Vince Lanci: Whos Shorting Silver Now? | Arcadia Economics

➡ Vince Lanci discusses the financial and precious metals market, focusing on the value of gold and silver in this episode of Arcadia Economics . He explains that gold is a risk-off asset used to store wealth, while equities are a full participation in the economy. He also mentions that the value of silver and gold may start to differentiate, with silver potentially increasing while gold decreases. Lastly, he talks about the practice of shorting SLV (a silver ETF), which can indicate a bearish market or deep pockets willing to take a risk.

➡ This text talks about the process of shorting the SLV (Silver ETF) to get physical silver. This is done by borrowing silver from SLV, delivering it to meet certain obligations, and promising to replace it later. This method is chosen due to cost, convenience, or access reasons. However, this can cause issues if the physical demand is high and the silver isn’t replaced in time. The text also mentions that this practice has been going on for over a decade and usually results in lower silver prices.

➡ The article talks about how smaller, local stores are becoming more important as big supermarkets lose their appeal. It also discusses how conflicts in Ukraine and the Middle East are causing oil prices to rise, which could lead to higher costs for things like heating oil and gasoline. In addition, it mentions that German inflation is at its lowest since May 2021, and that there are tensions between the US and Israel. Lastly, it promotes a special offer on silver coins from a South African mint.

Just call it what it is. It’s a physical short. Squeeze or not squeeze is not the right word. It’s a physical short. There’s tightness in the metal, right? So they’re like, I need to buy the metal. I need to get the metal. Where can I borrow the metal? Cheap? Welcome to the morning markets and metals with Vince Lancy, where each morning Vince brings you the financial and precious metals news to get you ready for your day.

And now, here’s Vince. Oh, good morning. I’m Vince Lancy, and today’s market rundown, we’re going to play a game called show and tell. You silver show, intel specifically. It’s a game where you think you’re not telling me anything, but you’re showing me everything. And it’s used to figure out what’s going on behind the price action. All right, in premium, we have some excellent analysis, the proper analysis, in my opinion, on how to value gold versus the S and P 500 by a boutique firm named Gavacal.

Now, quickly, what they’re doing is I have long held it this way, that gold is completely a risk off asset. It’s useless. It’s a pet rock, right? You can’t use it for economics. You use it to store value, use it to store wealth. And on the right hand side, you have equities. And equities are complete participation in an economy. And everything else on earth is in the middle.

Silver’s close to one side. Bonds are depending on what type of bonds are close to the other side. And so I know that to be true. And everything that’s in the middle, that’s man made is man creating a derivative of some sort that’s trying to replicate some of the qualities of gold. Now, what they’ve done is they’ve taken a step further and they’ve said, okay, we’re going to talk about the relationship between the two and how, if you have only two assets on earth to buy gold where you’re not in the economy, or stocks where you’re fully in the economy, how do they correlate? I think it’s a very good analysis.

It takes what I have contended for years and quantifies it quite nicely. Then we’ll look at the news. But first, let’s look at the prices. The dollar is down two at 104. 72 continues to be strong, which makes sense because the ten year bond is trading with a yield of 437 up a pip after a couple of bad days. The S and P 500 is 5203. 70, down seven handles the VIX is 15, up two percentage points in the last week.

I think that’s pretty strong. Gold is down ten and change at 22. 69. Silver is 26. 21, up eight, $0. 09. Continuation of the behavior that we’ve talked about before and that I’ve talked about before. And that is you’re now in an area where these two markets are going to start differentiating again in the other way. So people that are long gold are saying im going to take some profits.

And some people, people that are not long silver, not short silver, not long silver sale. I want to buy some precious metals. Silver seems undervalued. Thats two different players. However, theres also similar players that are doing both. There are also people that are doing both. It’s something that I used to do, and I know banks do in a big way and macro funds do as well. Anyway, the point is the relationship is now going to correlate activity wise and go opposite the other way now.

So you could see silver go up and gold go down for a brief period of time and either gold will catch up and rocket. Everything will rocket higher, or, or people start to throw the talent on gold and the whole complex will drop off. Just be aware of that. We’re at a gold silver inflection point. That’s the way to look at it. Copper is up a penny. No, it’s not up a penny.

Is it up a penny? Yeah, it’s up a penny. 407. Oil is up forty three cents. Eighty six thirteen. Natural gas is 177, up $0. 03. Bitcoin 580 points higher at 66 00:40 ethereum is 33. 15. Platinum, palladium are both down $11 and $4. 50, respectively. Palladium 993, platinum 913. Those two metals are slowly converging, at least lately. Grains, I think they’re all up. Grains are all up.

Soybean marginally at 1173. Coin at 422, up a smidge. And wheat at 556, up $0. 05, almost 1%. Okay, so there we go. Silver show and tell. Let’s get to it. Let’s start with this chart. I think you’ll like this chart most, right. Silver daily. Nice chart, right? It’s a great chart. The silver market yesterday had a very strong move, as you can see. We had a nice week yesterday.

Sometimes it’s a nice month in one day, but it’s a significant day. And I’m going to take this out to the, we’ll need to show you why it’s significant in a little bit of context. This area here, take it back a little bit. When silver ran the $30 and then echoed the $30, someone came in and said no. Now, they probably said no here, but for some reason, this became an area.

This became another line in the sand. No, no, no, no. You can see all the spots there. Right? All right. Well, if you just focus on these here. Silver is now where that green line is above this wick. This wick? This wick. I want to call that a wick, but it’s an important level. This area, this wick, this wick, it’s three quarters away through what I call a dead man zone.

All those wicks there, the area between the allies and the Axis, world War one, over the top stuff. No man’s land. Well, we’re three quarters way through no man’s land. So we’re looking for grenades and we’re looking for some sniper fire. Otherwise we could be through all this. We want to get through that. How could you be anything but bullish? I’m not going to throw water on this except to say, be ready for pullbacks, but not butt end.

Let’s talk about show and tell. All right, you see this chart here? This chart is more interesting to me than the actual silver price chart. Now, first, let me start off by saying that Bob Coleman of profits plus and Albert, who I follow on Twitter X, whatever we’re calling it now, they have been paying close attention to this. And I’ll give a lot of credit to Bob because hes very involved in the financials, and he knows that you can use the financials to assess the physical demand, lease rates, slv shorting.

And he has a good handle on this. But I want to just make this a little bit clearer for people that read him and read me as well. In 2011, I was involved in one of these trades. I actually shorted SLV, but that’s neither here nor there. The point is, you look at this chart, just go back to the present here. Sorry. You look at this chart and you say, wow, someone is really shorting SLV.

They must be bearish or they must be bearish and losing a lot of money. That’s the first level to assess this. And the answer is yes. The second level is, before you start judging, before I start judging, let’s zoom out a little bit. Well, let’s look at other times. It spiked at this level. So we go to the weekly and we go back to that $30 spike in SLV.

And you see the SLV prices are shorting, and you’re still looking at this saying, well, someone is shorting SLV and either getting their asses handed to them or they have deep pockets and they’ll make money eventually because silver does come off after these spikes. And you’d be right to think that. So let’s go to the next level. Right? Let’s look at the market during this timeframe. So here’s the market during that time frame.

Spike. This is one spike, another spike. There’s one in here and there’s one in here, maybe in here, I’m not sure. But now we have the current one here. So there’s the weekly same timeframe. Let’s put the charts together. This might hurt your eyes a little bit. No, I didn’t mean to do that. This might hurt your eyes a little bit because I couldn’t stretch it out properly.

But the red rectangles perfectly correlate the timeframe. So in 2020, SLb spiked, went silver spiked. Whenever this date is, I can’t even see it. So small. But every spike corresponds to a spike in silver. This is the Echo to 2021. Here’s a spike here. It’s not a spike, but it’s a working hire. But this spikes. It comes off. This spikes, it comes off. Now, I’m not telling you it’s bearish yet.

What we care about right now is, before we judge, is why is it happening? Why does it happen? That’s the first thing you want to know. Let’s talk about that briefly. This will help the people that are following along. Why does someone short SLv. Now, this is the show and tell part. You think you a bullion bank think you’re telling us nothing, but you’re showing us everything. All right, so why would you short SLv? Well, you short SLv if you’re bearish, I think it’s going to go down right.

You short SLv if you’re going to arbitrage another venue. I’m shorting SLv because I’m buying silver cheaply in Shanghai. Well, no, that’s not happening. I’m buying silver cheaply on Comex. Yeah, that could happen, but it’s not that lucrative of a thing to do this big, right? Third thing, I’m hedging SLV for options, length reasons. So, for example, I’m long calls, market rallies. I sell SLv to hedge, my gamma to readjust my delta.

Very possible. Happens all the time. Again, not in that kind of volume. Good. Could number four taking delivery of physical and or unwinding a comex hedge? Okay, well, that’s different. When you short a share of stock, those of you are not familiar with it. Some of us commodity people have to read this stuff. You borrow the share from a long, you get permission to short it, and you pay them an interest rate, something nominal, but sometimes it goes up, and that’s when you have short squeezes.

So you borrow SLV like a stock, and you short it in the market. But the difference between SLV and other markets is because it’s a physical commodity, you short the share, but you also get the right to take delivery of the metal. If you’re a player, you can take delivery of the metal. And there’s a robust market that not many people know about for big, deep pocketed players, where they will do this and arbitrage lease rates.

Okay? Sifo, silver, forward offered rate. And you have to be physically tied to the market, and you have to have very low cost production do that. This is something that I don’t do. I don’t think you do. Maybe you do. If you are listening and you are, blame bank. Kudos to you. All right, so when you short SLV, you can take delivery of the metal because you’re destroying a share and you’re taking delivery of the metal.

All right? So again, we still haven’t judged it. It’s one of those four things. But of those four, in SLV, it’s most likely number one and most likely number four. Right? It can be number two and number three, but not in any appreciable volume. So the questions you have to ask yourself next are, what’s the reason for shorting it? Well, when you answer that, you have your answer why they’re shorting it.

What’s the risk of shorting it? I know that risk. What’s the backend trade? How does it get unwound? How would a player prepare the ground for something like that? To make sure no one gets in the way and to get good levels, etcetera, etcetera, etcetera. These are all the questions that a risk manager asks. Okay, in 2011, I’m going to give you a little bit of background so the sleuths can go out there and find out for sure.

I had to educate myself on this in 2011 because I had a big spread trade on and actually made money, but not because I knew what was going on. I just got lucky. In 2011, people started shorting the SLV ETF to take the metal out to deliver the medal against someone who wanted physical back then. Okay. So they were essentially borrowing silver from SLV to be replaced at a later date, right along with the SLv shares and taking that metal and delivering it against obligations.

We don’t know what the obligations are. There’s nothing wrong with that as long as the silver’s not double counted. And there are people out there that say, this silver could be double counted. And I’m going to say this, it definitely can be double counted, but not at the SLV level. It’s another conversation. So during that time, the market is rallying, and that’s because of various reasons. But just call it what it is.

It’s a physical short. Squeeze or not squeeze is not the right word. It’s a physical short. There’s tightness in the metal, right? So they’re like, I need to buy the metal. I need to get the metal. Where can I borrow the metal cheap? While the interest rates on the metal in Mexico are too high right now. Crap. I’ll just take it from SLV and I’ll replace it later.

Now, the replacing is where the risk comes in. We’ll get into that another time. So what you’re seeing now is, if it’s number four, it’s someone who has a customer who wants SLV. Again, this is my opinion. It’s a customer who has demand for physical metal, and you need to get it. And one of the ways you get it is by shorting SLV and take the physical silver out.

And you say, I will replace that metal in 30 days. Okay? And the real cost of me borrowing that is only the cost of shorting it. So if it’s very small, it’s very small. But in a perfect world, it should be the same level as the lease rates. So lease rates in SLV should they. Should. They should be related, they should be at least corelated, and then 30 days later, I’ll have to replace it.

Maybe I take delivery of Comex and replace it. Maybe I raid my grandmother’s silverware and replace it. The point is, that’s how you do it. What’s the moral of the story? Well, there’s a lot of potential things going on here, but it’s my personal opinion. In 2011, those other charts that I showed you, other dates, I showed you that there is physical demand in the market. And for whatever reason, be it cost, be it convenience, or be it access, an entity is borrowing SLV, shorting SLV, taking the metal to satisfy a fiscal obligation which has been happening in gold for the last year.

Now, they eventually supposedly have to cover the slV. And when they cover the slV, right short, they have to replace the metal. But that’s not what’s going on right now. So to put it all together in a non conspiratorial way, and believe me, there’s plenty of conspiracy here, the non conspiratorial way is this. I’m a player, I’m a bank, I have a customer who wants physical, I don’t have any physical on hand to give them to satisfy the miners, don’t have any production handy, they’re all hedged, whatever people don’t want it to.

I say, you know what, I’ll just borrow from SLV. So you get it from SLV. You’ve got one guy who says I’ll give it to you in 30 days, I’m pulling it out of the ground. Now, I borrow from SLV and I say okay, I give you a lease rate. I do that and then in 30 days I take delivery and I replace the silver along with it.

That’s how it works. But during that time, if people sniff that I’m doing this, that I have physical demand, well they’re also buying Comex, right? Im taking delivery. Well I just told JP Morgan hypothetically that Im taking delivery, theyre going to lease from SL, theyre going to short SLV, take the metal and give it to me to satisfy that. At the same time Im going to buy some futures because I know its going to up JP Morgans probably buying some futures, other banks are probably buying some calls and thats how it works.

So what youre looking at here in a clean world is somebody wants metal. Somebody has chosen for one reason or another to get that metal, to raid the SLV pantry to satisfy that metal and will replace it at a later date. Now that trade has been going on for years, for over a decade, and it usually resolves with silver lower. So here’s what to look for going forward on the clean version of that trade to look forward to going forward is if the market keeps rallying and the shorts keep coming, then you’re going to see a problem.

But if you look at history, the problem is almost always eventually solved and it probably will be. It’s not to say people should not be getting audited or looked at for this sort of behavior, because as normal and as legal and as ethical as it is to do, very easy to daisy chain the metal, metal is here, it’s not there. Promises are broken and then now you’ve got metal that’s got to be in two places at once.

You know, it can happen that way. I’m not accusing that at all. But you have to have good internal auditing to take care of that. So what am I talking about? The markets? I’m saying that be on the alert that when the physical demand is satisfied, you’re going to see the market reverse. If this is temporary. Also keep in mind the Comex vaults have been going up, right? Well, SLV short borrows the metal, puts it in Comex.

I don’t know, maybe that Comex metal is going somewhere else soon. The point is somebody is unwinding a trade or putting a trade on and that’s it. That’s what you need to know. News market news. Cleveland Fed President Loretta Mester said Tuesday she will expect interest rate cuts this year, but ruled out the next policy meeting in May. So there’s not going to be any cuts in May or June.

Amazon’s grab and go checkout system is just walk out called just walk out has been a centerpiece of its ambitions to transform bricks and mortar supermarkets. I call that bodega decentralization. It’s the return of the neighborhood grocery store. It’s mercantilism. Complexity is collapsing. Big box stores are less important. Small self sustenance as, as big things break down, you go into local right, 15 minutes. Cities also ties that.

So all these phenomena are tied in. Next thing. This is actually geopolitical oil prices settled higher on Tuesday after a session in which ukrainian attacks on russian energy facilities and escalating conflict in the Middle east pushed the Brent benchmark above 89 about for the first time since October. This is a problem. Ukraine is now attacking russian refineries, which will drive oil up at the product level first. Heating oil and gasoline.

I personally think a little bit of Tom Luongo conspiracy here and its who benefits type stuff. The cubono of this is Zelenskyys in danger of losing funding. So hes probably, I would think that would be a way to get their attention. I want the money. Give me the money or I’m going to make your life a little bit more miserable during election time as oil goes up. I don’t know, but it could be.

German inflation fell to its lowest level since May 2021, consistent with the euro wanting to ease. And they’re bragging about it. Hey, fed, we’re going to ease. Inflation is down, et cetera, et cetera, et cetera. Geopolitics. Us President Biden criticized Israel and Ukraine bombings are making things difficult for Biden and deep divisions between the US and Israel over an operation. Deep divisions, but they’re not doing anything about it yet.

NATO foreign ministers will meet on Wednesday, discuss how to put military support for Ukraine on long term footing. I believe that’s related to how we’re going to continue to fund them without funding them. Data on deck today we have a 10:00 a. m. Factory orders and there’s a. I’m sorry, that’s Tuesday, Wednesday, 10:00 a. m. ISM services. Okay, so important number coming out at 10:00 a. m. The market’s going to overreact to these numbers right now, right for March.

And at 12:00 p. m. We have speakers the rest of the day. Again, the big day this week, data wise, is going to be Friday. I’m Vince. Hopefully this has been helpful for you and it was as fun as it was for me. And I’m going to have a conversation with Bob and a couple other people and we’re going to lay it out. And I have my opinions, but we’re not going to talk about it too much.

Oh, by the way, in premium I threw in this post from 2011 from Isabella Kaminska. Phenomenal post reposted here. Very plumbing oriented. Unless you’re like a real wonk, you’re like, oh, I don’t care about that. And the other thing is, I have that GLG post that we discussed. Okay. Have a great day. Thanks for watching this morning’s markets and metals update with Vince Lancy, brought to you each day by Miles Franklin.

Precious metals for this week’s special is 2023, dated 1oz silver krugurands for only $3. 10 over spot. KU Grands come from one of the major sovereign mints in South Africa and are also IRA eligible. Find out more about how precious metals IRA works or to get your cougar ants, call or email us at 833-26-4653 or arcadialesfranklin. com. 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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