I’ll show you a chart that shows that these levels of open interest are bear market levels of open interest. It doesn’t mean that gold’s in a bear market, but it means that the sentiment is similar to a bear market in gold. And futures are getting less and less popular as the price rises. This is basically a sign that the physical markets are starting to take control of the pricing mechanism for gold, which is what we have been expecting all along. The Treasury is down 241 billion dollars in four weeks. That gives it about seven weeks of cash runway left before they have to raise the debt ceiling.

It will be a little bit longer than that because income in the form of taxes will flow in in the middle of June due to corporate tax day and other things. But we’re getting down to the wire of when the X day is for the Treasury to raise the debt ceiling. And according to most estimates, it’s around August. And of course, as I’ve been saying here on The Endgame Investor, there are no more dollars from which to raise debt for the Treasury to spend since 80 percent of bank reserves are already being used by the repo markets.

And the 10 year to two year yield curve spread is now at 51 basis points. The last recession occurred at about 99 basis points, the one before that at 51 and the one before that at 12. So we could be any time now at the next recession, according to the 10 year minus two year yield curve spread. I have no idea what I just said. Well, like a child who wanders into the middle of a movie and walks about Walter. What the fuck are you talking about? That’s why I’m about to explain everything in the slides ahead.

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Let’s go to the slides. So quickly here we have what I call a gold delivery open interest love triangle. Open interest right now is about four hundred eleven thousand two hundred and ninety eight contracts. How do I have that number? Because the last reported number on the COMEX site, this is the CME on the left over here, is four hundred and twenty six thousand five hundred and seventy one contracts. There were fifteen thousand two hundred and seventy three deliveries yesterday, which is going to take off of that open interest. And we have a total of four hundred eleven thousand two hundred and ninety eight.

And we have what looks like another five or six thousand contracts still open that will go to delivery. All we need is one little down day in open interest, which will probably follow a down day in the gold price, which has been happening. It’s been very volatile out there in the gold market. And I think this is one of the reasons that futures are less liquid because of the Basel three regulations, which makes it more difficult for banks, for bullion banks to act as market makers in this market. So does Basel three positively or negatively affect the gold price? No, it just makes it more volatile by contracting liquidity in the futures market, which appears to be what it’s actually doing now.

Four hundred thousand in open interest, you can see open interest levels. I put a little thin red line at exactly the four hundred thousand mark in open interest. If you if you look in a magnifying glass, which I did, I zoomed in on this about five hundred percent just to make sure I got the numbers right. This number in open interest has not occurred since the beginning of 2016 right over here at the edge of this oval. This was the end of the last gold bear market. You can see it corresponds to the price right here of gold at about ten forty five.

We’re here. We’re clear. We don’t want any more bears. We’re here. We’re here. We don’t want any more bears. One thousand and forty five. One thousand forty six. Maybe the the the the low was whatever it was, it was about ten fifty. And from there on, open interest has never reached four hundred thousand contracts again, but it looks like it is about to, except this time the open interest is going down and the price is going up, which means that the physical markets are taking control. And at some point, the futures market is going to wake up.

And once it does, there’s going to be a lot of speculative tailwinds for the gold price. It could bring it significantly higher very quickly. We’ve seen huge moves in the gold price on very small moves in open interest, a big move in open interest in the positive side, meaning open interest rising will lead to huge moves in the gold space. You’ll see it in the coming weeks and months, especially as we get closer to the endgame and leading up to the final crash in the dollar. This is the Treasury’s account at the Federal Reserve.

When this goes to zero, they have to raise the debt ceiling. We can see from April 30th to May 28th, that’s exactly four weeks. We have gone down in this account, two hundred and forty one billion dollars. If you calculate that, there’s about seven, seven and a half weeks of cash left. It will probably be nine, ten, eleven weeks, something in that range because cash will come in from the various corporate tax days from now until August. But this cash is going to drain. It’s going to drain faster because they have to cut the bill size because they’re already at the debt ceiling and the debt ceiling.

We’ll see this go to zero. And once it does, they’re going to have to raise money, but they can’t raise any money because all the money is being used by the repo market. We’re going to see that in this chart. This is the next chart I wanted to show. This is the repos to reserves ratio, how much bank reserves, what proportion of available bank reserves are being used by the repo markets. I go over this chart every few weeks just to update where we are. And we can see we’re still in the same trajectory heading up inexorably to that eighty three percent repocalypse ratio mark over here.

This is twenty nineteen when there was a repo crash, a repocalypse and repo rates went to about ten percent overnight. We are headed there. We’re going to get there within the next few weeks. You can see here that we’re at seventy nine percent. The interesting thing about this number, seventy nine percent, is that it’s outside of a month turn. The month turn is actually today. This is two days ago here in May twenty eighth. This is always a day behind. So today we will see the repo rates from May twenty ninth. And then on Monday we’ll get the repo rates for May thirtieth.

And those will be a spike. You’ll see this spike probably above the eighty three percent repocalypse ratio mark. But it has to stay there sustained for a few weeks in order to trigger something. But we’re getting there and we will get there. And there’s not enough dollars to fund both the repo markets and the federal government. That’s two trains coming at each other at the same time. There’s going to be a crash. Let’s look briefly at the ten year minus two year yield curve spread right now. It’s at fifty one basis points.

We can see whenever it goes below zero and then goes back above zero. There is a recession happens every time. This time we’re at fifty one basis points. The last time we’re going to start at nineteen ninety and go into the more recent past. So we’re going to start at the next slide here. We see the ten year minus three year yield curve spread in nineteen ninety. At what point did we come into a recession at that shaded point? July second, nineteen ninety eighteen basis points. We’re now at fifty one. So we’re beyond that.

So we could hit a recession any time. We can see in February twenty eighth two thousand one. We hit exactly where we are now. Fifty one basis points by the time a recession was triggered at the shaded area here on February twenty eight two thousand and one. And most recently two thousand eight we got all the way up to ninety nine basis points for all intents and purposes. One percent yield spread between the ten year and the two year. So we do see here a trend. It’s been going up every time that we hit a recession.

First we had eighteen in nineteen ninety then fifty one and then ninety nine an hour fifty one again. Maybe we have to get to maybe we have to get to ninety nine again. Maybe we have to get a little bit above that. But we are headed there. You can see on this chart we’re headed higher and we will go higher still exactly how much time I think it’s going to coincide with the repoculus which is going to coincide with the repo to reserves ratio going above 83 percent on a sustained basis.

Now there’s two more pieces of news I wanted to cover and they are important. The first is Florida declares thanks to Governor Ron DeSantis that gold and silver are legal tender. What are the implications. How important is this. And second an article from Wolf Richter that shows that the ECB does mark its gold to market. Now I’ve been saying that if the Fed marks its gold to market the dollar will crash. You could look at this article of Wolf Richter’s and say well the ECB marked its gold to market and the market didn’t crash.

Well it’s a misunderstanding because the euro is really a dollar derivative. It is not a gold derivative it’s based on the dollar. It’s the dollar that cannot mark its gold to market or the dollar will crash. And with that the euro so the euro can do whatever it wants the ECB can do what it wants with regard to marking its gold to market. The Fed can not. DeSantis signs bill recognizing gold silver coins as legal tender in Florida. So there’s something that doesn’t matter and there’s something that does matter about this.

It says here there’s a quote here from DeSantis. So you’re going to be able to conduct transactions in these precious metals DeSantis said at a news conference in Apopka. I guess that’s a place in Florida. I wasn’t familiar with it. But anyway this is not true. You will not be able to conduct transactions in gold and silver not because it will be illegal but because it will violate Gresham’s law. Gresham’s law necessitates that people make transactions in the artificially overvalued monetary medium which is the dollar itself and it is not gold and silver.

Gold and silver will only be using transactions when the dollar is completely dead and cannot be used at all. But why is this important even though it’s not going to encourage actual transactions in gold and silver for other things because it’s going to encourage transactions between dollars and gold and silver and Florida can become a hub for gold transactions for coin shops for people like for companies like Miles Franklin. You can check the link in the description if you want to buy any gold and silver with them.

So here is the quote that’s important. Florida stands firmly for freedom economic self termination and resistance to government overreach but for too long outdated regulations and unnecessary sales taxes have made it impractical for Floridians to enter the gold and silver market. So basically what he’s saying is that there will be no sales tax on gold and silver so it will encourage saving in gold and silver not spending not exactly transacting in it but it will encourage saving in gold and silver in Florida by eliminating the sales tax and that will help the gold market.

It might only apply to sales within Florida. I’m not sure I’m a tax expert. You have to talk to a tax lawyer about that or exactly how this law is structured. But this is good news for gold and silver. It doesn’t mean that it’s going to create a gold and silver economy in Florida just yet but it will encourage savings in real money terms which is a step in the right direction. And with that this is Rafi of The Endgame Investor with this week’s silver report for The Endgame Investor.

I’ll see you guys next week. [tr:trw].

See more of Rafi Farber on their Public Channel and the MPN Rafi Farber channel.