I’m Mike Gleason and welcome to this week’s Market Wrap Podcast.
Coming up we’ll hear part of an enlightening and comprehensive interview of Money Metals president Stefan Gleason on Arcadia Economics regarding the recent fireworks in the silver market, the shortage of physical supply of minted coins, rounds and bars, and why a short squeeze has not yet occurred in the silver price on the heels of an explosive GameStop situation over the past two weeks. So, stick around for this informative conversation, coming up after this week’s market update.
A wild week of trading across asset markets has left investors wondering what represents real value – and whether it even matters anymore.
Stratospheric GameStop shares came crashing back to earth after their gravity-defying run up. The stock had clearly been pumped to ridiculously overvalued levels based on all conventional metrics. But that didn’t deter buyers who believed they could push it to $1,000 per share before cashing out.
After dropping over 85% its nominal price peak, perhaps the GameStop craze has ended just as abruptly as it began.
Meanwhile, some online speculators have jumped aboard other bizarre market frenzies. For example, the crypto token Dogecoin – which launched a few years ago as a joke – spiked this week to a market capitalization of over $6 billion.
A single tweet by Tesla CEO Elon Musk sent Dogecoin soaring by over 50% on Thursday. Musk, who is now the world’s richest man, stated “Dogecoin is the people’s crypto.”
It’s not clear whether he was serious or joking. But plenty of people took him seriously enough to put their hard-earned money into Dogecoin.
Regardless of whether Elon Musk intended to move Dogecoin prices, either for his own amusement or for the benefit of holders, the incident proves that anything that can be traded can be pumped – and then dumped.
That’s the kind of market environment we’re in, for better or worse. Asset prices are being manipulated wildly on social media sites and internet discussion forums.
Of course, as those of us in the precious metals community know all too well, certain large institutions are well practiced in manipulating gold and silver markets. Big banks including JPMorgan Chase and Deutsche Bank have paid millions of dollars in fines in recent years over price rigging schemes.
Other types of interventions aimed at suppressing precious metals prices are carried out openly and without any legal consequence. For example, after Monday’s big pop in silver prices, the COMEX futures exchange announced it would raise margins on silver trading by 18% and then JPMorgan followed by downgrading the silver sector in a thinly veiled effort to reverse the bullish sentiment.
Those moves had the predictable effect of causing long traders to pare back their positions, allowing short sellers to pounce. As prices began to fall precipitously, some sold in a panic.
Silver prices plunged from a high of over $30 an ounce intraday Monday to as low as $26 during Thursday’s trading. As of this Friday recording, spot silver checks in at $26.94 per ounce to register a weekly decline of 1.0%.
Turning to gold, the monetary metal is off 2.5% this week to trade at $1,814.
Hard assets investors who have diversified into platinum and palladium are seeing some gains. Platinum prices are higher by 3.8% for the week to come in at $1,133. And palladium shows a weekly gain of 5.0% to trade at $2,373 per ounce.
Although the price action of the past few days leaves many precious metals investors disappointed, silver and other metals will have opportunities to shine in the future.
The past week’s bullion buying surge cleared out dealer inventories. If physical bullion buying continues to remain strong in the weeks ahead, then it’s only a matter of time until supply and demand fundamentals drive spot prices higher.
In an interview with FoxBusiness earlier this week, Zacatecas Silver CEO Bryan Slusarchuk talked about the potential pressures the physical silver market could impose on paper prices.
Bryan Slusarchuk: The paper silver market is hundreds of times the size of the actual market for physical silver. And what you continue to see are these open contracts get kicked further and further down the road with most participants in the silver market, having no real ability nor inclination to ever deliver physical. Now, physical is in short supply. If anybody tried to buy physical silver this past weekend, they'll know that. If there's no ability on people that have entered into these contracts to ever deliver the physical silver they're contractually obligated to deliver, where does that lead to us? And that leads us, I think, to the potential for the mother of all short squeezes.
Unlike the recent crowd-sourced short squeezes on certain stocks that have poor fundamentals, a silver squeeze based on actual physical demand and real supply scarcity could last a lot longer than a week. It could play out for months or even years as public interest in silver and gold grows while miners struggle to ramp up production.
Physical precious metals aren’t for everyone. For some, the fact that their value is grounded in reality rather than being completely arbitrary is a disadvantage.
In the long run, though, chasing after absurdly priced assets tends to produce absurdly bad outcomes. It may be for the better that precious metals haven’t been rendered a joke by internet stock pumpers.
It’s certainly fortunate for those looking to accumulate more ounces that they can currently do so at reasonable prices. Although premiums remain somewhat elevated on popular coins, rounds, and bars, there are other cost-effective ways to own precious metals.
You might consider the Money Metals Vault Gold and Vault Silver storage programs. They are a great way to buy physical metal without the hassles and risks of storing it yourself. And unlike with futures contracts and ETF shares, you have direct ownership of the metal and are guaranteed to have a specific quantity of bullion held in a specific place in a highly secure vault. For more information, please visit MoneyMetals.com or give one of our non-commissioned Precious Metals Specialists a call at 1-800-800-1865.
Well now for more on what we saw during an incredibly fascinating week in the silver market and what it may all mean in the long run, let’s get right to this week’s interview.
The below will go at the end of the Stefan’s interview.
Chris Marcus: Well, hello there my friends. Chris Marcus here with you for Arcadia Economics on a very volatile day in the silver market, perhaps for many investors and maybe we'll decide today whether what's good, what's bad. I guess it's depending on one's perspective. Fortunately, I am joined by Stefan Gleason, president and owner of Money Metals Exchange, one of the larger bullion dealerships in the US, so one of the people that all of these physical orders, that from everything I hear, from a variety of bullion dealers I talk to, are continuing pretty strongly today. Stefan, I know you have a lot going on. Appreciate you joining us here today and how's everything going with you?
Stefan Gleason: Well, it's been a very busy month. Insurrection will do that, a Biden presidency. Seems like virtually honestly, it's just about everything that's happened in the world in the last year has been an impetus for more people to buy precious metals. And I think that's putting aside the chaos and all the bad that comes along with that. I think it's a good thing that over time, people are kind of waking up to the importance of accumulating gold and silver and whatever the impetus is, it's different every day, but still on the whole, I think there is an awakening and that has continued through the year through the fall. The summer of course, was intense. The fall slowed down just a tiny bit, but boy, the election turmoil, January, the inauguration, riots at the Capitol. It's one thing after another. And then of course the most recent thing kind of took it up into hyperdrive at a level that we hadn't even seen at the height last year, over the last week or so.
Chris Marcus: Okay. You mentioned that, the recent level, have you ever seen, even in 2011 or anytime previous what we saw the last two days?
Stefan Gleason: No. Although honestly, we weren't nearly as big a company at that time and we were only about a year old and our eCommerce capabilities were just starting at that time. But that said, that was pretty intense as well. It's really hard to say because our company is very different, much larger, able to handle thousands of orders in a day. That wasn't the case in 2011. But if you look at Google Trends actually and you look at the search interest in terms like buy silver and buy gold. Although I haven't looked at that in the last couple days, we have never gotten back to those peaks back in 2011, even in the last year, which is kind of interesting. If that's an indication then maybe we aren't yet at that level that we saw in 2011. Not withstanding the last couple days.
Chris Marcus: Yeah. Well, I guess that's where it really comes in. I would agree. Even a week ago we were not at those levels, although it's happened so quickly kind of like corona last year happened so quickly. But to me, what I've seen since Saturday is beyond what anything I remember from 2011 and we had David Morgan, a bunch of the guys who were around for the Hunt Brothers, they said even surpassing that. Would you say the same?
Stefan Gleason: Yeah. And I do think the last few days probably has topped all time, at least in terms of retail buying. Maybe 1980, I don't know, almost certainly 2011 was topped in the last few days, because really, what we saw over starting on Thursday really was just this doubling every day. If not more. Actually on Saturday, it was probably up three fold in terms of where it was on Friday and Friday was double Thursday and Thursday was higher than any day last year. It was just continuing to escalate and really, we started on Saturday night. We had a big conference call to discuss what to do about whether we wanted to continue taking orders through the rest of the weekend. And I think every dealer kind of came to the same conclusion we did.
Just about every dealer. A couple of them went naked, trying to hope they could cover the metal. Not necessarily that they didn't have metal, but cover in the spot market for hedging purposes on Sunday night. But many of the dealers Saturday night and Sunday morning basically said, "We don't want to go really short into the open on Sunday night. And if we keep selling like this, we could be tens of millions of dollars exposed on pricing because we can't hedge over the weekend." We decided that we wouldn't take any more orders till Sunday night and starting on Saturday night. About 24 hours and we've never had to make that kind of decision on a weekend or any day. When we turned things back on, on Sunday night at 6:00 PM, we're getting 20 orders a minute. It was crazy. And we had limits on how much you could buy.
You had to buy at least a $1,000 just to keep the lower accounts to a manageable level. And it was thousands of orders coming in in a short period of time. Obviously we were able to make sure we were hedged and make sure we had enough physical to make those commitments. But that's really what it comes down to. When you have this kind of volume, you have to be careful that you don't overextend yourself. We don't want to sell metal that we don't have on the shelf or on a truck, on the way to our facility. Even though we have a very large inventory, that can move pretty fast and you just want to be careful in this kind of market that you don't make commitments you can't keep. That's basically the way we have approached it.
And we're in a really good position right now where we're selling silver, we're selling gold. We have lots of items that we can sell. Premiums have shot up dramatically, but that's a result of the shortages that are developing almost instantaneously at all the wholesalers and nets. And that's just the reality. We have to pay a heck of a lot more for silver, silver bars and silver rounds than we did just a week ago. We have to adjust and it's more important that we have inventory available for people that want to buy silver than to be sold out and be twiddling our thumbs. That's kind of where we are. We're managing that situation. It's going quite well under the circumstances, but it's a moving target.
Prices came back down today. That of course just encourages the buying for those that really know why they're buying, the people that are selling on the paper markets, maybe they were surprised that they couldn't create a GameStop type event that easily. And maybe there's some reversal. Maybe the concentrated short players are ringing the register right now. And we can talk about maybe the right way to approach driving silver prices to where they need to go fundamentally or where they will go. But, it's been an interesting time and we're holding up pretty well. We're happy with where we are, but we're constantly re-evaluating and making sure that we're not quoting too long of a delay and not selling stuff that we can't deliver on very quickly. And I think all dealers are making those decisions and it's being made throughout the day all the time.
Chris Marcus: Yeah. And I appreciate you mentioned how the reason the dealers stopped on Sunday was because they didn't want to sell metal that they couldn't deliver. And perhaps we can talk more about how that's, I think, the risk with SLV, where we have JP Morgan, who's just been fined a billion dollars for rigging things. And they're the ones. Folks at home, if you're trying to put it in perspective, you could trust Stefan to send it to you or JP Morgan to hold it for you. There's that choice there, but Stefan, could you touch a little bit more on the psychology you heard from the people you talked with today? Because I think that's what it down to when the price was up yesterday, it's on CNBC. When the price is down today, for years, people would be scared off and sell and we'd see the market sit there for a while, but what's the reaction today?
Stefan Gleason: Well, no, I don't think there's really much of a change. What's happened is prices are back down. The premiums are still high. In fact, premiums have been rising even as the prices have been falling. I think those, we have of course new customers coming in because of the viral thing. And maybe they're new to the market. They may not know why they want to buy silver. It's just the latest play. And then there's experienced buyers who are taking advantage of the pullback, but then coming into the high premiums but still deciding they want to top off their positions. Are looking at 100 ounce bars, or we have an item called vault silver, where you can buy 1,000 ounce bars.
But I don't think there's that much of a change. I think the volatility just kind of stimulates demand one way or the other. And I would guess that the people that tried to do what happened to GameStop are a little disappointed. It wasn't that easy, maybe this will continue. Probably will, but the silver market is many, many times larger. It's a small market, but it's many times larger than GameStop was before they tried to squeeze GameStop. And the short interest is large in precious metals, but a lot of it's legitimate hedging and it also was not a 140% of the entire market, I don't think, like it was with GameStop. Oh, and just moving beyond that, the right way to put pressure on the silver market is not by buying SLV or call options on the SLV, which is also where money went or even mining stocks.
There's so many silver things and people are buying all those things, but those don't necessarily put a squeeze on the physical silver supply. In fact, they hardly do at all. And the way that you do that is by acquiring the metal and taking delivery of it. The reason that it's hard to do that quickly, unless you're taking 1,000 ounce bars off the exchange, is the small minted product, there's a bottleneck. There's a lot more capacity than there was a year ago, but it's still not enough to over the course of a weekend or even a week or even a month, to corner the silver market, I don't think, It will have an impact, but it's more, if you want to kind of squeeze the silver shorts, I think it's more of a long term thing.
And hopefully the attention that has come over the last few days from this new group of people and maybe others that maybe have some experience, hopefully that will ignite a passion and an understanding of why they're buying these things and also how to buy these things. And if that happens, then this is all a very, very good thing for precious metals.
You said that in the end, it does come down to the physical metal. And the question again, I've been getting a lot today, where is this silver coming from?
Stefan Gleason: Well, there's still plenty of 1,000 ounce bars right now. We're locking on hundreds of thousands of ounces, both for our own customers, but also for minting to then be delivered to us. There's plenty of silver. The lease rates have gone up, which indicates a little bit of tightness, maybe the SLV, some of that is caused by the inflows that where they have to go and acquire the metal. But there's still plenty of physical 1,000 ounce bars. There's a shortage of everything else. And that's the bottleneck thing. But, that's the thing that people often forget is that the silver market is way bigger than just retail, minted products. That's an important growing part of the market over the years, but it's not the biggest part of the market.
And there's literally just a bottleneck. That's the number one reason for the tightness and physical product is just the bottleneck of minting and the secondary market. No one's selling right now so there's none of that coming back to the wholesalers or the dealers. Everything has to kind of, or a lot of it has to come from mints and refineries to get the bars and rounds and so forth. But that said, that absolutely can develop over time. And I'm sure we've had a lot more silver come into the hands of strong hands of people, around the country and around the world that are not going to be quickly selling it, flipping it back into the exchanges when prices go up. And there is a supply deficit developing in silver, but it's just going to take more time.
And if you think about you're trying to suck the physical market out of a straw, the refineries and the mints are a straw that the retail public is drinking out of. And it's hard to get the metal out because nobody wants to take 1,000 ounce bars. And frankly, that's not really a good thing to take. It's hard to sell and it has to be re-assayed or melted so obviously that's an efficient way if you have a mechanism for that. But so I hope that this just reignites or increases the awareness of silver and doesn't turn into something where people get discouraged by the price action, because it didn't go up 300% in two weeks or whatever, like they wanted. I think I'm convinced silver's going way higher and probably way higher in the next few months, if not in the next few weeks, but it's not a weekend event.
If people keep buying on a retail level and I guess the last part of that, no long question, but we've heard the guys who were around for 2011 and 1980, they're like Warren Buffet was talking 20 years ago about the fundamentals, but each time it's been when you finally, because that at the margin is so small. And so it's always felt to me that, well, you might not even need a huge buying. Ted Butler says it was 60 million ounces after QE2 that went into SLV, that jacked it to 50. And we're seeing multiples of that. I guess there felt like a missing piece. And anything you could mention there?
Stefan Gleason: I think it's just a matter of time, Chris. We've just seen so much newly minted stuff come out. And there is an outflow of 1,000 ounce bars into the minting process. There's obviously there's new mine supply, but the amount of increase in the last year in silver minting, new minting. Secondary market, of course, there's a lot of silver out there being sold back, but there's a lot more being minted. And these mints actually finally got a reprieve for many years of really being in a bad business. That was the worst business in the precious metals market that I could see anyway, the part that I look at. That they were really sucking wind those mints and a couple went belly up for various reasons, but one of them is that there just wasn't much demand for newly minted silver, because there was so much secondary market silver out there that the mints didn't have much to do, but that changed big time a year ago.
And that continues and there's new mints going online and there's mints doubling and tripling their production and working seven days a week. And we need more right now, we've needed more access than we've had. Pretty much that's been the case for the last year. We would like to have more capacity in all of our mint relationships than we have. And I'm sure many other dealers feel the same way. That means there's a major outflow of metal going to the retail investor. And I think that's just the process that's going to continue. And I think it will have put pressure on the physical supplies of the commercial bars.
There were a lot of margin calls yesterday, a lot of margin calls because silver went up $3 from Thursday and Friday to Monday morning early. A lot of refineries and others who not just, I'm just talking about our side of the market, but really in general, anyone who is short, got a margin call and not only did they get a margin call because they had a loss and probably their margin went down, but the margin requirements were raised by the CFTC, I think by 20% or 18%. The amount of cash margin that you had to have to cover your short position or long position was increased substantially at the same time as the shorts had big losses. And so that was putting a squeeze on those now, many people that are short in the electronic markets have physical to deliver.
They may not want to, they may want to use it for refining or minting or have other reasons, but they could probably deliver into the position if they couldn't cover it. But more likely, people are putting up cash margin and not wanting to have their positions liquidated or have to deliver. And so that is of course putting pressure on certain parties and for JP Morgan to downgrade the sector, in some ways I think that probably saved some people from margin calls that were due on this morning.
There is that kind of nonsense that goes on. I'm sure that there's probably some, I would think there's some motivation in what they did there. But again, that's not where you want to invest in precious metals. And it's a little bit of a side show. I know it affects the ups and downs of the silver price that's a reference point, but as long as you're not putting your money into that casino, I wouldn't worry about it too much. I think ultimately the fundamentals will force the price higher, but it is a little bit troubling to watch when it happens. I know it is upsetting when you see this kind of thing like you're putting on the screen.
Chris Marcus: Yeah, very well said. And perhaps because it is a side show, but to the degree that when people have it and for years in the past, people would eventually sell. And this is just my own speculative opinion. I don't think these things are unintentional. In fact, Stefan, I'll give you a very leading question. I'll warn that before going into that, but given JP Morgan's track record, given the CFTC's track record where former commissioner Bart Chilton confirmed that back in the first mess, he found plenty of evidence the Department of Justice found 10 years later that other commissioners were blocking emails from people who were reporting evidence. Not a great track record. Gary Gensler, who was there, now SEC. And then on top of it, you have this from TD Securities, as soon as I saw this, I almost wanted to leave my account. Daniel, and you're welcome on the show, but silver squeeze is dead.
And in none of these articles you're talking about virality, YouTube, trending topics, but neither of these articles, no mention of the now 55 million ounces that have gone into SLV over the next two days. They didn't say anything about that. They didn't say anything about what you just mentioned and what everybody outside of Santa Claus that I bring on this show talks about with the physical level. Is it at least conceivable that some of these things affected the market, whether intentional or unintentional and led not the people who are buying physical, but the people who are trading the paper and then you in the wrong hands could facilitate that?
Stefan Gleason: Look, when you're playing in that environment, you're taking on leveraged, very wealthy, very powerful financial interests that have the resources to push the market around through their concentrated activity, in some cases, coordinated activity as the spoofing and other lawsuits and prosecutions ultimately have shown. If you play in that environment, you just got to be recognize it's not a winning place to be playing the silver market. And that's a little bit too much kind of too speculative and get rich quick kind of approach to in silver investing. And there's just so much leverage there. It is affecting things, but honestly the more I think the attention on silver is good even if it doesn't play out as a silver squeeze here. People that I know that barely know anything about precious metals have been contacting me the last few days.
Now, yeah. If they think, okay, silver is a bad investment because it collapsed, well, it's not going to collapse. I don't expect it's going to go down to $20. It might go down another buck or two, but there is a tremendous amount of fundamental reasons to buy silver, unlike GameStop, by the way. GameStop didn't have good fundamentals. Silver does. And the whole precious metals complex for a whole variety of reasons. There's going to be a lot of volatility. I think we're going to see more of that, but I wouldn't get disheartened by it. And not only that, but I think it's people are still buying like crazy. It's not deterring people, at least at the retail level. And that's ultimately people that are pulling silver and gold out of the exchanges and taking possession of it outside of the financial system, outside of this casino. And that takes time, like we talked about to get it out, but it is happening. And I think that's going to continue. Having the spotlight on the market is probably for the good, regardless of how this all plays out.
Chris Marcus: Stefan, can't thank you enough. Especially your reputation in industry is well known. You write, you speak, you show your face on camera. JP Morgan and SLV are welcome on the show. Come on fellows. Anyway, in wrapping up, can you share where they can find out more information? I'm happy to recommend you as a safe place where I've not purchased from you before, but I would feel comfortable doing so, that you'll get metal and people can contact you directly.
Stefan Gleason: Thank you.
Chris Marcus: Where can they find you?
Stefan Gleason: Yeah. Thank you. Thank you, Chris. Go to moneymetals.com and we can help you. Gold and silver, platinum, palladium. We also have our own in house depository. And we also, if you have an account at the depository or create an account and you need a line of credit for a business activity, you can actually borrow against your gold, your own segregated holdings, just like you can a home equity loan. That's a new offering, just not for most people, of course, but just another thing we do. Love to help.
One other thing, Chris, and maybe in the future, we can talk about this. We're pretty involved and I know others are paying attention to these things too, but we're pretty involved in the public policy side of precious metals and we have a project called the Sound Money Defense League, which is largely a money metals supported effort, where we're involved in state legislation and federal legislation to promote sound money, remove taxation from precious metals, rank the states on their policies. There's a whole lot happening at the state level this year and it maybe at a future time, we can go down the list of all the different bills that are going on, both at the state level, but even at the federal level with Congressman Mooney as one of our good allies there. I'd love to talk about that too, at some point.
Chris Marcus: Yeah. And you you can find that, folks, at the soundmoneydefense.org, soundmoneydefense.org. And yeah, Stefan, I know you have to run, although, like you mentioned, that was originally what we were planning when we scheduled this a couple weeks ago. Who knew this would happen.
Stefan Gleason: Then something happened. Yeah. The market happened.
Chris Marcus: Perhaps when we hook up next time we could also, I'd be interested to hear more how you mentioned lending programs and it's interesting. We could have a financial system and finance and flows of capital and lending to business without the dollar, is interesting. And anyway, I know you have to run and I can't thank you enough for joining me.
Stefan Gleason: My pleasure.
Chris Marcus: People appreciate this and thank you so much for all you're doing.
Stefan Gleason: Thank you, Chris. Appreciate the opportunity.
Well, that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.
About the Author:
Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.