Rafi Farber: 1970s Are Repeating for Gold Too Not Just Silver
Summary
Transcript
But now they are getting very intense. And if gold is flowing out of the paper funds, who or what is buying it? And it’s not just the etfs, it’s all gold holdings. Across all transparent funds. We have an open interest explosion of close to 20% in the last four trading days. So there’s a lot of people or a lot of big institutions buying futures, but not the etfs and not the other paper funds.
The BTFP. The bank term funding program ends on March 11 and the bulk of loans are due one month later, around April 11, April twelveth, something like that. I think it’s about $70 billion. And if we are to look at the value of treasuries from when the BTFP kicked off to now, treasuries are even more underwater when they were back then. What do you think is going to have to happen to the banks that have to take this paper crap back onto their balance sheets? The reverse repos probably have until the end of March, early April, before they zero out, which is going to be around the same time that bank term funding program loans given out in April have to come due and be paid back to the Fed, which is going to smash down the monetary base and threaten something happening in the plumbing in the repo market.
We went over last week, the 1970s, in silver. They are also repeating themselves in gold relative to silver. We’ll go into the charts that show this. While it might not feel like it, everything is going according to historical patterns that we’ve seen in the last 50 years. There is no reason to think that those patterns will change because human nature is basically the same as it was back then, except we’re a little bit stupider now and a lot more totalitarian.
But that will also come to an end soon. This week’silver report is brought to you by Boratuna silver mine symbol FSM. Earnings came out on March 6. Operational highlights are record gold equivalent production of 136,154oz in q four 2023 and record annual gold equivalent production of 452,389oz. 389, not 388 389, representing increases of six and 13% compared to the respective periods in 2022. Production is up. As for the mining costs, we have consolidated all in sustaining costs per gold equivalent ounce of $1,509 for q four 2023 at prices of about 21 50.
That’s about $640 per ounce in profit. Another highlight, at the end of December 2023, the Segala mine processing facility is performing 26% above nameplate capacity. And this is from CEO Jorge Ganoza. Mr. Ganoza continued Fortuna had a strong close of 2023, with record annual gold production exceeding guidance and silver falling short by 7%. But that’s why they took ownership of more gold mines. Gold equivalent production increased 13% to a record 452,389 gold equivalent ounces compared to two.
And we have guided further growth in 2024. Record annual sales of 842. 4 million, 24% above 2022. It’s a growing company. Symbol FSM Fortuna silver mines. If you are interested in mining stocks, this is one of my personal favorites, and I do own it. And of course, do your own due diligence. We’re going to begin with the GLD ETF, and this is representative of gold funds generally. We’ve seen a big trend change, or a big c change, more appropriately in the gold holdings of the GLD.
ETF and other etfs are mimicking this. So we see here in 2022, gold is trending down into the 2022 bottom. And this corresponds to the 1976 77 bottom in gold and silver. So we have here falling holdings and a falling gold price, which makes sense. And then here in the blue, we have a rising gold price, and we have a slightly rising GLD holdings into around June of 2023.
And then we have another falling in the gold price, down to this low over here, wherever it was. And again, we have corresponding fall in GLD holdings. But here, look at this. So we have another slight rise in holdings with the rise in price until we get to around the beginning of 2024. And then 2024. Look at this. We have gold going pretty much vertical here at the price of GLD going approaching.
I think it’s $200 a share now. And we have even higher volumes of gold flowing out of the etfs. So something is going on here. Gold is being vacuumed out of the etfs, and we have very high volume in futures and a lot of open interest. We’re going to go into that in the next slide or two. So here I just wanted to show you that it’s not just the etfs, that the outflows in gold across all paper holdings, all funds, all transparent funds.
We see here that over the last three days, as gold has really climbed pretty strongly, we have a loss about 100,000, another 200,300 thousand. That’s about 600,000oz of gold in the last three days as the gold price has rocketed higher. So something is going on here. This, to me, makes it look like this is a banker war of banks versus high net wealth individuals. If the etfs aren’t being chased here, retail is not involved, and I don’t think premiums have risen that much.
So the stackers aren’t really that heavily involved in this rally, which means we got a lot of fuel for this to go when they do become involved. And I would not recommend waiting for them to get involved, nor to acquire more stacks, if that is in your plans. I’m not one to wait for price to hit a certain target to add to my stacks. I do that every month.
Anyway, I want to show you here what is going on in open interest. This is pretty extreme. And this is up to March 6. So we have here the two numbers from the CME website. This is from February 29, and we see here 424,082 contracts. And that was a change of 12,393. So if you take 422, 24,000, take away 12,000, and you get how much open interest was in gold on February 20 eigth.
Right. Simple math. Then you take what we have on March 6, that’s 487,545. So we have. And this is really complicated. I’m not sure. I’m afraid we need to use math. 487,545 minus this sum over here. And that equals 75,856 contracts, 75,000 in cash in. I think it’s four trading days, maybe five. I don’t know the math on that. You can look at it yourself. And how much percentage increase in open interest has there been in gold futures over the past four days? That would be 18.
43%, nearly 20% in four trading days. This is pretty extreme. And it shows that bullion banks have shorted this amount of contracts in four days, and someone is buying them, but not in the ETF. So this looks to be a banker war versus high net worth individuals. 75,866 contracts is 758,000oz of notional gold. That’s a lot of real money. And, yeah, that amount does exist on the Comex.
I think there’s like 8 million registered ounces. So, yeah, plenty to go around there. And I just wanted to show this chart as well. This is GLD volume to show you that it corresponds with the holdings going down. We can see here that there has been no volume spike into this high at all. So we see here, to compare it to the August 2020 high, we see these bars down here.
This is the volume. This is the volume spike goes up to about 125,000,000 shares being traded in a week. This is weekly bars. So we see here there was a volume top here, which signals a top in the gold market. And we saw here, again, this is two years ago, actually, March 7, 2022. That was nickel Armageddon, when the nickel market nearly blew apart the LME and all derivatives across the world with it.
So we had a huge volume spike here and a high in gold. And now look, we’re here at a new high and there’s nothing doing over here. No volume, nothing is being chased here in the etFs. This is very, very strange. So the banks are up to something and the retails and the stackers are not getting involved yet. We’ve got a lot to go in this rally, according to my calculations.
And now I want to show this important chart that can help you visualize what might happen when the bulk of loans come due on the BTFP, the bank term funding program. The title of this chart is treasuries are even more underwater now than when BTFP started. The blue line is the BTFP loans. Right? So we see here March 2023, they are at zero. The BTFP gets started. There’s a misconception here.
On March 11, when the BTFP expires, all these loans are going to come due. That’s not true, because on March 11 is when the program, when the eligibility for the loans started. But the loans weren’t taken out until about a month later in bulk. So here, this, I think, is April 11, April twelveth, something like that. And we have about $80 billion of loans coming due at around April 11.
So that’s when a lot of the mayhem, if it happens, is going to be felt. A lot of the impact, I shouldn’t say mayhem, I should say impact, whatever it’s going to be, I don’t know. But we see here, these are the ten year treasury yields, representative of the value of treasuries. The lower these go, the higher the value of the treasury bonds. And the higher they go, the lower the value of the treasury bonds.
So we see here when the bulk of loans were taken out what were ten year interest rates. There are somewhere between 3. 4 and 3. 6% over here. Right? And this is when they were already underwater. And now we have a year later. And where are yields now? They’re going to have to take these bonds back, these treasuries back onto their balance sheets. At what yield? At around 4.
14. 2%, something like that. They’re worth even less now than they were when the program started. So the banks are going to be in trouble again. And what’s going to happen? There’s going to have to be another bailout somewhere. Who knows where, when what we know why it’s so gratifying to leave you wallowing in the mess you’ve made. You’re screwed. Thank you. Bye. And now let’s go into the rrPs.
We are winding down on this program, and I will show you why. I think that by the end of March, beginning of April, these are going to zero out. So I have three days highlighted here. This is what generally happens to the rrps. And there is like 440,000,000,000 left, or 430,000,000,000, something like that. Here we have the three dates of the first business day of April. And each time, April 2020, rrps were down 77 billion.
April 1, 2022, they were down $206,000,000,000. April 2023, they were down $154,000,000,000. And if we see something similar this year, down 150,000,000,000, that should bring the rrps down to maybe 200, 250,000,000,000. And then you have April to zero them out. We have tax day in April, which is a big drain on reserves because a lot of money goes from the monetary system into the Treasury’s bank account at the Fed taking it out of m two.
That should also cause some stress on the rrps. We have about a few weeks to go on this, and it should correspond to around when the BTFP expires. And that’s going to cause some monetary stress. We’ll see what happens. It’s going to be interesting. And finally, let’s go back to the 1970s. Last week we dealt with silver, the fact that it did not move. This is the bottom chart in silver over here.
Silver had a double top in 1974, corresponding to something along the lines of the August 2020 top and the February 2021 silver squeeze top. And then five years of nothing into early 1979. So we see here what was happening in gold, right? We have gold in the current situation, gold breaking out to new all time highs. So this was the all time high of gold. 1975. Over here, early 1975.
And then we have a low about two years later, 1977. And then we have gold achieving new highs here in early 1978. Right. At this time, silver was still struggling. It did not reach new highs in 1978, which is, as I said, around where we are today. So you have the same situation today where gold is reaching new highs, but silver is not. According to this chart, we have about another year until the silver and gold major breakout to all time crazy highs of monetary crisis levels.
It could be less than a year. Nothing is exactly the same. Patterns do not repeat exactly, but they rhyme. So you got to be ready for it now. Even though according to this chart, we’re about a year out. But there you have it, folks. History is rhyming. Gold is at new highs. Silver is not. Same thing that happened in 1978. The futures traders are getting frantic. But the ETF traders are asleep.
Means we’ve got a lot of fuel left to this rally. There’s a long way to go. It’s going to get scarier. It’s going to get more volatile. Which is why we have to keep in mind always what money actually is. It is simply the most liquid commodity traded in an economy. This is Rafi of the endgame investor with this week’silver report for Arcadia Economics. You can check out my YouTube channel.
You can sign up for free to my substac at endgameinvestor substack. com or become a Patreon patreon for as little as $3 a month to check out what I have to say about the more emotional religious angles on this debacle that the world is going through today. And I’ll see you guys next week. .
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