Demand for Physical Bullion Surges - Will It Break Paper Markets? / Commodities / Gold and Silver 2021
Last year felt like apivot point in U.S. history. The pandemic and election left the nationideologically divided.
There seem to be onlythree resolutions going forward.
America will face anincreasingly authoritarian federal government ruling over a largely apatheticpopulace, the nation will splinter, or leadership will emerge which is somehowcapable of bridging the ideological divide between the American left and theright.
Gold bugs aren’t bettingon bridges being built any time soon. Demand for physical metal ratcheted up toa new all-time high in January.
As investors take stockof markets under a Biden presidency, they will find some drivers remain thesame.
The Federal Reserve hasbeen inflating financial assets since the central bankers went berserk lastMarch. They pumped trillions into the debt markets via Wall Street banks andcut interest rates back to zero.
The financial marketshave been riding high on that massive wave of stimulus since then. However, itis only a matter of time before the stimulus wears off. Central bankers claimthey are trying to goose the real economy.
Those claims are ringinghollow. The stimulus has produced no lasting economic strength.
What we have is lots ofinflation, concentrated heavily in the financial markets and real estate. TheFederal Reserve must continually go ‘bigger” just to keep air in those bubbles.
Joe Biden certainly won’timpose discipline or restraint at the Fed.
Americans can also expectmore of the same from Congress. Biden already asked for nearly $2 trillion instimulus. Whatever he gets will just be a down payment, as Congress works againand again to increase spending and grow government.
The Democrats who nowcontrol both the House and Senate won’t be impeded by calls for fiscalrestraint. The unpayable federal debt could easily exceed $40 trillion beforethe next presidential election in 2024.
Metals investors shouldavoid the rigged casino otherwise known as the futures market. They will notget a fair shake. Goldand silver price discovery will continue to be a sham much of the time.
Given the failure ofregulators and the Department of Justice to rein in the crooked banks, goldbugs are going to have to wait for a market solution.
The good news is that maynot be too far off.
Last year we finallyfound the point at which physical demand for metals constrains the bullionbanks’ ability to sell paper gold and silver. Premiums for the large bars usedto deliver against futures contracts rose sharply last Spring.
There were cries ofjubilation in the metals trading bullpens as prices crashed in March. Bankerscould see huge profits coming on their concentrated short positions.
Those cries turned toagony, however, when bankers discovered too many contract holders wereunwilling to take their beating and instead chose to take delivery of theactual bars. The bullion banks lost hundreds of millions of dollars in thescramble to come up with enough physical metal to meet those unexpectedobligations.
We have yet to see largebar premiums start rising in response to the current crush of demand. Butrequests for delivery remain near record levels.
Given confidence is thefuel that powers the phony USD/Wall Street/Government power and enrichmentracket, we may not be as far as many think from those tanks running empty.
It isn’t at all hard toimagine a shock which, for example, prompts investors to abandon the paper futuresmarkets and demand physical metal instead.
By Clint Siegner
Clint Siegner is a Director at MoneyMetals Exchange,perhaps the nation's fastest-growing dealer of low-premium precious metalscoins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon,puts his experience in business management along with his passion for personalliberty, limited government, and honest money into the development of MoneyMetals' brand and reach. This includes writing extensively on the bullionmarkets and their intersection with policy and world affairs.
© 2021 Clint Siegner - All Rights Reserved
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