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Summary
➡ Central banks, like those in China, Turkey, and India, are investing in precious metals, leading to a record demand for the third year in a row. This demand supports the price of gold, even when the paper price drops. The Ukraine war in 2022 led to the US freezing Russia’s foreign currency reserves, which has made other countries wary and increased their demand for gold. Despite potential political changes, the trend of investing in gold is expected to continue due to ongoing issues like surging debt.
➡ The article discusses the increasing physical demand for gold and silver, which is causing stress in the system and could potentially expose it. It also mentions the widening spread between the London spot market and the COMEX futures, indicating a scarcity of available stocks. The article suggests that this could lead to a mismatch in the market, possibly sparking a crisis. The author also discusses the concept of Exchange for Physical (EFP) contracts and how their volume and spread can impact the market.
➡ The discussion revolves around the concern of potential issues with February deliveries of gold and silver. The surge in the lease rate indicates a lack of confidence in the system, causing stress and disrupting the market’s functioning. The speaker suggests that this could lead to a systemic lack of trust in future deliveries. However, they also note that the increase in gold inventories could help settle these concerns, while the situation with silver remains uncertain.
➡ The speaker discusses the performance of gold and silver stocks, highlighting that while gold is expected to have a good year, silver’s performance is uncertain due to not achieving an all-time high annual close. They criticize large mining companies like Newmont and Barrick for their inability to control expenses and disappointing performance. The speaker encourages investors to do their homework and consider smaller, more efficient mining companies for better returns. They also mention the potential for a deficit in silver due to increasing industrial demand and lack of investment in mining.
➡ The speaker discusses the fluctuating value of silver, predicting it may reach $40 an ounce this year. They attribute this to potential economic recession and the Federal Reserve possibly cutting more than expected. They also mention the possibility of the Fed implementing a yield curve control program, which could impact the value of silver. The speaker advises patience and a long-term perspective when investing in silver, as its value can be influenced by various factors such as supply and demand, and economic conditions.
➡ This text talks about a mining company that’s doing well, especially during the current increase in gold prices. To learn more, you can check out a previous discussion about it.
Transcript
And as Jim Willey would say, we have the great Lord Hemke joining us on the show today. That is, of course, Craig Hemke of the TF Metals Report. And, Craig, happy New Year and nice to see he’s calling in from vacation, so there’s some dedication, although he’s still bringing us the silver and gold. Craig, how are you today, my friend? Well, I’m all right. It’s kind of a working vacation. Just trying to escape and find some sunshine. Yeah, I, I’ve got all the answers. That’s why, you know, I’m Nostra Dumb asses in the house, as they call me.
No, we’ll try to project. You know, I, I write this forecast every year and I always warn people, you know, this is not, I’m not like trying to get clicks and all that kind of. I write this stuff down because I’m gonna be wrong to a certain degree. More, some more in some years than others. And I want to go back, you know, by, because by the time you get to be my age, you forget what you had for lunch. And I was about to say you’re changing the story. I thought you write it down because you want to remember it a couple months later.
Right? And that’s exactly right. I want able to go back by, you know, this fall and say, God, why the hell did I think that was going to happen? Then I can go back and here I at least have a fossil record. I can go back and see what I was thinking and get wrong. It’s like the one last year I thought gold would go up, but I thought it would wait until the Fed started cutting rates. And, you know, as you know, it took off in March instead. And I like, well, what did I miss? And I, I, and I tried to write about this year.
I think I mainly missed the central bank demand and the impact that was having, but nonetheless, it’s out there. It’s in the wild you can go to my the easiest way to find it is on my Twitter profile page, TF Metals at TF Metals and it’s the pin tweet. So anybody can just go there, pull that up and you get it. Looks like that it’ll direct you to my site and you can I’m just glad it’s over, Chris. Man, it is a pain in the neck to write every year. I just dread it because it’s too much.
Was too hard on my ADHD brain to focus that long to write the damn thing. But it’s over and I don’t have to do it again now for a while. Well, I hear you. I’m actually writing a silver report as we speak. I’m going to see if I could get AI to maybe do some of the nice well, I use AI for the editing more so but I know what you mean when you have a big file and you’re sorting it out. Although I think that’s a helpful thing internally for the person writing it, but certainly also for people who are trying to understand the markets.
And Craig, I’ll do you one better. Even easier is that we have linked to the macrocast in the description field below and as I’ve learned from YouTube experts point makes it even more likely that people will click on it. So it’s down there and fortunately we will dig into that today. Although like you mentioned with 2024, I’d like to get some of your thoughts on that. Well, the first question is an important one. You said you’re in California. Am I assuming you’re going to be back in Kansas City by Sunday when you and your chefs have a big playoff game against the seemingly mighty Buffalo Bills? That surprised me because they lost a lot of guys last year, but I know that’s a big event for you and are you going to the game or what’s going to happen on that? I will not be at the game, get blocked by too many fans.
It’s like, right, like steal Patrick Mahomes’s crowd. Right. You know, I, I this is going to sound disingenuous, but it won’t break my heart if Buffalo wins. They, they’ve fought and for so long and the Chiefs have just driven them bananas. So if they break the eyes, they beat him in the regular season, but they lose in the playoffs. The Chiefs all the time. They get through this year. We’ll see. I actually, it’s funny, I, I was texting with Eric Sprott this morning because living in Toronto, he’s a Buffalo Fan. And so we always kind of give it back and forth to each other when they’re playing.
And I actually found a thing, I sent it to him. Over the last 10 times the Chiefs and the Bills have played, it’s five to five. Both teams have scored 251 points. They have. It’s almost. I mean there’s almost everything’s identical. So if I were to give any betting advice, expect a very close game again, you know, if you can tease the line to get the Chiefs or the Bills getting like a touchdown, that’s probably a good, good way to go because it’s. I’m. I can’t imagine not going down to the wire again. Should be fun.
Well, I’m just impressed. Say when I’m texting Eric Sprott, I mean, that’s, that’s pretty cool right there. I mean, you put that on your resume right? In your 50s, dude. I laugh. I still joke. I mean, I’ve been doing this now for whatever, 14 or 15 years, you know, and I, I’m still just amazed. The people I know, people I’ve met. I’m just an idiot. I’m just this dope that lives out in the middle of nowhere, you know, that bangs on his keyboard. But everybody, you know, that subscribe to my site and all this stuff has granted me with this platform and so the, the people I, it just seems so strange still to this day, but he’s a Michael Jackson of precious metals.
Just got there. You got it. Roll with it. And so I’m glad you’re excited now. I, I think that’s nice having some sympathy for the Bills fans. Although if they do win, a little concerned how you’re going to guy later on that evening. And ah, I know he was giving you some guff when his Broncos beat your backup squad, but yeah, yeah, yeah, he. I will not be pulling for the Broncos anytime soon. But, but yeah. And I. This comes from a position of all the winning that the Chiefs have done, you know. Well, okay, we’ll share this with Buffalo, but I, and I will say I’ve been living in that area for better part of three decades.
So I have like the Bills fans slugged it out through a lot of crappy football. So the fact that it has not been so crappy for the last six or seven years is fun. Well, I’m happy for you. Gives us jets fans hope. And it’s funny last football comment because I know people are saying, not for the football. Let’s get to some football. Like I remember before you Guys won. It was probably like seven or eight years ago. I was thinking that one, one day I was walking around, I’m like, there’s some teams I know they’re just never going to win.
And the Chiefs were the example that came to mind, so maybe there’s hope for the rest of us. And with that said. All right, enough of the sports talk, folks. Let’s get to it. Craig, first, before we get into what you expect to happen in 2025, you touched on 2024 a little bit, and I think we talked about this a little bit a couple months ago when I had John. But now that the year is complete, it’s almost strange that you had such a big move that year when it wasn’t like we got more easing than expected.
We was delayed. We got less. Jerome’s even saying, well, we might hike interest rates. As you look back on 2024, any thoughts? And what do you think it was that in particular the prices went up as much as they did last year? Well, was, I mean, starting with gold because silver didn’t keep up. And you know, some mining shares are great and we can talk about those too. But you know, if you measure by the gdx, I mean the GDX was up a third maybe what gold was. So, so regarding gold, I, I, I think what I didn’t give enough credence to is something that you and I have talked about multiple times over the last couple of years.
And that is one that central bank demand, you know, where central banks are doing, what you and I do, we take our excess reserves, which is, you know, our savings that are in dollars, and we’re there, we carve off some and put it in the precious metals. And that’s what China and Turkey and India, you know, and you go down the list, that’s what they’re doing. This would be the third year in a row of record central bank demand. And that underpins to me the paper price so that as paper price sells off, all of a sudden there’s all this physical demand that remains.
And you, it kind of keeps the, restrains the ability of the banks to really wash it out. And so that keeps gold moving in kind of two steps forward, one step back. And that one step back is pretty shallow. So then when you get another leg higher, you just keep moving into these higher and higher prices and that demand continues. But the other thing, Chris, that I, I, I think, I don’t know, I, I, I gave a lot of thought to and thought it was very important at the Time, But I think now I’m seeing it more and more in other places, other people starting to go, Yep, that was a big deal.
When. When the Ukraine war started back in 2022, in that first weekend of March, after the war had been going ON for about 10 days, the US did two things. They kicked Russia out of Swift and they confiscated. And now Yellen, before she was finally kicked to the curb yesterday, was, you know, starting to use the Russian assets for loans. They’re basically stealing those assets now that they froze. I mean, Russia had estimates 300 billion, $350 billion of their own foreign currency reserves that were held outside of Russia and the US and the EU The IMF froze those assets that Russia couldn’t have them, and now they’re starting to use them to raise cash to rebuild Ukraine, all this kind of stuff.
Anyway, look, we. I don’t want to get in the marriage. Sorry, though. Oh, yeah, right. Exactly. I don’t want to get in the merits of the political part of this. The message that those two things sent to the rest of the world that said, wait a second, hold on. Just. We might be getting along fine with the U. S. Right now, but there’s probably going to come a time where our interests conflict with theirs. Are they going to cut us off, too? We better start being a little more proactive about this. And so I think that has driven this demand for gold to get out of dollars.
You know, we talk about the gold price going up 26% last year versus that’s. Versus the dollar. Well, actually, that’s a dollar devaluation of 26% versus gold. I mean, that’s the way we have to look at it. And so all of these factors contributed to breaking out gold. Well, before I thought it would break out back in March, I thought it’d be summertime before it did, and then driving it higher because the dips were so shallow. And now here we sit, 2, 700 gold. Looking another good year this year, too. Yeah. And along those lines, as we had, you know, I guess we’re already in 2025.
But based on what you said, let’s say that Trump seems like he has a better relationship with Putin than Biden. Not hard to do that. Let’s say that the war in Ukraine ends. Do you see that trend reversing at all? You mean, like they could unfreeze those assets and that kind of thing? Well, we’ll leave that as. I mean, I guess that would be. Let’s say they unfreeze the assets and Russia some Sort of end to the war exists. You see the trend of send other countries of that changing where they don’t feel safe because of sanction risk.
I tend to think that, you know, once you do something like that, maybe it slows a little bit, but I don’t see that trend stopping, especially because you place it in the middle of all the other things that are going on with the surging debt and yeah, 8 million other factors. Yeah, it might be reprieved in some regard. But remember, Trump’s only around for four more years and God, you know, who knows who’s going to follow him. Right. And I think it’s a lesson learned and nobody wants to be, you know the old adage of fool me one, shame on me or shame on you, fool me twice, shame on me.
You know, if they did this to Russia, they’ll obviously willing the not only US but the EU willing to do this to anybody that gets sideways with them. So I don’t think it’ll impact it. And I, and I and in a bigger picture, that debt that you mentioned, which the new US fiscal year began on October 1st, so we’re three months into it and we’ve already run a deficit of what, a $721 billion in just the first three months. That constant devaluation of the currency by issuing more of it through all of this debt I think keeps that train rolling.
I mean that math is the math. And so yeah, the central banks continue to buy at the rate that they’ve been buying. I probably, you probably saw Chris, that article at the end, it was in, it was a Goldman Sachs research piece from late December that said when the Chinese came back after officially suspending their gold purchases in May, when they came back in November, they said they bought 5 tons and Goldman Sachs said no, actually they bought 55. And then when they reported for December they said 10 tons. So that that overall central bank bid I think remains and so long as it does, it’s going to really handicap the ability of the banks to smash the paper price.
And in doing so again they shut the the pullbacks remain shallow, you your Next, you know, 90 day rally launches from a higher level than it would have otherwise. And you just keep making these new highs. It’s pretty cool. Yeah. And you touched on the Chinese central bank gold buying. I know that’s been a topic of debate. They what they reported was a pause. Yan Nuanhouse has done a great job of going through some of the data which would suggest that the buying continued. And obviously you and I have talked about this before and I think most people in the gold and silver industry think and can document that China has purchased a lot more gold over the years than they report.
So you kind of answered that, but it sounds like you’re on the school of thought that they were purchasing even when they stopped. Would that be fair to say? Yeah, it’s like the, the thing, what are they, what are their official reserves now? Like 2000 tons or 2100. Whatever they’re up to, nobody in their right mind thinks that that’s the only goal that they have. You know, I mean it’s like we all laugh about, oh look at Chinese GDP is 8%. I think what they report last week, 5. And nobody really believes it because I mean they’ve got their own propaganda that they’re trying to promote.
So anyway, I, I would imagine it’s considerable what they have and I would imagine one day they will use that to their advantage. But for now they’re using the pricing western pricing scheme to their advantage and they’re accumulate, continuing to accumulate at what is still a pretty inexpensive price. Yeah, and I’ll just pull this up real quick from Gold Charts r us. There’s SG withdrawals since about 1980 or. No, the withdrawals started in 2008. Yeah, between domestic gold production and SGE withdrawals we have 35000 tons. So not saying that all of it went to the PBoC, but guessing I’ll take the over too.
Right, right, right. And in the end, Chris, is this gets to what I mean we probably spoke about the first time we met. You know, this, this pricing scheme is a fractional reserve scheme, you know, that relies a lot of times on kind of just in time delivery. The, the, the futures contracts determine a price. The spot price generally follows that. You know, it’s that futures tail wagging the spot dog that Ned Naylor Leland first talked about in 2011. And then to give the system legitimacy, you have to be able to deliver metal. Mary knows, you know, there’s whatever leverage is used on the COMEX and the futures exchange, it’s not one to one.
So to that price that’s determined through the futures contract, you have to at least deliver some. And so what ultimately will take that pricing power away is making stretching that leverage so tight or so wide because of the lack of the physical metal, it eventually breaks. And you find out just how much metal there really is. With clear title, you know, between all the unallocated accounts and the futures accounts and all these other forms of Good as gold, you know, just as good as gold that has been alchemized over the, over the decades. So any type of physical demand that moves out of the London vaults, out of New York, moves to the east.
That is stressing the system and one day the system will be exposed. So that’s why we, you know, like to see those trends continue. Yeah. Well then I think 2025 could be shaping up as your year because. No, you’ve been following this. We’ve talked about it a bit here with the situation in the EFP market, which is the spread between London spot market and the COMEX futures which has surged. And I showed you this one before we started. But I’ll just read what Robert Gottlieb of renowned investment bank JP Morgan, I’m sure you got his poster on your wall there.
So this is a former managing director and he mentions this is not the overall system perhaps, but in regards to this EFP situation, markets are in total dislocation. There seems to be a scarcity of available stocks in both gold and silver. We did also see the gold lease rates have recently surged to the highest level in decades. And again, I get your opinion in just a second. But I don’t know that this is the event that you’re sitting here saying this is code red for Comex futures in gold and silver. Although when you put it inside the context of like you said, a fractional reserve system.
And I don’t know if you saw when I had got Rick Rule on about a month ago and was asking him about because I had heard him talk about what happened during Silver squeeze in the next couple of months as PSLV was buying silver. He talks about we cleared out Chicago, we cleared out Boston, we cleared out New York. And it was interesting. I know he down. He doesn’t seem to look at the manipulation aspect the same as some others. Yet with all that said, I was surprised because he said more than once that it’s a matter of when rather than if.
When there is a mismatch. Now, could some of these conditions we’re seeing here spark that? I would say that’s a possibility. But let me stop there and I’d love to hear your thoughts on any of that. This Gottlieb guy, at least he’s a JP Morgan Terry that’s not in jail. So that’s kind of nice to see that there are still some guys. I assume it wasn’t like through the glass on a phone phone somebody was asking him this stuff. It sounds like he’s but, you know, Michael Nowak, I think, is still in the hole. You should go visit him, see if he wants to talk.
Ah, wouldn’t that be fun? Go track him down. Mr. Noak, you have a visitor. He comes out here’s. I’ll tell you what, let’s. After we wrap up here, we’ll, we’ll see if there’s a way to contact, see if he wants to do an interview. He says, yes, I’ll meet you there. Sure. He’d love to talk with us. Some minimum security federal prison, you know, with a golf course in the back. I’m sure that’s where he’s at. But anyway, I digress. What’s going on here? Like, I, I have been, I, I go back to 2017 with these EFPs.
I was, I used to do these weekly calls for Sprout Money with, with Eric Sprott, and we’d record every Friday, and there was a Friday in November of 2017. He says, you’ve been watching the volume of these exchanges for physical. And I’m like, well, I keep track, open interest every day, but I don’t watch those because it’s been surging. So I started watching and, you know, some days they do a thousand EFPs in volume and then, you know, just do more and more and more. And by the time we got into early 2020, we were doing like 30,000 of these exchange for physical trades in March, February and March.
And open interest was at all time highs up near 800, 000 contracts. And, you know, I know, I guess if you look at the market and say it’s legitimate, people look at it and say, yes, that’s actual physical metal that’s being settled, you know, through this process. And I always thought it was. I just. Yeah. Apologize for interrupting, but could you possibly just briefly explain when you see EFP contracts going up or down, what that actually means, in case anyone is unclear? Well, when you do an exchange for physical, it’s. You’re selling the futures contract. And a lot of times you can do this across all the different ETF that if you look it up, the definition on Investopedia or whatever it is they talk about, you know, getting baskets of shares of equity, ETFs, that kind of thing.
So allegedly that’s what’s happening. And, and I guess it, you could say it’s legitimate in that that’s why there’s this sudden spread, you know, where you’ve got. And it should be arbitrage is what I’m getting at. The Trade should be you’re exchanging a, you’re buying the, the spot and you’re selling the futures contract. Okay. And that’s what these banks were doing back in 2020 for like a two dollar spread. It was just being, but it was like free money. You know, they’re, they’re again buying spot, selling the futures, closing that gap down to nothing. And it was, it was almost like an abuse of the system at that point.
Well, now it, the volume is still there, but the spreads are wide. It began to widen back in December and everyone’s like, well, this is weird. The spread between spot versus futures is $30. It shouldn’t be $30. Well then it widened again here in January and there’s articles written about how it’s due to this possible imposition of tariffs and can gold be, you know, settled in New York versus a spot contract in London. And how are we going to do that? Because again, if you’re going to narrow that spread, if you’re going to arbitrage that thing with, with get my hands all going all over the place, Chris.
But the spread is spot is say 2720. And the February front month futures contract is 2760. Right. With the February contract being the front month going off and going off the board and into its delivery phase. Next week that spread should be like $2. Right? But instead last week it was 40. Why? Because again, you should be, if you were, if you have inside, if you have enough cash in size and if you have confidence that you’re going to get the metal to deliver against your futures contractor selling, then you can, you can affect that trade and you can close that spread again.
And what are you doing? You’re selling the February futures contract. You’re buying it spot, sell by, sell by, sell by, sell by. And that gap narrows. That makes sense. Okay, so that gap shouldn’t be there because there should be enough confidence in the system if you buy at Spotify, that you actually have the metal to deliver against the short that you established. If I hope I’m not making this as clear as mud. I feel like I’m talking myself in circles. Am I doing it? You follow me? So, because if you follow me, I’m sure everybody else is making.
I’m with you and I’m trying to point along because I got the commodity prices here so you can see the futures and put my glasses on because this is current. All right, so there you go. It’s a 15 spread. Last week it was high as 43. Well, why did it come down well, Yesterday, Monday the 20th was Martin Luther King Day. And though there was no Comex trading, they were still trading on the Globex and which is off exchange, like after hours trading. And when the news came out that Trump wasn’t immediately going to impose tariffs, you know, it was one of the first things that he was going to do as president.
Well, the dollar plunged and gold futures rapidly sold off by like $25. Spot was unaffected, was the futures that sold off. And that spread, as you can see, is now narrowed down to 15. It will continue to narrow now because that February contract’s going to go off the board on the 30th, which is seven trading days from now, eight trading days from now. And all the hedge funds and whatever banks swap dealers, whatever that are long that February, if they don’t, if they’re not standing for delivery and putting up full margin, they got to be out of that contract.
And so they’ll be selling the February and they’ll be rolling into April or June. Well, just that selling pressure in the February, which we saw a bunch of yesterday on Monday when the Trump tariff thing was that report came out, there weren’t going to be tariffs. We’ll close that gap. Okay? This will happen. I have no doubt in my mind. And then we’ll start looking at the gap versus April. Most important is why is there a gap? That’s what we can’t lose track of. Why is that spread so wide? It should never be more than a couple of dollars, maybe 5, 6, 8.
Why? To get to 43. Why was there a sudden lack of confidence that if you bought today at Spot, you’d have the metal to deliver against that futures contract that you sold in February. Do you see what I mean? Yeah. And I think that’s why it’s interesting that we’re seeing also the surge in the lease rate because that would indicate that we do have an issue there. And Craig, the other thing I wanted to ask you as you were saying that, do you think this could potentially. I mean, we’ll find out for sure, but is there at least a possibility that there could be an issue with the February deliveries? No, I doubt it.
Concerned about that. To me it’s only just a sign. And this how we got to the subject. It’s only a sign of stress in the system, a lack of confidence in the system that just in time delivery. Because again, if, if you have confidence that you can deliver gold against your short of the February, well then hell, that’s $43 per ounce. Every contract’s 100 ounces, that’s 4, 300 bucks. You do that, do 100 contracts, that’s $430,000. Riskless. That’s a riskless transaction. You’re buying here and you’re going to deliver it out eight days from now. The fact that it’s not that arbitrage and getting close shows you it’s not riskless.
Right. People don’t have the confidence and the faith that, that, that they’ll have that medal. That’s why the spreads blew out back in March of 2020 when that first round of EFP abuse blew up. Because again, remember, it was on logistics. Covid was setting in, could we get the metal to New York to settle and all that stuff. And so spreads widened out. Theoretically, that’s what’s happening now too. That’s why the lease rates are up. Because, because the tariffs. Would metal be here in New York to settle against that short of the February contract? And so this lack of confidence drove that wider again to me now, will it appear again? Are we going to have the same thing crop up? Will the April contract open up 50, $60 versus spot, that sort of thing? Because now we’re getting it because it happened in December, it happened in this month, it’s going to happen in February or March.
Now we’re getting into kind of systemic thing, a systemic lack of confidence that that metal is going to flow and, and it disrupts the functioning of the market. So we’ll see. Will there be enough people to stand? You know, that’s the thing back in, you know, usually, and I’ve always kept track of these things. I have a front month, a delivery month. In Comex Gold, you might get 6,10,000 contracts standing for delivery. This is pre 2000 or 2020. After all this happened in 2020 with COVID all of a sudden, like the April contract, the June contract, there were like 50,000 standing for delivery.
Okay. Which would, I mean a lot more. That’s trended back down. We’re back down now. The average month is maybe 15 to 20,000. So what’s it going to be this month? It could be more again, you know, in a similar to 2020, we could have 40,000 standing for delivery. But that’s still not enough. You know, that’s going to break the COMEX kind of thing. Could it be a hundred thousand? I suppose. But now then we start running into position limits, right? I mean the, the actual stated position limit in the front Delivery month is 6,000 contracts.
So how many entities would be have to be Standing for the full 6,000 to actually get to where we have a hundred thousand standing. You see what I mean? So I don’t suspect that will happen. What I do suspect is like what happened yesterday, enough selling in the futures contract. Just simply do the contract roll will lead to the futures contract coming down toward the spot price and then we’ll get to next week. At this time it’ll be down to two or three dollars. If enough selling comes up, it’ll even go into backwardation. We’ve seen that happen too.
And then what we’ll want to watch is if now versus the April contract, if that spread widens out again. Because like I said then, now we’re getting into this kind of what could be a systemic lack of trust of future delivery. And that would be noteworthy. Yeah, well, that’s a great point and I appreciate you breaking that up because we will just by the nature of February coming up here, see that start to go to zero. So like you said, keeping an eye on April will be the. We have to keep track of that. So appreciate you breaking that down and Long answer.
God. Sorry. Oh, well, you explain it well. So. Well, I don’t know if I did or not. I feel like I kind of talk myself in circles anyway. There’s a lot about this on this, on that spread that’s wide. It should never have been that wide. It will trend back down toward flat and it is a sign. The fact that it existed and then it kept getting wider rather than narrowing is a sign of a lack of confidence that I can buy at spot to deliver versus that futures contract that I sold to Narrow to capture the arbitrage.
That’s. That’s how I see it anyway. Sorry. Okay. Well, here’s another one. I’d love to see if you’re able to draw a conclusion from it yet. I’m not quite sure what to think. Although we look at right Comex stock, so here in gold, we’ve seen total inventories go up quite a bit over the past month. You see, registered is up about 3 million ounces. Eligible has a spike too. That’s on the gold side. Silver, it’s a little different where here the total has gone up from about 260 to 330. Yet the picture in registered, we had that jump in the beginning of December.
Yet the metal’s been coming out of there so far. Any thoughts on anything we can draw from that or. We need a little more data to see what might be happening and why there’s a difference in the pattern. Well, because silver spread is widened out too. It got over a dollar last month and it got over a dollar this month. The spread from Spot versus the March contract in Comex Silver, which is a front month and there are a little more time involved, which effect widens that spread too. The gold that you see, there have been articles, I think you even tweeted the article from mining.com that had all these kind of mainstream sources about all this gold that’s flowing into New York.
And that’s why again, if you’re gonna, if you’re going to deliver metal on the futures exchange, there’s got to be metal in the vault. Now what’s delivery? You know, is it a warrant, you know, and a delivery receipt with a warrant attached? And is it out of the register? It’s got to be out of the registered. That’s what registered metal is. Is it actual physical delivery that’s being off take, you know, an offtake from the vault and all that kind of stuff, or without getting into all that, this extra, what is it, a million ounces or whatever that’s come into the registered vault of Comex.
Again, that’s metal that’s apparently come over out of London so that you can settle those shorts, you know, because if you’re going to close that gap, you are selling the futures and when you’re selling the future, you are short and you are on the hook to deliver that metal, you know, to someone who’s long during the delivery period. So this metal had, it needs to come in if this is, you know, if we’re going to somehow gain control of the situation. And that’s, you know, that’s why that stock, the stocks are going up. What the fact that it’s not going up in silver tells you.
We don’t necessarily have the same situation. You could also. Maybe they’re in the silver, I don’t know. But we don’t have that same situation yet in silver. Silver, I don’t want to say it’s more plentiful than gold or anything like that, but we don’t have that same concern about future delivery. Now let’s see, let’s see what happens as we get into February because that March contract will go off the board at, I don’t know, probably on 26th or 27th, whatever, I don’t know, maybe that’s a Saturday, I don’t know, whatever. The late in February, that March contract for silver will go off the board in delivery and we may have the same situation develop, you know, the spread may go out to a buck again in silver.
It’s currently back down to 65 cents or something. And we’ll be waiting for the arbitrage to close it. And to close it you got to buy the spot and sell the future. And then if you’re going to sell the future, you got to have metal to deliver. And so maybe that same spike in, in metal going into the COMEX vaults, will the metal go, you know, silver will come across and go into the silver vaults in February. We’ll see. But so far it’s just been putting out the fire for February, for February gold. That’s why you’ve seen the vault totals go up.
Well, unfortunately we can keep track of these things on TF metals.com and, and the CME site. I mean, I mean I, I look at it almost every day, but the CME puts those, I mean you can look at the gold stocks and the silver stock report every day and see that metal allegedly moving around. So, and Craig, and to our audience, I know we said we were going to talk about the Macrocast which we’ve been talking about as we’ve been going along here, but I wanted to pull it up again in case there’s anything that we did not highlight or if you’d like to just walk people through again.
Anything else in particular here on the Macrocast. Well, again, I, I would suspect we’re going to have an okay year in gold again this year. Once you get through the old all time high, probably tack on another 10%. That’s generally how things work. That’s why I thought last year we go from 2000 to 2300 because that first 10 usually follows when you make a new all time high. So I think that’s probably a good target for some point this year. Silver will be interesting. Unfortunately, Chris, we did not get an all time high annual close in silver.
That might have really ramp things up in silver this year. But we didn’t get that at the end of last year. But it should still be a good year. The only other thing I would add that I wrote all the way. Like you can see what a labor of love this is. It just goes on and on and on. If you get all the way to the end, God bless you for having the patience to read all the way to the end. I have, I have another section about mining companies which is that part there. And you know, it’s such a disappointing year and if you measure by the GDX, GDX is only up 8%.
Well, the big problem there is about 20% of the GDX portfolio is Newmont and Barrick. And those companies are ass. I mean, they’re terrible. They can’t control their expenses, so their margins never seem to widen out. Their expenses go up as fast as a gold price, and all they ever do is disappoint. And until they do better. I. I just was recording a thing for Sprott Money earlier this morning with Ronnie Sturfila, and he was like, what we really need is Newmont and Barrack to do better. Because the generalist investor, that’s what they do. Even Stanley Druckenmiller, for God’s sake, who’s a million times smarter than I am.
But whenever you hear about Stanley Druckenmiller’s getting into gold, he’s buys. Not only does he foolishly buy the gld buys Newmont. Like Stan, don’t you have an army of analysts and shit that could look at you and go, don’t buy Newmont. Buy Agnego Eagle instead. But Standby is new because it’s the only company he knows. Newmont and Barrick, and that’s all these home offices and institutions and hedge funds, that’s the only one they know. We got to send them a copy of the Mining Stock Journal, get them some Cranston. Exactly. But they buy Newmont. Newmont then reports earnings that are below expectations because they can’t control their costs.
The stock goes down, the hedge fund or Stan Druckermiller goes, well, these things are terrible. Gold prices going up and Newmont goes down. Why do I want to own them? And then. So nobody owns them. So one to Ronnie’s point this morning was we really need those two companies to perform better. Point made. I’ll take it. That’s a good one. But we also need the investor to do their homework. You know, I got the charts right there. Look at, there’s Newmont and Barrick versus gold prices. Scroll down a little bit further and you’ll see the exact same charts for AEM and for.
Oh, maybe that. Wait, go back up. Oh, okay. That first Ag. Those are AEM and Ken Ross. I didn’t have my. I’m going to keep my glasses on this time, but go up further. Look at, look at. That’s gold in candlesticks. And Newmont as a red line. I mean, that’s just terrible. Gold’s up 26% and Newmont’s down 10. Look, barracks. Even worse, gold’s up 26%. Newmont was down. What is that, 14%? New. Okay, I mean, this is terrible. But if you go down further and you, you can see the chart, look at AM. Okay, so there’s AM’s doing.
Ken Ross is doing even better than that. So the point that I wrote about this year, as I said, like you said, Mining Stock Journal. You and I know multiple people that work there ass off studying, you know, assay reports. You know they know about length and grand per ton and drill length and what that means and all this other stuff that I’m. By no means am I an expert in. If you want to invest in this sector, find some people to help you. Don’t just go, I’m going to buy new mod. Do your homework. If you do your homework, if you’re willing to do your homework, spend a little money for someone you know that has a great newsletter.
You’ll be rewarded as gold goes up and silver goes up. But if you’re just going to be a dope and stick your thumb in your butt and buy the gdx, you’re going to continue to be pissed off anyway. I don’t think that’s exactly how I wrote it. I think you should have mixed that in there. That would have been a good conclusion to the article. If you’re, if you’re thinking about buying the gdx, that’s what it feels like is some in your butt. So anyway, sorry I’m getting salty with my language but it’s true. I mean all the people that complain about the mining shares would not be complaining if they bought low cost.
I mean go back, scroll up one more time. Chris, I know we’re almost done, but scroll up one more time. I included this chart for mining visuals. This one. Next one down. No, that. There it is. Look at Newmont 1611 for their third quarter. All in sustaining costs. Look at AG Nico Eagle 1286. So why did AM go up 50% last year and Newmont goes down 14? Because their margins are that much wider. Because they can. Look at Ken Ross 1350 versus Barrack at 1507. Do your homework and you’ll be fine. Okay? It just don’t just don’t just buy, you know.
Anyway, I made that point. I’m just rambling now. Sorry. Well Craig, I guess my final question for you today is that ties into what you were just saying because great year for gold and silver. Still not really so much for the mining stocks. I talk with Steve Cope from Silver Viper every month who is on the exploration side. He says the same thing that you and many of the other folks in mining that you talk to, especially on the junior side, there is not money coming in there yet. And here we sit in silver where I don’t know, we’re three two and a half months away from Silver Institute’s latest report where they’re going to show another big deficit.
I understand the numbers. It’s an imperfect science. Although I continue to talk to people, ask, you know, various capacities. Rick Rule thought the deficit might be even bigger than what’s being reported. So we have a deficit, but we’re also on track where it’s hard to see what is the way that’s resolved. Because I mean a, it’s going to take longer than a month or two to get that silver out of the ground. So you already have the time lag there. You don’t have money going in. Oxford Economics did a report for the Silver Institute last year where they calculated over the next 10 years they expect industrial demand to grow 46%.
So I preface this with I remember we had the Stockpiles declined from 1990 to 205 and then it reversed. So the time is done. We’re in the third quarter maybe. But I’m wondering if you’ve come up with any way that gets resolved and perhaps the other part to add onto there. We’ve seen a wave of retail silver selling, which on one hand maybe I don’t know how much it actually did hold the price back. Yet to some degree those inventories are still coming down because we saw it first in COMEX, then LBMA, then it was coming out of the ETFs for a while.
I haven’t found anyone who even has a good starting point of how to judge how much retail has been sold. But if you use the 3 billion estimate of how much is out there, there’s some amount coming down. So also the, at some point have the people who want to sell around 30, have they sold already? So curious how you combine all of that and where that leaves us. Well, that is an overhang of supply. You know, when we talk about whatever it is above ground stockpiles being 2 billion ounces or what, you know, I always see these numbers.
I mean they’re counting grandma’s candlesticks, right? And her silver platter that’s all tarnished, you know, from sitting in the, in the whatever with all the rest of her silver stuff. That assumes again that at some point someone’s going to take grandma’s candlesticks and go sell them to the, you know, we buy gold people down the street and that’s going to be and maybe not, I use that example, but there’s, there’s always going to be people that bought silver in 2011 at $40 an ounce. It had been frustrated like crazy for the 14 years since. And if it ever gets to $40 an ounce, man, they are going to sell that crap and go buy themselves some Nvidia that’s always going to be there.
Whether that, and I guess, I guess my answer is that that’s just going to take time to chew through. It’s probably a part of why, you know, you’ve seen cocoa lumber, zinc, I mean nickel go down the list. I, I think everything but sugar and silver have made new nominal all time highs in the last decade. So sugar may have just almost. I don’t know if silver just did it or not. That’s all part of why silver hasn’t, I suppose is that every time you get into any kind of supply squeeze like Coco has been through, some of this stuff magically appears, you know, and it gets melted down and feeds through the system.
So you just kind of have to chew through that, that and that continues to take time. I don’t, I’m not sitting here trying to say so you got to be patient and all that kind of stuff. But I do think for me personally I’ve done okay because over the last 12 years I’ve just kept buying it on a regular basis. And so my basis is like $20 an ounce. And so, and I have not sold, I don’t think I’ve ever sold a single ounce ever of all the metal that I’ve acquired. So you know, it just, if you under, if you like the fundamentals, you like that story, then it unfortunately does require kind of a long term point of view because of what you mentioned, this supply overhang that’s out there and you got to let this supply deficit from mine supply chew through that in the years to come as demand for physical silver and all its electrical applications continues to increase.
Do you think we hit 40 this year? I do, I do. I wrote that in the into the macro cast and I don’t think we finished there. You know, again, especially in a market like silver, bull markets unfold in a two step forward, one step back routine. Silver is you could say doing that now. I mean it broke out from 23 or 24 Easter Sunday night last year, March 31st it took off and finally about a month after gold and then ultimately kind of stair step pattern all the way up to 35. But it’s been in this kind of Long term uptrend that is punctuated or with these kind of continuation pattern of what we call bull flags or whatever where it goes up and consolidates and up and consolidates and up and consolidates and that’s what it continues to do.
I gets through 35. When it does it’ll probably go to 38 or 9 and it’ll consolidate and then it’ll probably actually bust up through 40 then pull back again and I think I have it probably finishing closer to 38 would be my thought. Now again, a lot of the other stuff that I wrote about in that macrocast going to have to come to fruition. I mean we’re going to have to actually be heading toward recession, which is what I think we are. We’re going to actually have the Fed actually cutting more than what people are expecting at this point because of said recession and then we’ll see what happens in the mod market.
Because you want a wild far out prediction for this year, I’ll give you one. What if by the December FOMC meeting the Fed is actually taking questions about the possibility of a yield curve control program? Nobody’s thinking about that right now, but boy if we are, all those things come to pass. Yeah, 40 silk, $40 silver won’t be a problem. But if the economy chugs along and Trump is able to actually cut $500 billion in spending and the dollar index goes to 120, we’re probably not seeing $40 silver this year. Well, in terms of that yield curve control, there is someone who has been on it.
In fact, I’ll have to send you something I wrote about this, but Ben Bernanke apparently was writing a column for the Brookings Institute back in 2016 and a three part series of what tools does the Fed have left? First was negative interest rates. He didn’t call it yield curve control but targeting longer term interest rates. And believe it or not, the third part was at he actually wrote an article about helicopter money and how it shouldn’t be ruled out as a last ditch option. So Craig, I will leave you with that, huh? Show everybody helicopter. Ben, you’ve got.
That’s a great lead in Chris, you got it all right where. I think I got him pulled. Give me a minute, I’ll pull that up. While you pull that up, I’ll add some color. I actually have the link in the macro cast to the Chicago Fed report about the history of yield curve control because this is not unprecedented. The Fed did this coming out of World War II when debt to GDP got crazy is they instituted yield curve control for like nine years and what is it? And they may not call it that, but if yields keep rising and that’s an untenable thing not only for the economy but for servicing all that debt, the Fed will basically say, and that’s what the article that Bernanke wrote, they’re just going to cap yields.
They are a buyer of all treasuries above 4% whatever. And that they’ll cap yields and that’s yield curve control. It’s what the Japanese were doing for decades. Yeah, that’ll be next. And if, if we get into a buyer strike, if the rates continue higher through 5% to 6% that just that is a non starter. They cannot, they being the Fed and the politicians and the bankers cannot have that. And so that’s what I mean that could very well be on the table. That could be an open topic of discussion by the time we get into later the part of this year.
So anyway, helicopter Ben, everybody should buy themselves one in preparation for that. Step three. Come on. Where is it Chris? Oh, there he is, there he is. And look at the superstar we got for the commercial. Here is the Silver Chop. That is so Con Air, Craig. Con Air, Craig. Rose out 100. So yeah, we finally got that launched and got the first batch almost completely out by the way. I know there’s a few people still waiting for theirs, little delays on some of them but we’re getting that all finished up. And yeah, at least if you want to have Ben Bernanke flying around in your kitchen covering you with hundred dollar bills and as I said here, his familiar brand of easy money love.
At least it helps when you have to on those rare occasions when you read a Janet Yellen quote about how she’s sorry and but most importantly again I will mention one more time that you can find Craig at a great participant of Today’s interview@tf metalsreport.com and the link for the Macrocast which explains everything that’s going to be happening in 2025 is in the description field below. So Craig, I thank you. I guess we went a little longer than expected today but great to have you on here and catch up with you again and we’ll see in a couple of months where that leaves us but great foundation to be prepared for what’s going on this year.
So I thank you for that my friend. It’s always a pleasure, Chris. And it was the football talk at the beginning that dragged us out. No, there’s a lot to cover and so thank you for for the additional time and hopefully it’s at least of some help to everybody. Well, I think so and we will catch up and do this again my friend. You got it. Well thank you to Craig for today’s call. Sure is always fun to catch up with him as he is one of my favorites in the gold and silver industry and still remember my days listening to Craig even before we had an arcade economics or a show.
So really appreciate that he made a lot of time and we got the extended version today and hopefully had fun with that one at home. And real quick before we wrap up, would also just like to thank Fortuna Mining who kindly brought us today’s show and Fortuna actually had their 2024 full year and fourth quarter production results out. And as you may have imagined, if you’ve been following Fortuna, especially with the progress of their fleet flagship Seguela mine, they did have a record production result in 2024 and a lot of interesting things shaping up for the company in 2025.
Which Fortuna Mining CEO Jorge Ganoza came by and joined me on the show yesterday. And certainly if you are a Fortuna shareholder or looking for mining stock exposure, I think it’s a great call that really lays out what they are doing and highlights why they have put themselves in a great position, especially in the midst of this gold rally. And to find out more, well just click on that call that we did yesterday cuz it’s coming your way now.
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