Iran has done precisely nothing. I did absolutely nothing and it was everything that I thought it could be. I’ll see what happens this coming week. Who knows? But today we’re going to go into the yield curve. Why? When the yield curve uninverts, it signals imminent recession. We’re going to go into open interest, which is collapsed in gold down to the 470,000 something. And I’m waiting for about 450,000 to make the all clear, not necessarily precisely all clear. But if we get down to 450,000, I don’t think that we’re going to have a collapse in price much beyond that.

We’re pretty close as it is. And we’ve had a minor short squeeze, which I will show you in the charts. Gold is outperforming commodities. The gold to commodities ratio continues to rise. Gold to CRB is now at nine and climbing. Bankersers have jumped higher this week with a weekly change in the top 10 or 11 of weekly changes since 2008, which means there was a massive influx into bank reserves this week. And I think a lot of it came from reverse repos, which have been falling and have broken the $300 billion mark for the first time since they started rising in 2021.

I’m going to show you evidence why I think that we have about two to three months until the reverse repos finally zero out from the Treasury’s quarterly funding or refunding announcement. And from estimates from Bank of America, I think we have about two or three months before there are no more reverse repos, before the extra tank spare tank of dollars that was created in 2021 empties out. And once that happens, all the bill auctions are going to have to be funded by bank reserves rather than reverse repos. And that’s when we should see bank reserves really start to fall and getting a lot closer to the final financial crisis once I believe reserves fall below the three trillion dollar mark.

We’ll see if I’m right when we get there. And if I’m not, well, at least I was convincing. Anyway, let’s begin with this week’s slides. This week’s Silver Report is brought to you by Fortuna Mining, symbol FSM, which just came out with its quarterly earnings report, which I’m going to go through right now. Fortuna Report’s financial results for the second quarter of 2024 highlights our attributable net income of $40.6 million or $0.13 a share compared to $26.3 million or $0.9 a share last quarter. Liquidity was $355.6 million compared to $212.7 million last quarter. Gold equivalent ounces produced 116.57 thousand ounces versus 112.54 ounces last quarter.

Everything is growing except for the silver production because the San Jose mine is in its last year. And this I wanted to note consolidated all in sustaining cash costs per ounce of gold equivalent sold of 1656 an ounce compared to 1495. What was responsible for the rise in all in sustaining costs? Well, I asked Luis Genoza, the CFO, in last night’s earnings call with Chris and Dave Kranzler, and he told me that a lot of it actually had to do with Argentina’s peso stabilizing thanks to the Mille regime, which is a lot more fiscally responsible than the communists that ran the country previously and the strengthening peso is increasing their costs in Argentina.

So for a while, libertarian policy or libertarian leaning monetary policy has caused an increase in all in sustaining costs in Argentina, but that shouldn’t last much longer as the peso stabilizes those costs also stabilize. And we are looking forward to the Kingfisher prospect at Segella, which intersected 23.7 grams per ton and the Amazon exploration project in Senegal, which intersected a 31.3 grams per ton gold over 12 meters at the Caracara prospect. So we got some good prospects going on. San Jose and Mexico, the main silver mine is in its last year. The company is transitioning to a new phase and we’ll see where it goes.

Symbol F.S.M. I own it. Do your own due diligence and let’s continue with this week’s silver report. The yield curve. People have been talking about this, that we are about to un-invert or we’re about to normalize. Some people prefer the term normalize. I don’t prefer the term normalize it, but for un-invert because it reminds me of belly buttons moving from innies to outies, which is more entertaining for me. So that’s the term I use. I have very specific reasons for the language that I speak, apparently. So we have this yield curve and it is about to cross above the zero threshold.

We’re at five basis points. We can see we’re almost touching the zero and recessions. As you can see here, they happen after the un-inversion, after the normalization, usually between six to eight months after, as we saw that here, we saw that here shortly after the normalization or going into positive territory. That’s when we saw the recession take hold. It happened the last three times over here, over here and over here. That’s 1989, 2000 and 2008. Now we’re about to cross over into positive territory for the first time since June 2022. This is the longest we’ve had an inverted yield curve ever.

And the question that one of my subscribers has asked is, Rafi, why is it that recessions only happen when yield curves un-invert or normalize? And why don’t they happen as the yield curve is inverted? Well, I don’t have a perfect answer to this question. I have a speculation because I don’t always know what’s happening exactly in the bank system. But my answer for now is that when the yield curve is below zero, that means banks can’t borrow short and land long, which means they can’t create money through the fractional reserve system, which means the money supply falls.

When the money supply falls, you start to have signs of an impending recession. And once you have signs of an impending recession, what does the Fed do? It cuts rates. And when it cuts rates, it cuts the short term faster than the long term. And the yield curve starts to un-invert. So the un-inversion or the normalization is really a sign of the Fed starting to act, but they’re always behind the curve and they never are able to prevent recessions because Keynesian economics never works. And now why were we able to stay below zero to stay inverted on the yield curve and have the money supply shrink for so long? Because so much money was printed in the last printing round and all that money was put into the reverse repo facility.

And as it exits that reverse repo facility that sustains the money supply, even when the yield curve is negative. But since the reverse repos are running out now, we cannot sustain this fake economy below the zero on the yield curve for much longer. So the Fed is going to start cutting interest rates and the yield curve is going to start to un-invert or normalize. And we’re not going to have a lot of time once that starts until the next recession, which this time I believe will be very severe and will cause the final money printing round, which is what I’ve been saying since the beginning of the endgame investor.

Anyway, let’s go to the next slide. What’s going on in gold and open interest? Well, we have some encouraging developments here. We have what looks like a minor short squeeze, which is able to reset open interest, lower wall of the gold price rise, as you can see in the red rectangle here. Falling open interest from looks like to be about five hundred and seventy thousand, maybe closer to six hundred thousand, whatever that number is exactly down to about five hundred thousand, five hundred and ten thousand. So we had a closing of about maybe seventy thousand contracts as the price.

The gold price went from twenty three fifty to about twenty four seventy or something. So this is the definition of a short squeeze. Contracts closing out, short positions closing out and the price rising. It wasn’t an insane short squeeze. It wasn’t a non manageable short squeeze, but it was a short squeeze and it keeps the price supported as open interest resets lower. I want to see this go below or at least at four hundred fifty thousand before I call the next rally ready in terms of the fuel available. Doesn’t mean it would start exactly when we hit four hundred fifty thousand.

But a lower open interest means that when the next rally does happen, we will have fuel left for it. And now gold has been taking off versus commodities. Silver is hanging on at the 200 week moving average, but gold is really taking off versus other commodities. So we’re seeing that the commodity complex is suffering now. And I think this is the the signal of an impending recession, which is why commodities are falling. So gold isn’t falling along with the commodities, which means that the gold to commodities ratio is rising. We’re back at nine.

We’ve only hit nine once if you take this area that’s above the nine. Right. And just write that off to lockdowns and insane policies for controlling micro organisms or pseudo microorganisms or let’s not just let’s not use any other bad words. So if we just take this out as in a period of especially acute insanity, then the high here is really at nine and we’re at that now. So gold to commodities is at an all time high, excluding this little period over here, which I think we’ll get back to, but not because of anything similar to what happened back then.

It will be a monetary crisis instead. And I wanted to talk about bank reserves. I’ve been waiting for these things to fall below three trillion. It doesn’t look like it’s happening just yet. We had a big rise to almost two hundred billion dollars this week. This is the weekly change in bank reserves going back to 2021. And this is the third biggest week in increase in bank reserves since 2021. Right here. What was this? This was the regional bank ballot, which you would expect that would increase bankers because he had an enormous bailout of the banking system in March 2023, which is why we had a big influx of reserves from the Fed into the banking system over here and over here.

I don’t know what that is. It’s June, July 7th, 2020. I don’t know what’s happening back then. But this is the third highest since 2021 of influx of bank reserves. Why is that? Well, because we had this huge sell off on Friday of last week and Monday of this week and people were freaking out about it and it was all over the financial mainstream media and like banks started to insist that the Fed cut rates now intermeeting, there was the rumors of an emergency Fed meeting that Chris texted me about and I was driving at the time.

I didn’t know what he was saying and I got kind of excited. But this is a big influx in bank reserves due to the sell off. This is going all the way back to 2008, the weekly fluctuations in bank reserves. You can see that we’ve hit here. If you count here, it’s 1-2-3-4-5-6-7-8-9-10-11-12. So we’re in the top 12-13 of weekly changes in bank reserves. There was a lot of panic and that’s why reserves increased. And let’s talk about when they are going to fall fast. And that is when reverse repos finally drain out. So I made here an isosceles triangle.

We can see here that for 20 months and 15 days, the reverse repos went from zero to the peak of 2.553 trillion. And I mirror image that line here. And if you take the same amount of time, 20 months and 15 days from December 30th, 2022, which is when this peak happened, would take us to September 15th, 2024. It could be a little bit past that, but it’s not going to be much past that. And here’s why. What causes the reverse repos to fall is mostly Treasury bill auctions. Banks take money from the reverse repo facility and they put it into T bills because they’re in a little bit more interest than reverse repos.

Reverse repos is 5.3. And I think the the Treasury bills are like 5.32 up to 5.4, something like that. So there are a little bit more basis points in Treasury bills. So the more Treasury bills that are issued, the more money is drained out of reverse repos. We haven’t had net issuance of Treasury bills since we’ve had like 90 billion from January to June, but now they’re starting to increase in July. We had a net issuance of 150 billion. And that issuance should rise. And we see that from these articles over here. First of all, we have this Financial Times article.

People are flipping out about T bill issuance. And we’ve even got a Futurama meme over here from Robin Wigglesworth and Kate Duguid from July 26, 2024. So here Wigglesworth and Duguid say, among other things, smart people at J.P. Morgan, Barclays and Apollo worry that the government’s reliance on T bills to fund the deficit risk a rerun of the 2019 repo crisis. So what Fry here represents is that as bills are going to increase in issuance and net issuance, we’re going to pressure the banking system to enter a new repo crisis, according to these smart people, according to Robin Wigglesworth and Duguid.

Here they say blood pressure already raised next week’s quarterly refunding announcement in which the Treasury Department makes public their borrowing plans for the coming three months could make budget hawks faint. Well, let’s go to that quarterly refunding announcement because this article is two weeks old. And so we have the Treasury quarterly refunding announcement from Bloom Berg, and here we see U.S. plans to hold note bond sales steady for several quarters. Now, the the proof is in the inference from that title. Note and bond sales are long term debt. If note and bond sales are steady, that means that bill sales have to rise.

The bills are what are taken from the reverse repo money to the bill auctions. So we see here they say this outright. The Treasury Department said in a statement Wednesday it will sell $225 billion of securities at its so-called quarterly refunding auctions next week, which span three, ten and 30 year maturities, notes and bonds long term dealers had widely predicted that outcome, that outcome, seeing the department as able to make up any funding shortfalls over the period via more bill sales. So basically, Treasury bill issuance is going to go up. And more specifically, we have this paragraph on the trajectory of the sales of bills which take their dollars from reverse repo facility, the department said Wednesday it expects to modestly increase the offering size of short dated bills being auctioned next week.

Then keep that cadence through August. It sees modest reductions in early to mid September when certain taxes are due over October and anticipates increasing all bill sizes, all bill auction sizes, given the fiscal situation. So we have about $300 billion left in reverse repos. We’ve seen from the quarterly refunding announcement that bill sales are going to increase, especially in October. So I think that the reverse repos will zero out around October. And then what happens, what happens is that since there’s no more dollars left in the reverse repo account, the dollars that fund Treasury bill auctions are going to have to come from bank reserves directly.

And it’s that point that will start to see bank reserves really fall hard. And once they do, we’re going to have a repo crisis, which the smart people quoted by Robin Wigglesworth from J.P. Morgan and other megabanks say is a serious problem once we hit the next apocalypse or whatever exactly it will be. It’ll be something like that. We’re going to have to have the final Fed printing round, which is what is going to bring gold and silver to the moon or to Saturn or to one of Saturn’s moons or Jupiter’s moons.

I mean, there’s a lot of moons doesn’t have to be our moon necessarily. It could be any moon I prefer Enceladus because it might have subsurface oceans. But that’s just my preference. Which moon do you prefer gold and silver to go to? Put your preference in the comments below. In the meantime, this is Rafi of the Endgame Investor. You can sign up to the Endgame Investor on Substack at endgameinvestor.substack.com or you can go to my Patreon on Patreon where I discuss the religious aspects of monetary and economic policy decisions. And I’ll close out with just telling the reverse repos.

Let’s go already. Let’s go already. Let’s go already. And get this show on the road. [tr:trw].

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