Vince Lanci: This Is Whats Driving The Gold Silver Rally | Arcadia Economics

➡ Vince Lanci discusses the recent rise in gold and silver prices on Arcadia Economics. He explains that this isn’t due to anticipation of a cut by the Federal Reserve, but rather because of increased debt and demand from buyers in Asia, the Far East, and the US. He also mentions a “short squeeze” in the silver market, where the cost to borrow shares for shorting has increased, causing some to cover their positions.  Lastly, he points out that gold and silver prices are mirroring real interest rates, which are getting closer to zero.

We’re going to get into what triggered the buying last week and probably yesterday as well. And that’s part of risk management. Like, you know, why do these guys buy? You know, why do these macro funds buy? We’re going to talk about that. Welcome to the morning markets and metals with Vince Lanci, where each morning Vince brings you the financial and precious metals news to get you ready for your day.

And now, here is Vince. Good morning. I’m Vince Lancey. And in today’s market rundown, we’re going to talk about the drivers behind what made gold and silver rally yesterday as well as over the last week or so, how it’s changed the market. We’re going to talk a little bit about the irony of this pending silver squeeze and we’ll look at some market driving news. But first, let’s look at the markets.

The dollar is up three at 100 and 280, pretty strong relative to other fiat. Ten year yields are 419. We had a good 30 year auction yesterday. I’m not sure we had a good bond auction yesterday. The S and P 500 is up twelve handles, continuing to rally insanely. The VIX is 13. 46. Gold is 21 67, down seven and change. Silver is 24 98. These are spot down two cent, hovering right around the 25 or eight, which everyone has noted is a frequent pit stop for silver.

Copper is 401, down 1. 6 cents. Bitcoin is 73,000 and change essentially unchanged. Ethereum is 39 62, down 1%. Platinum and palladium are slightly higher. Palladium at 1068, up $6. 50. Platinum 937 up less than a buck. Oil is up $0. 61. Again, that’s a very nice, orderly, stealth rally there. And that gas is trading 163, down one and a half cents. Okay, what are we going to do? We’re going to talk about how, in context of the mainstream media’s headlines recently, gold has been rallying on anticipation of a fed cut.

Now, it’s not to say a Fed cut not happening won’t make gold and silver drop. They probably will. But that’s not why gold’s rallying. We know why gold’s rallying. Gold’s rallying because of the increased debt. Gold rallying because someone in Asia is buying or someone in the Far east is buying or because the US is buying. Gold’s rallying because they want the gold, as I’ve said a million times.

But we’re going to get into what triggered the buying last week and probably yesterday as well. And that’s part of risk management. Like why do these guys buy? Why do these macro funds buy? We’re going to talk about that. These are the stories from yesterday, the stealth takeover of american metals. Us metals quick note CPI comes in hot. And the founders, we got an updated note for a very special Goldman note, which we’re going to touch on today.

All right, so let’s get to it. Let’s get to the good stuff. The first chart there, courtesy of Bob Coleman, is the irony of why silver is rallying now. It’s rallying because they want to buy silver. That’s the first reason. The second reason is it’s also rallying because all the big boys in the macro discretionary funds that bought gold, that are making money now they’re saying maybe it’s silver’s turn and they’re throwing a little money into silver.

But here’s the ironic reason, and it’s probably very accurate, silver is not rallying because there’s no silver. Now, I’m not saying there’s not a physical demand for silver, but I’m saying right now, the irony of silver is the financialization of it is it’s undoing. The market is rallying. Well, one of the big catalysts in the market rallying is not because we need the silver and they need the silver.

But the problem is this. When you get bearish silver, you short shares, that will be the SLV ETF, and you have to borrow those shares from someone and they charge you interest. And usually that interest is almost zero. Well, now the interest rate is exploded because people aren’t making them available for loan. Why is that happening? Well, because people want to be paid more for it. This is literally a short squeeze on the share side.

So I’m not saying it’s a bullion bank, I’m not saying it’s a bank at all. But I’m saying if you’re an institution and you control a lot of shares of a stock or an ETF, and you think the market is vulnerable to shorts that are under capitalized, well, you just say, you know what, I’m going to loan my shares out to you. But now I want 5% a year.

Now I want 10% a year. Now I want 50% a year. You make it more expensive for people to borrow shares to short them. And so what do they do? Well, do I want to spend 50% interest rate to borrow shares for three months or do I want to just cover this and get it over with? So this market is being driven, at least at the margin, by shorts, being squeezed by financial players who have their feet in both markets.

So I’m not sure it’s the bullion banks, but you should keep that in mind. All right. That’s the first thing, right. That’s kind of interesting, Bob, put that up there. What we’re going to talk about now is we’re going to talk about, this is my morning prep, okay? Yesterday after the markets rally and I’m like, why are they rallying? I know why they’re rallying. Right? Where are they rallying? I know where they’re rallying.

Well, why did these guys pull the trigger, these macro discretionary guys? What caused them to. And I think I have the answer with a little help from Goldman Sachs. All right, we’re just going to read some charts. Exposure to rates can help explain some of the recent safe haven asset purchase. People bought gold and now silver because real rates are becoming less positive, which is a sign of inflation ultimately.

Second reason, second data point, the correlation of safe havens to equities has somewhat weakened. And this is a big one. It sounds kind of so. Well, it means that the markets are not buying gold and silver because they think the Fed’s going to cut. They’re buying it because they’re worried about something going, you know, when the Fed’s going to cut. You hear gold and silver rally with stocks.

Well, this is different. This is gold and silver rallying for a different reason. And that reason is real rates are dropping. Which begs the question, why are real rates dropping? Before we get to that implied volume of gold and japanese yen diverge from the other safe assets when gold and the yen move the same way, just volatility, right? When people have demand for gold and yen volatility, well, then you have to start looking at what’s going on in Japan.

It’s another reason. Where is that quick chart here? Percentile of sentiment indicators the yen and the gold CFTC futures positions have. I’ll give you what this means. Bottom line, they’re not overbought, but they went from oversold to normal pretty aggressively. So it’s kind of like a correction of sorts. Commodity net long positioning. The funds are getting in now and they’re by no means as long as they can be before this market takes a breather.

But they are getting in. So they’re getting longer, but they’re not too long yet. And this is the chart that matters. I have another version of it, but we’ll just use the Goldman one. The dark blue line is the gold price and the light blue line is the ten year yield. It’s inverted. So as the light blue line rallies, the interest rates are getting less positive. They’re getting closer to zero.

So you could see what’s happening here, at least on this chart from December 23, that gold and silver are mirroring real rates. But why such an overperformance? That’s what I couldn’t figure out. And the answer is if I have that here, let’s talk about the performance itself first. Over the last week, month and year, precious metals have outperformed every other sector of the Goldman Sachs Commodity Index fund.

Precious metals, 5. 7% is the weighting, I should say. Right. All right, so for the last week, precious metals up 4. 5% over the last month, up 7. 7% over the last year, up 16. 7%, outperforming everything. I mean, livestock is in second place for the one year. Who’s in second place for the one month? Industrial metals. Copper. Right. And who’s in second place for the one week? Well, there basically is no second place today.

Industrial metals, I’m sorry. Agriculture, up one and a half percent. Anyway, the point is you’re not going to see that in the press. All right, so what’s really going on here? What’s really going on is in the news. Right. So I’m just going to read a couple of things here. Gold and silver did not rally because of fed cut expectations. Check. They rallied because real yields have dropped and macro funds decided now was the time to get long.

Check. They have increased, and this is key. They have increased in correlation with the yen. Applying this is based on Japan’s possible next move to strengthen the yen by letting rates rise in Japan. They’re considering letting interest rates rise to offset inflation, which would make the yen stronger. And if the yen gets stronger, the dollar gets weaker. So if you anticipate the yen getting strong again, you buy gold.

Who’s buying the gold? Macro funds who see the yen is about to get strong again. And people in Japan who know that the yen is about to get strong again. I won’t be surprised if Japan wasn’t one of the central banks buying over the last month, or I really, really would not be surprised. Okay, so that’s it. That all continues in premium. Let’s go to the news, the market news.

The House voted overwhelmingly to approve a bill on Wednesday that would ban TikTok from operating in the US or force a sale. Sounds good, but it’s really a Trojan horse. TikTok is bad, but it’s a Trojan horse and it paves the way for the government to force you to shut down a social media platform, take it over, nationalize it, or censor it and whole. And that’s what governments do.

If they can’t control at this level, they back off and they control bigger picture. Waymo will begin offering a robotaxi service to the public in Los Angeles this week and in Austin by the end of the year. I’m sure that has. That’s one of the reasons that Tesla has been so weak for so long. The bank of Japan, and this is the gold thing. The bank of Japan will discuss whether to end its negative interest rate policy as pay hikes by major companies bring the central bank’s 2% stability target within reach.

Forget about whether it’s within reach or not. They just can’t keep it underwater anymore. Furthermore, with more BOJ policymakers embracing the idea, the decision is seen coming down to the results of Japan’s annual wage negotiations. Geopolitics. I’ll let you read that on your own. Nothing really special there. I want to look at the charts for a second. Right? I want to look at the silver chart. Right? Okay, so the story, right? The washout, right? This area here, remember the ICE patch.

ICE patch, lower ICE patch up. ICE patch, lower ICE patch up. We called that correctly. Then I said, I don’t know, this could be, well, you know what? Little bit of an ICE patch there. Let it pause for a second. ICE patch up. And now we’re here. Where are we? We’re at the level of death. Historically, for silver, there’s several levels of death, but that’s how it works.

But this one is not being held back by the bullion banks. I think. I think the bullion banks are very aware of what’s going on in the Silver ETF area. And I think. I’m not predicting this. Okay? I think that there is a really good chance that it takes this out. Really good chance. I’d like to see it go sideways for a day or two. Right. All the indicators, if you’re a technical trader, not overbought.

Overbought. There came off overbought. There came off, not overbought. Now it’s vulnerable. Don’t get me wrong, it’s very vulnerable. But this is pretty quick. The market can break 26. I’m not saying it’ll stay above 26 either, but I’m saying that if there’s plenty of silver out there, and you can see that because premiums aren’t really elevated, the EFP, on the other hand, is getting elevated. So at the customer level, premiums are cheap.

Premiums are low right now. I’m going to give you a little bit of advice. If you’re a stacker, and I know a lot of people listen to this, are premiums are low right now because a lot of coin dealers, not necessarily the one that you deal with, but a lot of coin dealers have excess inventory, okay? And that would say that they were going to keep their prices more competitive.

They have more supply than there is demand right now. However, the EFP, the exchange for physical, which is measuring real physical demand at the grassroots level, is getting backwardated again. It’s a sign that the physical demand at the grassroots level is happening again, which means if silver stays at this level, or even if it drops a dollar and stays at that level, you could see premiums eventually creep up as the market digests the buying.

So as this wave of physical demand comes through at the grassroots level, at the EFP level that I talk about a lot, you’re going to see. I don’t know what’s going to happen to the price, but I think as this inventory clears out because the price is high and this inventory gets depleted because the EFP is physical, well, you could see premiums rise again. Now, I’m not predicting that’s going to happen.

I’m just saying be aware if you’re waiting for premiums to come in cheaper, I wouldn’t expect that. If you thinking that they could go out, they could. Do you want to buy silver at $25 if you’re a stacker? Well, maybe you don’t want it. Maybe you want to wait for it to go to 24, but it could go to 24 and the premium could be the same. Anyway, long story short, back to the silver chart.

That was the digression above $25. You have to think that this is going to test $26. It’s really that simple. The market has done all the work it’s doing. And I think that this buying now is, as I said, the macro funds coming in and saying, you know what, gold’s working out. Let’s buy some silver now. They’re not as aggressive as they are in gold, but they don’t have to be because silver is a much easier market to hurt.

PPI is today. It’s probably going to be out by the time this is in your hands. It’s 819 right now. I’m Vince. Have a great day. Thanks for watching this morning’s markets and metals update with Vince Lancey. Brought to you each day by Miles Franklin, precious metals, where this week pre 1933 $20 gold liberty coins are only $65 over spot per coin. Call Miles Franklin at 833-26-4653 to get your pre 1933 gold now and we’ll be happy to answer any questions you have and get you any of the gold or silver that you need.

Please note that this video is not intended as legal licensed financial trading advice and is to be used for informational purposes only. Please contact your financial advisor before making any decisions. And thanks for watching. .

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