00:00:00
hey the price of gold keeps going up and
00:00:03
now it's at an all-time record high It
00:00:05
just blew through 30,000 Are you worried
00:00:07
about that Chair Pal are you worried
00:00:10
that the gold market is saying something
00:00:13
that maybe you've got your policy wrong
00:00:16
there is arbitrage around the globe but
00:00:18
not as as significant as it was a few
00:00:22
weeks ago you know because it's becoming
00:00:24
too difficult to get it there So I think
00:00:25
that arbitrage uh which would
00:00:28
necessitate some form of expediency in
00:00:31
getting the metal sent this way when
00:00:33
you're talking 8 weeks delay now that
00:00:35
these contracts are are being stopped Uh
00:00:38
I think that this is something that um
00:00:41
is going to start to perhaps put great
00:00:45
strain on the physical market Perhaps
00:00:47
could put a run on the LBMA You're not
00:00:49
going to see a move from 33 to 34 When
00:00:52
silver moves it really truly moves But
00:00:54
normally that move takes a while to
00:00:56
establish itself and normally what
00:00:58
establishes it is momentum in gold
00:01:01
during uh the Q&A and I'm going to get
00:01:04
into a lot of the
00:01:06
that one question that nobody asked
00:01:10
which should have been uh you know asked
00:01:13
by by
00:01:14
everybody was the price of
00:01:17
gold Nobody said to pal "Hey what do you
00:01:22
think about $3,000 gold because on
00:01:25
Monday gold closed above 3,000 for the
00:01:28
first time ever It closed above 3,000
00:01:31
again on Tuesday and again today it hit
00:01:35
another record high It closed at
00:01:39
3,048 and it's up again the evening
00:01:42
another $5 So as I'm recording this
00:01:45
podcast live on Wednesday evening here
00:01:48
in New York or I'm not in New York but
00:01:50
New York time gold is trading in the
00:01:53
spot market at
00:01:58
$3,053 up
00:02:00
$5 Nobody brought this up because gold
00:02:05
is flashing a warning that the Fed is
00:02:09
too loose You know in the Q&A
00:02:13
uh one of the reporters brought up Allan
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Greenspan's old definition of price
00:02:18
stability where Greenspan said "Well
00:02:21
price stability is where uh businesses
00:02:24
and and workers don't even bother to
00:02:28
calculate price
00:02:30
changes into their plans because prices
00:02:34
are going up so slowly that nobody
00:02:36
really cares right so it's like
00:02:38
indifferent in decision-m and he asked
00:02:41
Jerome Pal if he would you know ascribe
00:02:44
to that definition and if he believes
00:02:47
that we have price stability And he did
00:02:49
say yes I like that definition Uh but he
00:02:52
really didn't answer as to whether or
00:02:54
not he thought we had price stability
00:02:56
Kind of dodged that But the point I'm
00:02:58
making in bringing it up is that Allan
00:03:01
Greenspan also talked about the
00:03:04
importance of gold in setting monetary
00:03:07
policy Allan Greenspan said that even
00:03:10
though we're not officially on a gold
00:03:13
standard he said that he used the gold
00:03:16
price as a reference as a signal to let
00:03:20
him know whether monetary policy was too
00:03:24
tight or too easy What Greenspan said
00:03:26
was that if gold gets up to $400 an
00:03:29
ounce that means that he's too loose If
00:03:34
it goes below 300 that means he's too
00:03:36
tight So obviously at the time that
00:03:39
Greenspan made the statement gold was
00:03:41
probably around $350 an ounce And he
00:03:44
kind of looked at if it was going above
00:03:47
400 I'm too loose Maybe we got to
00:03:49
tighten policy But if the price of gold
00:03:51
drops below 300 maybe we're too tight
00:03:54
right we got to ease up Well of course
00:03:56
gold's 3,000 now right so that shows you
00:03:59
how much things have changed You know I
00:04:01
looked again at the chart going back to
00:04:04
the beginning of this century The S&P is
00:04:06
actually down 60% if you price it in
00:04:09
gold I mean that is enormous bare market
00:04:11
And it really shows you that the
00:04:13
entirety of the gain in the stock market
00:04:15
is due to uh inflation It's due to uh
00:04:19
the destruction in the value of money
00:04:21
Not a real increase in the value of the
00:04:23
companies uh that are represented by the
00:04:26
S&P 500 but that we are uh you know
00:04:29
measuring their value in rapidly
00:04:32
depreciating currency And it's not just
00:04:34
the dollar relative to the euro or the
00:04:36
yen or the pound because all those
00:04:37
currencies have have gone down Uh a and
00:04:41
so it's a global inflation uh it's not
00:04:43
just an inflation in in the United
00:04:45
States but Greenspan acknowledged that
00:04:49
in that gold was an important market
00:04:52
signal And he even said we're not
00:04:55
officially on a gold standard but it's
00:04:57
kind of like we are because I'm using
00:04:59
gold right so if gold goes up I'm going
00:05:02
to tighten right and so it's kind of
00:05:04
like a gold standard but it's not a gold
00:05:06
standard Well what about now what is
00:05:10
$3,000 gold saying about Fed monetary
00:05:14
policy well apparently nobody cares
00:05:17
Nobody even wants to ask these questions
00:05:19
Not one reporter in that room There was
00:05:22
a reporter who asked Pal about the stock
00:05:26
market and its decline and if the
00:05:29
decline in the stock market concerned
00:05:31
him at all Are you concerned about that
00:05:34
right Are you concerned that the markets
00:05:37
are repudiating your policies that the
00:05:40
markets are telling you that interest
00:05:43
rates are too low and that inflation is
00:05:45
going to be too high Nobody is even
00:05:46
asking pal you know his opinion on that
00:05:49
I I mean I would love to hear his answer
00:05:51
although I'm sure you know he'd find a
00:05:53
way of of weasling out of it like he
00:05:55
does for any question that he you know
00:05:58
either can't answer or is
00:06:00
uncomfortable answering But that is the
00:06:03
reality that that is the real proof that
00:06:06
the Fed is wrong because you have a
00:06:08
market that is uh saying that the Fed is
00:06:13
too loose and that these rate cuts are a
00:06:16
mistake whenever they come The Fed
00:06:18
should be hiking interest rates not
00:06:20
deciding when to cut them No longer
00:06:23
purchase forward contracts You can't
00:06:25
purchase futures contracts from New York
00:06:28
on the LBMA And so it's drying up the
00:06:32
liquidity in London where they would use
00:06:35
a lot of the banks would hedge their
00:06:37
positions in London with forward
00:06:40
contracts derivatives paper Remember in
00:06:43
London right now there's 200 roughly
00:06:46
last week I don't know it's probably a
00:06:48
little less now but 279 million ounces
00:06:51
of gold in London Only 36 of that is
00:06:54
available for delivery The rest belongs
00:06:56
to ETFs in the Bank of England That's
00:06:58
standing behind 380 million ounces in
00:07:01
outstanding spot contracts 11 times
00:07:04
nearly the number of contracts issued
00:07:07
versus the amount of gold issued And in
00:07:10
silver it's very similar Roughly 270
00:07:13
million ounces of silver is all that's
00:07:16
available of the 800 million Now it's
00:07:18
under 800 million like 770 780 because
00:07:21
we saw 85 to 90 million ounces That's
00:07:24
what COMX is on track for to be
00:07:26
delivered for March of silver coming
00:07:28
into Comx almost all of it coming from
00:07:31
the LBMA And so all of and and when you
00:07:35
talk
00:07:36
about 290 million ounces and and there's
00:07:40
available yet they're trading 2.9
00:07:42
billion ounces of silver again a 10
00:07:44
times the number of contracts standing
00:07:47
behind the uh or the metal standing
00:07:50
behind those contracts 10 times the
00:07:52
number of contracts To me what it really
00:07:55
speaks of is a lack of trust in the LBMA
00:07:58
system that no one trusts that they'll
00:08:00
be able to deliver anymore And they're
00:08:02
trying to tell us that it's a lack of
00:08:03
it's a logistics thing It's a lack of
00:08:05
trucks and a lack of manpower Uh I think
00:08:08
they're realizing that the exchanges are
00:08:09
being bled dry And maybe now maybe now
00:08:13
what we see is uh coax trying to
00:08:15
distance themselves to distance
00:08:18
themselves from from the LBMA In the
00:08:21
last 3 months 128.5 million ounces of
00:08:24
silver have been withdrawn from London
00:08:27
And so you're talking almost 50% of the
00:08:30
float gone in the last 3 months in
00:08:33
silver So between the amount of silver
00:08:34
and gold uh delivered not to mention all
00:08:37
of the others that are standing for
00:08:38
delivery but they're being told it's 8
00:08:40
weeks uh it seems like they're turning
00:08:42
up the heat And maybe just maybe that
00:08:44
rumor of Trump trying to stick it to the
00:08:47
Bank of England is really true after all
00:08:49
because this is a very provocative mood
00:08:51
move And I think you know it it it
00:08:54
really does speak of um uh of the LBMA
00:08:59
losing confidence globally in its
00:09:01
ability to deliver Uh and this is the
00:09:03
beginning So I guess we'll see what the
00:09:05
real reason is Much like most of the
00:09:07
things we've seen lately on the LBMA and
00:09:09
COMX we can assume and surmise what the
00:09:12
the real agenda is Um mainstream would
00:09:15
tell you that's not the case I don't
00:09:16
believe it I actually feel that we are
00:09:19
witnessing a shift from this paper
00:09:21
market that all of us thought would
00:09:23
never be broken into other hubs like
00:09:26
Shanghai like Moscow like Dubai These
00:09:29
are cash and carry exchanges where the
00:09:31
price setting is far more realistic
00:09:33
instead of a futures uh market where
00:09:35
it's it's you know 90% paper and 10%
00:09:39
physical And no one ever stood for
00:09:41
delivery And you and I have been talking
00:09:42
about this and you know the the the
00:09:45
logarithmic decay little by little by
00:09:46
little by little the and then bang Are
00:09:49
we at that point well it sure feels that
00:09:50
way when almost half of the available
00:09:52
silver has been drained And now they're
00:09:54
saying it's logistics We can't really
00:09:56
get it over to you as fast as we would
00:09:58
like Uh you know demand for physical
00:10:02
gold and silver is rising and this is a
00:10:04
move away from the western markets It's
00:10:06
a big deal We'll see how big it is But
00:10:08
yeah I think this is something people
00:10:09
really need to pay attention to on top
00:10:12
of the fact that it just continues to
00:10:13
move higher um it seems almost every day
00:10:16
now Primarily affected private sector
00:10:19
banks It was ma it being gold was made a
00:10:21
tier one asset for banks like Barclays
00:10:24
uh Bank of America Cityc Court Dichi
00:10:26
Kango those types of global banks The
00:10:29
buyers have been foreign central banks I
00:10:31
do believe that the Basel 3 Accords will
00:10:33
be important to the gold price going
00:10:35
forward when the private sector steps up
00:10:38
to the extent that the public sector has
00:10:40
in the gold in the gold trade uh other
00:10:43
aspects of the Basel 3 banking accord uh
00:10:46
probably indirectly will benefit gold
00:10:49
too in the sense that although the rules
00:10:52
around gold were made uh less
00:10:55
restrictive there were other rules
00:10:57
around the characterization of bank
00:10:58
reserves uh and in particular the
00:11:01
charact the differentiation in reserves
00:11:04
against debt instruments that were held
00:11:07
for sale versus uh held to maturity uh
00:11:10
accords that allow banks to extend and
00:11:14
pretend uh around uh time losses in
00:11:19
their portfolios that I think will uh
00:11:23
destabilize the economy a bit
00:11:25
particularly in crisis uh and as a
00:11:28
consequence likely unfortunately in this
00:11:31
case help gold I I hope that wasn't too
00:11:33
wordy an answer Silver in my experience
00:11:36
has been more of a speculative
00:11:37
instrument than gold And silver tends to
00:11:40
outperform gold towards the middle or
00:11:42
the end of a precious metals bull market
00:11:45
In my experience precious metals bull
00:11:48
markets are led by gold because the
00:11:49
first buyer is the fear buyer Precious
00:11:52
metals oscillates between uh greed and
00:11:55
fear with the fear by buyer kicking off
00:11:57
the move Uh and then the momentum
00:11:59
established by the fear buyer bringing
00:12:01
the greed buyer in silver because I
00:12:04
suspect of its lower unit cost uh when
00:12:07
the generalist money comes down into the
00:12:10
precious metals space that money
00:12:12
eventually causes silver to outperform
00:12:14
gold And by the way when the silver bull
00:12:17
market starts you're not going to need
00:12:18
Rick Rule to tell you it's here You're
00:12:20
not going to see a move from 33 to 34
00:12:23
When silver moves it really truly moves
00:12:25
But normally that move takes a while to
00:12:27
establish itself And normally what
00:12:29
establishes it is momentum in gold
00:12:32
People I mean largely institutional
00:12:34
investors are expressing skepticism
00:12:37
around the precious metals bull market
00:12:39
Uh and the easiest way for them to
00:12:41
express that dissatisfaction is on the
00:12:43
New York Stock Exchange uh the best
00:12:46
vehicle for expressing either your
00:12:48
support or your lack of support for
00:12:50
silver uh on a leverage basis in
00:12:53
equities markets is the New York Stock
00:12:55
Exchange and hence PSLV PSLV is
00:12:58
experiencing a war between those who buy
00:13:01
the precious metals narrative and those
00:13:03
who don't Much to my amusement you know
00:13:06
there's a lot of people who are against
00:13:07
shorts primarily long Uh I love a big
00:13:13
short position uh against something I'm
00:13:16
in favor of Uh that's a position that
00:13:18
has to be bought Uh and it's up to it's
00:13:21
up to reality whether that position
00:13:23
needs to be bought higher uh or lower
00:13:26
Earlier in my career when I was more
00:13:29
overtly a stock promoter there was
00:13:32
nothing in the world I liked more than a
00:13:34
good short position uh in some
00:13:36
investments by the way silver related uh
00:13:38
often Pan-American silver and silver
00:13:40
standard in particular we delivered
00:13:42
quasi religious experiences to the short
00:13:45
community and I suspect that if people
00:13:48
end up being too short uh
00:13:52
PSLV that they could experience just
00:13:55
exactly that kind of religious
00:13:57
experience There's nothing in the world
00:13:58
worse than being caught on the wrong
00:14:01
side of a short trap
