top of page

Current shortages and manipulation only support the fundamentals of gold and silver investing

Allow me to reintroduce gold and silver.

In this so often inelegant world of money, we are getting the opportunity to witness a coming of age. It is a story filled with bobs and weaves, peaks and valleys, moments of joy and years of sorrow, the likes of which are book-worthy. An opportunity so grand that simply having a small piece could be enough to revitalize even the most flaccid of portfolios, perhaps even financially prepare us for retirement at an early age. To this end, I once again alert our readers to the story of gold and silver bullion.

The demand for physical gold and silver is exploding worldwide in 2021, and bullion banks are experiencing an unparalleled supply crunch. This story reminds me eerily of the billions of dollars lost on Chinese reverse mergers. Essentially these were companies that ended up somehow making their way into the U.S. stock trading market. They somehow got listed for trade. Despite big audit companies, SEC, and Government officials supposedly "watching" out for the American public, they ended up being empty shells. They had no actual products or a fraction of infrastructure and revenue that they had purported to have and were nothing more than just paper promises.

Silver and Gold paper trading reminds me of this same thing. Yes, there is a supposed tonne of oversight and Government agencies watching/monitoring the trading. There are auditors involved and big mints and fabricators supplying a lot of product. But how often do we get to see the gold and silver? Wouldn't you, as an investor in any number of possible ETFs or other big paper traded vehicles, like to see inside the vault once and a while? All of Delta's clients have the right to see and hold their products and do so regularly. I believe that in the next few years, we will find out that for every 100 or so "paper" ounces claimed, only 1 "actual" physical ounce exists. It is that bad.

As physical demand continues to rise, the colossal paper Ponzi scheme that the bullion banks have engaged in on the COMEX (The primary PAPER market for trading metals such as gold and silver located in New York) is going to become increasingly evident. It will also become increasingly public. (Think #silversqueeze #silvershorts, #silverbugs, #silverbacks etc.) At some point, the lack of physical gold and silver (such as right now) will break the back of the paper markets. If this occurs, we would witness the coming of age for gold and silver and see both metals rise to levels imagined only in our wildest of dreams.

The truth is that the central banks of the world, sometimes referred to as the "bullion banks," and sometimes working through intermediaries, such as large banking institutions like JP Morgan et al., have made "paper promises" that vastly exceed the amount of actual physical gold and silver in existence. This kind of scheme works fine if everyone does not demand their precious metal at the same time. Unfortunately for the ones running this scheme, people, even whole countries, are now starting to ask for delivery of their physical gold and silver, causing huge problems.

Over the past decade, numerous countries have requested or completed the process of repatriating their gold reserves (reserves held in global bullion centers around the world as insurance, hedges, protection, goodwill and many other reasons), 500-1000 metric tonnes (16-32 million ounces), depending on how accurate the reports are of gold. Bullion is supposed to be physical, sitting on racks, not leased out, and ready to ship at a moment's notice.

In Germany's case, this should not have been a problem for the U.S. government and the Federal Reserve, which claims to be flush with bullion and to hold the world's largest known stockpile in Fort Knox, but guess what? Instead, it took years to finalize the transaction for something that could have taken a relatively small amount of time if the actual physical bullion was there. It was a strain on the U.S-German relations at the time, but by no means is Germany the only country to have problems. Now, almost a decade later, all kinds of people, institutions, and whole countries have begun asking for their bullion to be delivered, causing severe stress on the bullion banks.

The following is what Hong Kong hedge fund manager William Kaye told King World News back in 2014… "There are serious strains in the (gold) system. I've never witnessed such a serious strain in my lifetime… This suggests that…there are forces at work: One is that there are serious strains in the system- that the bullion banks are struggling to come up with the physical gold for spot delivery that the markets demand." This quote and article have since been wiped from the King World News website, but one can surmise that the situation has only compounded itself, and many of us now know that silver is in the same position.

Since 2005, I have been penning this newsletter and in all of that period have argued, as does everyone at Delta Harbour Assets, that this situation and potential extreme shortage in physical bullion should come as no surprise.

We know that banks like JP Morgan and others have had significant delays in delivering bullion from time to time. We also know that delivery delays are getting longer. If you look at JP Morgan's clients alone, they have withdrawn upwards of 60-100 tons since December of 2012. The lesson here is that the writing is on the wall. Investors are beginning to lose trust in banks like JP Morgan and their ability to deliver, not to mention the fines they continue to receive as slaps on the wrist to act in a duplicitous and deceitful manner.

JP Morgan will pay record settlement to resolve 'spoofing' case against 15 traders

Former JP Morgan trader pleads guilty to manipulating U.S. metals markets for years

CFTC Fines J.P. Morgan Securities $650,000 for Inaccurate Reporting

J.P. Morgan Adds $2.6 Billion to Its $25 Billion Plus Tally of Recent Settlements

JPMorgan Paid $20 Billion in Fines Last Year—So Its Board Is Giving Jamie Dimon a Raise

UPDATE 2-JPMorgan to pay $614 mln in U.S. mortgage fraud case

And the list goes on and on.

What does this all mean? It is apparent to me that we are witnessing an awakening of the general public to this delinquency. We are beginning to see a shift in disposition towards a new marketplace. We are now seeing a "coming of age" which will transform how we think about investments such as gold and silver.

Silver Shortages Suggest We Are Only Months Away From $50 Silver

Silver dealers scramble to find supplies for retail buyers

Our perceptions of wealth are beginning to become more insular as we struggle to understand what comes next. I, like you, think about it all the time. I do not tolerate anyone who suggests one equation or one right way to build wealth or protect it. It can be different and more diverse than ever before. But, there is growing concern that something big is coming. Unfortunately, most folks continue plugging the same numbers into the same equation over and over again, PASSIVELY, hoping to find the same result on paper and at a cost to their overall portfolio strength.

Financial well being, which I have written and spoken about, is beginning to transcend, in a cyclical, historical manner (what goes around comes around) our mindset towards what wealth is (physical, tangible, hold in your hands) versus "the promise of wealth" (paper). We see this in silver and gold ownership because people believe in "real money" or something tangible; a hard asset.

Four fundamental building blocks support this subconscious change in our mentality towards wealth.

The first fundamental is predicated on the long-term depreciation of the U.S. Dollar and many other global currencies, as we all watch the printing presses dilute the value of our fiat currencies. It is appalling. Asian and Russian central banks have already begun to realize this and lead the way in terms of bullion buying in the whole world. They also pay premiums for their physical bullion to avoid delays in their shipments, almost like they expect a failure to occur.

Through their state-controlled "companies", the Kremlin and the Communist Chinese regime have been signing significant deals with each other that analysts say will contribute to the acceleration of the U.S. dollar losing its status as the global reserve currency. Bypassing the U.S. dollar and favouring domestic currencies or regional currencies has caused a war in the past. However, it is now becoming unavoidable. The geopolitical implications of the quickly-moving trends are colossal — especially for the United States, where the end of dollar supremacy will lead to a potentially unparalleled economic cataclysm. Keep in mind for those thinking Cryptocurrencies that the BRIC (Brazil, Russia, India, China) countries don't want them and won't allow them without complete control of them.

The second fundamental is the real threat of inflation. It is based, in part, on the 1st building block. The unprecedented money printing and propping up of the U.S. Dollar and other currencies have led to a state of permanent quantitative easing and loss of purchasing power. Since the U.S. Fed started printing money in 2008, their monetary base has grown six-fold from $800 billion to $5.2 trillion.

Imagine that what took seemingly hundreds of years to create took only thirteen years to grow six times over. That has spawned an extraordinary amount of money printing around the world which has increased total debt dramatically.

The third fundamental is geopolitical instability. Since 9/11, there has been a terrible escalation in the number of geopolitical storms worldwide.

I have spent a great deal of time discussing this and its ramifications on the gold and silver marketplace. Whole countries have now moved to protect themselves, insure their foreign reserves, and try to obtain some footing in the most turbulent economic period we have ever witnessed. Geopolitical trends include sanctions, sovereign debt, war, instability, civil unrest, and many other major macro topics that impact a countries ability to conduct business. Therefore to stabilize, many central banks turn to safe havens such as gold to maintain faith in their currencies and economies.

Currencies mirror the health of the countries issuing them. When a country manages its economy well and offers a stable social and political environment, demand for its currency increases, and the currency value appreciates. In contrast, the opposite happens when the economy and politics of the country are managed poorly. The fiat currency is a country's image, and its value only depends on the trust/confidence people have in its economy. When the international monetary system is on the brink of change because of geopolitical instability, there is always a flux toward tangible assets (land, buildings, jewelry, gold, silver etc.). Gold is real money, contrary to the different countries' currencies, which are fiat money and can be devalued by monetization of their debt.

In the current geopolitical framework, no one region necessarily dominates. Each one has advantages but also disadvantages, and as a result, an international supremacy struggle is occurring between the United States, the European Union, Russia and China. In this new "Cold War," uncertainty prevails.

Other countries are playing different roles, such as accelerators, agitators, or troublemakers. It is resulting in a war on the price of gold led by western countries. (in the form of manipulation using the paper markets). But there is also a war for gold ownership between all the countries, eastern countries being the ones that wish to exchange their dollar reserves for gold and as fast as possible.

In this new currency war, gold has become central in the international political stratagems of all countries involved. During this period of significant risks and uncertainty, gold will shine until the return of a new geopolitical, economic, and monetary order. Gold is money "in extremis" and is the only real money without any counterparty risk. Therefore, gold is considered, and rightly so, a geopolitical metal.

The fourth fundamental point as support for the ownership of bullion is supply and demand. "Now you see it, and now you don't." And this is what we genuinely believe will serve as the trigger for this coming of age of bullion ownership.

The general public will realize that gold is valuable in a monetary sense. Gold is being reintroduced worldwide as a means of currency stability and as a pillar for good money management to back and maintain confidence in a government's overall long-term economic stability.

On the other hand, silver has a monetary tradition and a newly born industrial revolution of sorts, which has taken grasp and added fuel to the fire as an argument for ownership.

We can now find the shiny bright metal in countless types of applications. From electronics to solar power, medical uses to warheads and hundreds of applications that have only really come into existence since the turn of the millennium. The list goes on and on: from water purification to bearings, washing machines to clothing and colloidal silver. The best part about this is that it comes when arguably our above-ground AVAILABLE resources are at their lowest. Some say as little as 800 million - 1.2 billion ounces is about all that can be had outside of ounces that are already spoken for.

Gold and silver bullion are truly unique opportunities for anyone that realizes their potential right now. At some point, all of the paper floating out there in the world will burn. When that happens, the prices of silver and gold are going to go through the ceiling. Be early to buy if it is for you. Be consistent in your buying if it is for you. Be diversified in your holdings if it is for you. Do your due diligence to know if it is for you.

Yours to the penny,

Darren V. Long

98 views0 comments

Recent Posts

See All