcome on in. And how are you today? Good to see you, brother. Yeah, I’m doing well.
Thanks for having me. It is. It’s crazy. The wheels are spinning faster and faster and faster these days. It seems everywhere you look, in every single area, not just in finance, but everything, it just seems. Keep your eye on the bounce and ball. It’s hard to do. Well, hopefully you can keep up with today’s gold price. We’ll see if there’s any more movement as we’re sitting here recording on a Tuesday morning.
But we now have gold over 2100 while the Comex is open. Obviously, we had that brief rally that went to about 21 50 on a Sunday night, which, amazingly, that’s already three months ago. Hard to imagine, but yeah, here you can see over the last couple of days there, back on the 20 eigth, we were at 2043. So almost $100 higher in less than a week. And curious, your thoughts on the move that we’ve seen here.
One of the things that I find most intriguing about this move, Chris, and I don’t think you’re hearing enough about this, but I think this is, in one respect, kind of the market’s way of saying we’ve lost confidence in the Fed’s ability to restrain inflation. Because what you’re seeing now is that typically we’ve seen gold and bond prices move in symmetry. As bond prices were rising and interest rates were falling, price of gold was rising.
And that’s the Gibson’s paradox, the inverse relationship between real interest rates and gold. But we’re seeing it now diverging. And this is a big deal because gold used to be positively correlated with bonds. And now we’re seeing bonds falling and interest rates rising again, slowly, but not the pivot that everyone was expecting. And yet gold is doing well in the face of real positive interest rates, at least if you believe the CP lie.
Bottom line is this is a big development for the price of gold. And now that it’s busted through, its all time closing high. I mean, in terms of resistance, there is none. The sky is the limit. Now, are we going to get to those numbers like when bank of America was saying 3000? Or is this the move up, the one that we’ve all been waiting for? And when you’re beaten down so many times you end up getting used to it and you’re waiting for the shoe to drop.
When you look over your left shoulder and see what bitcoin is doing and your right shoulder and Nvidia is doing, you wonder, is that how markets are supposed to react? Is that how bull markets are supposed to go? Or is it more like the price of gold, which is slowly and methodically the tortoise going higher and higher and higher every single year for the last several. Is this the move we’ve all been waiting for? I guess only time will tell, but I think in the face of rates that are positive against the CPI anyway, a real return, seeing gold move higher is a very bullish sign as far as I’m concerned.
Yeah, it certainly is. And again, I would caution people that obviously these things usually do not move in a straight line. So I would imagine there will be pullbacks along the way. We’ll be interesting to see if 2100 now serves as a bit of a floor similar to how we’ve seen that 2000 level really since back in December and throughout a lot of last year. I mean, it did dip below, got down into the one eight hundreds back in October, but for the last couple of months, with one brief dip last month slightly below 2000, when we had the higher than expected CPI report come out, 2000 has been the floor.
We’ll see if 2100 holds as now we’re up to 21 40. So there it goes. Andy, what do you expect in silver? I mean, people who’ve been following silver for a long time, especially in relation to gold, feel that it has some catching up to do. And certainly there’s the school of thought that silver, once it starts moving in the past on its two big moves, has outperformed gold.
Certainly not seeing that yet. At the same time, not a bad two week stretch here for silver, as we see there it was at $22 back in middle of February, now up to 24 30. But any thoughts on silver as we see this move in gold? Chris? There’s the phrase asymmetrical risk reward. And it basically says, what is the asset that I can own that has the lowest downside risk and the best upside potential? I mean, in my life, I’ve never seen anything like silver because it has so many utilities.
The folks in Canada trying to push it towards a strategic metal rather than an industrial. And I think it should be a strategic metal. It is needed in so many capacities, even in things that the military industrial complex uses, that really isn’t even openly counted on the supply demand fundamentals from the Silver Institute. So from military to green to digital, the need for silver is massive. And then the monetary aspect that people have awoken to over the last three years, largely in thanks to people like yourself, who have woken up the public to the value, this asymmetrical risk reward that the old statement, markets can stay irrational longer than you can stay solvent.
But think of it this way, we are running. I mean, there’s approximately, right? I’m not sure on this, but I would say approximately, let’s say there’s, what, 100 billion or less in silver above ground, right? I mean, somewhere in that neighborhood, we’re accumulating that much debt right now. Every 100 days, or, excuse me, every ten days. A trillion. Every 100 days. 100 billion every ten days. So when you talk about how much money is out there versus how much silver is out there versus the need for it and the real potential in investment, if you take the fact that you have these stupid commercial banks that have been short massive amounts for years, rendering silver the asset on the Comex that has the largest concentrated short position of any commodity traded on the entire exchange, you take that out of the equation.
And, yeah, silver should be way higher. Now. I guess the bottom line is that you can only manipulate any market over a very long period of time by pushing it in the direction that it is going. And I think the difference between the markets we see now, Chris, and the markets that we’ve all lived through, is that for the very first time in my career, 34 years, I think there is a big push globally to accumulating assets, commodities.
It used to be dollars and treasuries and stocks and real estate. But that’s an environment that I think has cycled and is moving the other direction as commodities and tangibles are moving into a bull phase at a time. When you think about it for a moment, you got mining eviscerated exploration, eviscerated. You got sentiment at the lowest levels. At the same time, you got sky high deficits and massive debt and all of the issues that we see around us that we talk about geopolitically and politically and socially and morally, the contrarian side of things would say there’s never been a better time to jump headfirst into silver.
But like I said, the market has a way of staying irrational longer than we can all stay solvent. But from a standpoint of logic and mathematics and economics, I don’t know that there is a better place to be. So, yeah, have strong fingertips. Hang on, because I don’t think I’ve ever seen a better opportunity in my life, in my career. A better opportunity of asymmetrical risk reward, lowest downside, best upside.
And I don’t think there’s even a way to shoot a hole in that, at least in my logic. Yeah, I know what you mean. And certainly, while I get it, people often want to see these things reflected more on a day to day basis, and unfortunately, I don’t have much control over that. But at least in terms of things I look at. And here you go. On the silver side, this was from the Cop 28 climate change conference.
And interesting note, agreed to work together to triple the world’s installed renewable energy capacity to beast 11,000 gigawatts by 2030. Again, I’m not saying that it’s necessarily a one to one correlation, but if that’s saying that based on where we are now and the amount of metals that going into the green agenda, that you’re going to get triple that. And certainly, as you talked about with the situation in silver, where in a deficit, seeing the inventories come down, and then you’re going to triple the amount going in here.
While Elon Musk is saying that he actually could power the US with solar panels, he was saying it is possible if they could get a battery that would power that. It leaves you wondering what this situation looks like in five or ten years and whether we’ll have the silver to do all these things that we want. And meantime, something I came across yesterday I wanted to run by you.
This was actually from April of last year, but interesting, I hadn’t heard her actually phrase it this way. Sanctions against Russia could hurt the US dollar as countries like Iran and China seek alternative currencies for trade. But there was a good quote in here from Janet Yellen. She says there’s a risk when we use financial sanctions that are linked to the role of the dollar, that over time, it can undermine the hegemony of the dollar.
But it’s okay because the US only uses the dollar as a tool, judiciously. Yeah, well, and that’s the entire rallying cry, if you will, for de dollarization, because the dollar is the tool of the sanction. And if no one wants the dollar anymore, then the sanctions become meaningless. And you could argue they’ve already kind of hit that wall. I mean, look at the ruble. If I’m not mistaken, I’m pretty sure it was the best performing currency of 2023, or very close to it, if not in the midst of crippling sanctions.
But it is the rallying cry that are bringing all of these countries together because it is the tool of the US hegemony. And she’s right. And that’s why you have to wonder, I mean, it’s almost too stupid to be stupid. They know what they’re doing by weaponizing the dollar and crossing the rubicon of saying what she just said in Brazil the other day, which is as stupid as a mud wall.
And that is, yeah, we need to confiscate that 380,000,000,000. Not just sanction it and freeze it, but confiscate it because we need to use it to rebuild the Ukraine. Now you cross that Rubicon, there will never be a country, least in the southern hemisphere that will ever trust us ever again, and rightfully so. And I think that’s when you start to question, could this have been really thought out? Are they trying to reset the system by having the world dump dollars and coalesce in a group that is rapidly growing? Where another 35 countries have formally applied to the BRICs, another 20 plus more have informally applied.
Where these countries are gaining a mass amount of humanity, the majority of all of the world’s energy production in the strategic shipping lanes, and it’s still early in the game. But by continuing to impose these kinds of sanctions from a country that much of the world views as hypocritical, look at what’s happening in Iraq. That’s the big deal. They’re kicking the western coalition forces out. They’ve made trading and dollars illegal.
If you own a business, you can wind up in jail and they’ll take your business. And there are no green dollar bills in the country anymore as of January 1 because they made 90 billion in oil revenue last year. Asked for a billion dollars a few months ago, and we said, not now. And so when you talk about hypocritical, we invaded their country 20 years ago and are still sanctioning 14 of their banks and under false pretenses looking for weapons of mass destruction.
Didn’t find any. Sorry, but we’re still here. And so when you talk about the way the world views us and then looks at the way that our fiscal constraint is out the window, and then you look at a country that’s maybe lost its bearings with the elections, with the judicial system, with the lawlessness, with the borders, you go on and on and on, and the wokeness and loss of traditional family values and all of these things, are they intended? Is it too stupid to be stupid? And that’s why I always go back to Jared Bernstein, the lead economic advisor to the US government, who says we should lose the world reserve status.
This is the main economic advisor to Biden because it’s a privilege we could no longer afford. So by weaponizing the dollar, by signing executive order to go green and then blowing up what it means to be an american on many levels while culture is being whitewashed, yeah, I think you could argue in a very logical fashion without being a nut job or a tinfoil hat or conspiratorialist that could this really have been thought out? Are they trying to do this? Do they want to point to a villain? And I go back to what Richard Russell said many, many years ago, and God bless his soul, he was the smartest man I ever knew.
And he said, the Fed has two choices. This is back in 20 years ago, and that would be to inflate or die. Inflate or default. A lot of people say, no, we can pull ourselves out of this. He said, you have two choices, inflate or default. Well, maybe the third choice is to find a villain. And those are the villains. Xi Jinping, Putin and Opec and the BRICS.
They’re the ones that created a reset. If not, then our politicians are just completely and totally imbustles. Or maybe this was thought out. So I don’t know. I’ll let you think that, figure that out for yourself. But I think about it a lot, because the moves that we are making, you have to understand, have consequences. And either they don’t think one step ahead and our administration is just reactionary, childishly reactionary, or they do think steps ahead.
Like Janet said here, she knows exactly what weaponizing the dollar would do. She acts like an idiot, but she knows exactly what it would do. And to go to Brazil, a member of the BRICS, and say, we need to confiscate Russia’s money, the next day, the president of Brazil called for a BRICS meeting to address world financial issues. Now, is there a correlation or a coincidence? I’m not sure, but the point of it is that she’s in the BRICS backyard.
We need to confiscate that money urging the European Union to do the same thing. That’s a line you’ll never come back from, in my opinion. So, yeah, this is all connected, Chris, and what we see happening with the BRICs. There’s almost 200 meetings between now and the big meeting in October, all of them brick centric in Russia. So I think every day there’ll be something more and more and more to talk about and think about as this gains momentum and credibility and critical mass.
Well, certainly will be a lot to keep an eye on as we go throughout this year. And, Andy, I’m assuming this is a little bit early, as this has only been the case with this rally over 2100 for a day now. But based on anything you’ve seen the last couple of days, has there been any changes in premiums on gold or silver, or noticeable reaction from any clients to what you’re seeing that might be useful to people at home? They’ve climbed up a little bit in the last few days.
It’s been very busy. It’s interesting when the market moves up or the market moves down, there is interest. When a market trades in a tight trading range, it’s very quiet, so it’s been very busy. I’ve noticed a lot of our backdated items have been sold out where the stuff that wasn’t 2024 has disappeared. You’re seeing the large inventory starting to thin out, and that’s how fast it happens.
So you get rid of the backside of your inventory and now you have still flush in 2024 stuff. But all it really takes is one big thing where what if gold spiked and silver spiked by 20% today, like we see in Nvidia and bitcoin? Well, bang, it goes straight to the moon. $2,500 or whatever it is, in the span of 24 hours, the entire industry would be sold out.
And I want people to understand that for six months now, or literally since Christmas, for sure. Anyway, three, four months, you and I have been talking a lot about how premiums have come way down, and it’s been very slow, and I didn’t quite understand it, but you can slowly see that that’s changing by the backdated stuff all start to disappear. And what has been very flush for a very long time, at least three, four months, could very quickly change.
And we’re beginning to see that happen. At least the backside of it changing where we’re not as flush with inventory as we have been for several months now. So, yeah, just a few cents, 1020 cents. We’re seeing premiums on silver go up. We’re seeing premiums on gold just rise a little bit. I think that’s indicative of what we’ve seen so far, which is spiked up demand. And one interesting thing is that I haven’t noticed selling.
And you would think when you get to all time highs, you got a whole bunch of people who bought gold even in 2011 at almost 2000 an ounce. Recently, as we’ve hit all time highs, we’re not seeing that influx of selling that some pundits would say would happen. When you get. People have been hanging on for a long time and just want to let go. We haven’t seen that.
So I don’t know. I think that if things continue the way they’ve been over the last few days, where gold’s up over a trading days, you’ll see things, I think, really start to change in terms of premium. Well, I appreciate that and appreciate that each Tuesday we know we can get an update if and when they do. So, Andy, thank you for this week’s report. Before we wrap up, anything on special on the silver or gold side that people should know about if they’re looking to add to their stack in the middle of the rally, looks like we have silver maple leafs at $3.
39 over spot. Various dates. We have 1oz palladium bars at 119 over spot. And we have Queen Elizabeth british sovereigns at 26 99 over spot. Those are the older coins. They’re zero point 25 four. An ounce of gold. And they’re a neat way to own fractional gold. A lot of the pilots, like in the Vietnam War, in the Korean War, probably even in World War II, all the US pilots would carry british sovereigns in their flight bag in case they were ever shot down.
Because british sovereigns have been traded for so long and they’re so well recognized as a fractional form of gold. It’s a neat way to own fractional gold and way cheaper than just about any other form of quarter ounce gold coin. And this is just a tiny bit under a quarter ounce and a neat piece of history. So, sovereigns, 1oz palladium bars, metal that’s come way down from where it’s been over the last few years.
And of course, the backdated silver maple leafs. And that’s it for now. So things are still all pretty much on special, but I have a feeling I’ll go on record as saying if things continue like this for even a day or two more, you’re going to start to see premiums take off again and availability start to wane. So, still a good time, but we’ll see if the trend continues.
And either way, I look forward to catching up with you next week. Chris. Thanks for having me, buddy. Well, we will pick it up next week. Appreciate you being here and I’ll talk to you then. .
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