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Enormous Paper Silver Trading Volumes ...

Interview with Jay Taylor on August 26, 2014 discussing the Enormous paper silver trading volumes on LBMA and physical silver premia.

Jay Taylor Interviews Daved Jensen MP3


Topics:

1. Continued Shanghai Gold Exchange and Shanghai Metal Exchange physical metals premia vs. LBMA/LPPM pricing:

  • SGE Gold: $1286.29 /oz & premium of $ -0.71/oz. = -.1 % premium vs LBMA
  • SGE Silver: $21.12 /oz & premium of $1.59 /oz. = +8.1% premium vs LBMA
  • SME Palladium $1,031.06 /oz & premium of $145 /oz. = 16.4% premium vs LBMA
  • SME Platinum $1,508.68 /oz & premium of $89.68 /oz = 6.3% premium vs LBMA

Moscow Exchange metal premia vs London:

  • Gold $1,497.5 /oz and premium of $210.50 /oz or 16.4% vs LBMA
  • Silver $22.73 /oz and premium of $3.20 /oz or 16.4% vs LBMA

London, China and Moscow have VAT taxes on metal purchases (Gold excluded from VAT in Shanghai and London)

2. Silver market of interest:

  • Predicted 113 M oz deficit for 2014
  • 1.4 B oz visible above ground global stocks of silver (ETFs, Swiss vaults, etc.)
  • 1.63 B oz LBMA daily trading volume of silver implies a very large open interest on the LBMA:
  • 2x daily volume multiplier = 3.3 B oz open interest for silver
    3x daily volume multiplier = 4.9 B oz open interest for silver
  • False supply of silver indicated on LBMA by billions of ounces of trading positions without allocated silver
  • Move from LBMA paper positions as LBMA paper positions lead to mispricing silver which will lead to shortages

3. Trading on the LBMA - 85% of global daily gold volume on LBMA

  • LBMA's "Loco London Liquidity Survey Q1 2011" http://www.lbma.org.uk/assets/Loco_London_Liquidity_Surveyrv.pdf
  • 10:1 daily gross trading volume vs end of day net settled volume shown on LBMA website.
  • 90% of daily LBMA gold trading in spot market
    5% in forward instruments
    5% in 'other'
  • Paper trading on LBMA leading to global shortages of precious metals through mispricing (artificially low pricing)
  • Moscow and Shanghai exchanges showing materially different pricing for metals

4. Physical exchanges:

  • Singapore Exchange online in September 2014 with 25 kg (803 oz) physically settled only gold contract
  • Shanghai Free Trade Zone exchange trading starts September 26, 2014
  • Both will provide important physical benchmark pricing for physical gold vs LBMA derivatives

5. Global Reserve Currencies

  • Have always been gold or silver
  • Paper currencies have been the trade name but they started as interchangeable with the metal itself
  • At US gold default in 1971, 6x more dollars than gold backing

6. Rising rates - impact on gold

 

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