Political and Economic Turmoil Suddenly Surging

Mike Maharrey: Greetings. I'm Mike Maharrey. I'm an analyst and reporter here at Money Metals, and I'm here today with Ed Steer. Ed is a veteran analyst with nearly three decades in the gold and silver precious metal space. He is the publisher of the Gold and Silver Digest, and he is also a member of the Gold Antitrust Action Committee. Ed, thank you so much for taking a little bit of time to talk today. How are you?

Ed Steer: I'm doing fine, and thanks for having me on your show.

Mike Maharrey: Well, it's my pleasure. And we actually scheduled this several weeks back, but we definitely lucked into a good day to chat, with the trajectory of gold prices over the last couple of days. We had a new record price yesterday and a bit of a selloff today. Now, the assumption seems to be that this is being driven by Jerome Powell and other Fed officials who are signaling an interest rate cut coming down the pipeline. We've been waiting for this, seems like, for months, but do you agree with this analysis? Or do you see other factors at work in these kind of bull runs we've had of late?

Ed Steer: Well, certainly, if you're talking about yesterday, which is Tuesday, the big run-up in gold prices, the gold price was certainly came on the news, on that news that there was going to be an easing of interest rates in September. But the fact of the matter is that all the price action that was of importance took place in the COMEX futures market, and it's the paper market where the price is set. But yesterday would be one of those instances where the news actually did drive the price. But if you do notice the fact that, even though gold set a new record high yesterday, silver was up on the day, on Tuesday, but it wasn't up as much as it should have been. So they're actively suppressing its price, even though that gold broke out to a new high, silver is, what, still 19 or so dollars below its old high of 2011. And was it 1983 or whenever the heck it was? They're obviously suppressing its price.

Mike Maharrey: Yeah, it's interesting you brought up silver, because that's actually on my list o' questions here a little bit down farther, but since you brought it up, let's go ahead and touch on the silver market. Because as you noted, it rallied with gold yesterday, and it was up well over $31 an ounce. But the last time I looked today, it was down, I think it was almost a dollar, which is a really big move, as far as silver goes. And again, as you mentioned, we're a long way off the highs that we saw even during the pandemic, which was still way off of the all-time records. Do you see this gap closing up? And is there something else going on that's kind of making silver to laggard? Or do you think it's primarily just this suppression that we're seeing in the paper market?

Ed Steer: It's primarily the suppression in the paper market, which has been going on now since basically 1975 or whenever Nixon took us off the gold standard, where that was-

Mike Maharrey: -'72?

Ed Steer: '71.

Mike Maharrey: '71?

Ed Steer: '71, yeah. So the prices of all precious metals have been actively suppressed almost since that time, and it's reached the point now that it's a hundred percent paper market driven, the silver price. And the Silver Institute, as everybody knows, we're in the fourth year of a structural deficit in silver, which is only getting worse as every day goes by. And it's to the point now that the physical market, at some point, will run over the paper market in the COMEX futures contract. And it's just a matter of time. And like you said yesterday, we had a nice rally in silver on Tuesday, and then, of course, at the London afternoon gold fix on Wednesday, they just hammered the snot out of it. And they had it down, I think, about a $1.20 on the day in the spot market.

And this is just all paper trading. There was nothing to do. The dollar index was down big time today, and it was not reflected in any of the precious metal prices. Because the traders in London and New York are actively suppressing their prices. And the big rally we had yesterday, that piled onto the shorts, the commercial traders piled onto the short side, and today, they undid all those by smashing the price down. So it's still a paper game in the COMEX futures market, until it isn't.

Mike Maharrey: Right. A couple of questions come up in my head when we talk about this issue. The first is, what do you think it's going to take for the physical market to finally overrun what's going on in the paper market? And you rightly pointed out the supply and demand dynamics, if you're just looking at that, you have to be really bullish silver. But what's it going to take for this to flip in the physical market, to gain the upper hand?

Ed Steer: Well, the thing is, the supply-demand fundamentals have been off the charts for a while, and I follow the amount of silver that's moving in and out of the COMEX and SLV and the other various silver ETFs and mutual funds everywhere on Planet Earth on a daily basis. And the amount of metal that's being shipped in and shipped out and being delivered, is issued and stopped, it's just amazing. And the pace is absolutely rabid for the people that use this metal to come up with this stuff. And so, it's just becoming absolutely frantic in the physical market, and it's just a matter of time. We don't know when it's going to be, but this has been going on for years now.

I know this is something that Ted Butler, rest in peace, Ted, mentioned, was on about for the last four years, just how dramatically the silver physical movement in thousand-ounce Good Delivery bars was everywhere, whether it be in the Far East or in London or in New York on the COMEX or in all these ETFs. And this is an absolute sign that there is a physical shortage and they're having to move it all over the place as quickly as they can to fill the supply deficit. One of these days, it just isn't going to be there, but what day that's going to be, I don't know. And nobody knows, but we're all waiting for that day when it arrives.

Mike Maharrey: Right, yeah. None of us have a crystal ball, that's for sure. I have friends and know several people who just absolutely refuse to get into silver in particular, but even gold, because they say, "Well, the whole thing's manipulated and there's just no point." How would you, and I hate to use the word, "advise," because we're not advisors here, but what's another way of thinking about this as an investor? How would you look at this as an investor?

Ed Steer: Well, as an investor, for me, it's a no-brainer, but for people who don't want to get invested in it for whatever reason, some people, you just aren't going to change their minds. It's as simple as that. We'll take Bitcoin. I'm not involved in Bitcoin. I never will be. So there's some people just aren't going to buy it no matter what story you tell them. But for the average investor, basically, all they need to know is that it's the only commodity that hasn't had a new record high. It hasn't broken through its new record high and setting new record high prices in the last 13 or last 40 years.

And sooner or later, the supply-demand fundamentals are going to dictate that it's going to be trading at some rather large and impressive three-digit price. And it's a gift to be given. Even today when we got smacked down a dollar and whatever it is, it's just a gift that is being handed to investors. And anybody who's got a few dollars to spend, I highly recommend they spend a few dollars of that in the silver market, whether it be in the physical commodity itself or in the equities.

Mike Maharrey: Yeah, yeah, absolutely. Here's a kind of a related question. You kind of see this global competition to get as much gold as possible, especially in the East Asia emerging markets. China has been gobbling up gold. Do you see any place where countries are competing for silver? Do you see this dynamic? And if so, where?

Ed Steer: Well, no. There's been heavy demand out of India during the first quarter of this year. Last year, Turkey was a huge importer of silver, but this year, so far, they're missing in action. They've imported very little. But regardless of that, the demand is still there and there's no banks or any banking institution that's actively accumulating it, although I know that the Central Bank of the Russian Federation has silver in its vaults, because I've seen the photographs of that silver there. So if they're accumulating it or if banks are accumulating it, they're not announcing that fact. But it doesn't matter whether the banks are accumulating it or not, the Silver Institute has stated categorically that, for the last four years, we're in this structural supply-demand deficit. And that's really all you need to know about the silver market. And at the moment, JP Morgan is the only entity on Planet Earth with the physical silver in-house to satisfy this deficit.

So all of the silver that's being used over the supply that's available is coming through them. Ted's research showed that, by 2011, they had accumulated about a billion ounces of silver, and it's their stockpile that's being drawn down to meet this deficit. And I think it was last year, late last year sometime, he said they've already divested of well over half of that. So there's a limit to how much JP Morgan is going to supply to the market or can supply to the market out of their holdings. And as I say in my column every Saturday, the moment that JP Morgan stops supplying silver to the deficit is the day this price management scheme ends. And whatever day that is, we're still sitting here waiting for it, until the supply-demand fundamentals dictate a much higher price.

Mike Maharrey: As you're talking about that, I'm thinking about the old game some of us old people played as kids, kick the can down the road. And it's true, you can kick the can down the road a long way, but at some point, you do ultimately run out of road and the fundamentals and the supply and demand dynamics, they kick into gear. There's only so much you can do in terms of keeping that game going.

Ed Steer: Well, I'll tell you what, the kicking the can down the road is an absolute perfect analogy for what they're doing. The fact of the matter is that all the commercial traders, the large commercial traders, the big four and big eight shorts, know everything you and I are talking about right now. They know the demand is much larger than supply. There's no more supply out there. And they're just, like you said, kicking the can down the road, because there's nothing else they can do, except keep suppressing the price until the demand overruns supply. And they've been at this now for, what, 50 years? 50 plus years in the four precious metals.

And when they thought this was a good idea to start suppressing commodity prices way back when, they took everybody off the gold exchange standard in 1971. But at the time they decided to do this, they didn't have an exit plan. So now, we're getting down to the point where the demand for gold, silver, and even platinum and palladium are in supply-demand deficits right now. They've painted themselves into a corner, and there's no way out of this thing, except for a massive repricing of silver in particular and all commodities in general. But the kicking this can down the road thing, the brick wall is fast approaching.

Mike Maharrey: Yeah, I came up with another analogy. I love analogies. I think people can wrap their head around them. You talked about they kind of entered into this scheme or scheme. I used to say scheme when I was a kid. I still say it sometimes. They kind of entered into this without an exit plan. So it's like you're going down the highway and there's no exit ramps in sight, and you're running out of gas. That's a bad scenario right there. Here's something that I always wonder about, and it's always interesting to me. You see things that are happening and you wonder what motivates them, who benefits. Why do you think that this whole idea of suppressing commodity prices and silver in particular? Who's benefiting? And why did they come up with this scheme?

Ed Steer: Well, the commercial traders for a while, up until a couple of years ago, were actually making money doing this. A lot of the prices to run up and they shorted it all the way up, and then, they'd engineer a price decline, like they did today. And all the shorts they put on on the way up, they'd clean up on the way down. So there's money to be made in this, until this gold price ran up five or six or $700 in the last year or so, and all of a sudden, everybody that was short in the commercial category or anybody short in any category is now in a world of financial hurt and they have unrealized margin call losses, which they haven't covered yet, I don't know, approaching 20 billion, according to Ted.

And so, there was money to be made. And number two, the reason is, and most of these commercial traders are bullion banks or investment houses or commodity trading houses that are all colluding, the commercial traders are all collusive, and it's all for one and one for all, they all go long at the same time, they all go short at the same time.

So this is an attempt to keep everybody from running from the paper asset side of the street, which is stocks and bonds and your favorite whatever stock in Apple or Tesla or whatever, keep people on that side of the street, rather than running to the hard asset side, whether it be silver or gold or copper or lead or zinc or anything like that. Because once they lose control of the commodity prices, then the paper assets are going to take a big hit, as everybody runs to the physical side. And besides that, the financial system itself, the paper currency system, we're in a totally fiat currency system worldwide.

And it's been like this is the first time in recorded history we've had that. And no fiat currency system has ever survived the test of time ever. And the US dollar and the Canadian dollar here in Canada, are all part of that. And they've known that the end is coming, they've known it for like 50 or more years, even when they started this thing. And now, we're in the final innings of this thing. And it's just a matter of time before the whole thing falls apart. And like you said before, the analogy of kicking the can down the road, they're just kicking this thing down the road until they just can't do it anymore. And then, the consequences for the financial system of a repricing in the precious metals is incalculable, especially in silver, because Keith Neumeyer, First Majestic Silver, I got his T-shirt that says Three-Digit Silver, and before this is all over, it's going to be a rather magnificent number with three digits in it. That's for sure.

Mike Maharrey: Yeah. You mentioned gold, and we've had a really healthy run-up in the price. Do you think that maybe the, we've kind of seen this shift of physical particularly moving from the west to the east, so we have really strong demand in China, Vietnam, Korea, and Japan, where both central banks and investors are gobbling up physical gold, whereas this demand's kind of lagged in the west, do you think maybe that this is the beginning of them losing control of that paper market, that we're starting to see that in the gold market with this really high physical demand that we're getting in Asia? Or am I off base here?

Ed Steer: No, not at all. The culture of gold in the Far East, you pick a country, the Far East or the Arab states or Vietnam or Philippines or India or China has been around for thousands of years, where in the west, it's a relatively new phenomenon, but it has never gone away. And the physical demand, it's not as strong as it, it's strong, but it's not like silver where they're running a deficit. But it's running close to the point where it's running a deficit, in gold as well. So the demand is really there. And the drain from west to east has been going on for, I don't know, China was at 2008 or something like that. They became net importers of gold, and they've been importing gold ever since. And it's not just China. It's India and, like you said, everywhere else. And at some point, just like in silver, but the silver market will be the one that goes first. And it'll take gold and the other commodities with it.

The paper market is getting very long in the [inaudible 00:18:32]. These commercial traders right now, and I was just checking the stats before I went on air, is that you've got the commercial traders, whether they be banks, investment houses, or hedge funds, whoever they are, all working together in collusion are short about 60% of the entire open interest in both silver and gold in the COMEX futures market. And they alone control the price, as you saw this morning, at the London afternoon gold fix, when they hammered gold and silver into the dirt. And these are the ones controlling the price, and when their number comes up, it will be all over.

And that's basically what we're waiting for is for the physical market, whether it comes from the east or where it comes from, is to trump the paper market. And like you've pointed out and I've pointed out, we're in the final innings of that. And the east is more than aware, China's more than aware of what the Americans are doing and the British are doing to keep gold prices suppressed. And they're buying us all this stuff on the cheap, because they know that, someday, it's going to be priced much higher. And this has been going on for generations. And it's only a matter of time before, like I said, that brick wall approaches, and we're still waiting for that.

Mike Maharrey: Yeah. So if you were talking to somebody who is just starting out in investing in precious metals, maybe somebody's listening to us today, they've got no positions in gold or silver, and they're thinking, "Well, these guys make sense. Maybe I should think about this," what would you think would be some good product options that would be better than others, not really considering the cost of entry?

Ed Steer: Okay. Well, I'm not an investment advisor, but what I would do, if I had to start all over again, is I would take whatever number of dollars they wanted to invest, and I would put half of it in physical metal. And if you've only got a two or $3,000 to invest or whatever, I would put half of it in physical silver, that you could hold in your hand, not in paper silver, but contact your nearest coin dealer or get online or whatever and buy some ounces of silver. And if you're into stocks, I would buy a good precious metals mutual fund. In the United States. That would be the VanEck Gold Fund. And in silver, that'd be SILJ, which I own a position in, by the way.

And here in Canada, there's a silver equity fund called Ninepoint Silver Equities, but I would put half of it in physical and the other half in precious metal stocks, preferably in a mutual fund, because there's no way, on God's green earth, anybody should rifle shoot this sector by buying a stock, regardless of what it is. They should cover their behinds by buying a basket of funds, and mutual funds are the best way to go.

Mike Maharrey: That sounds like fantastic advice. So before we go, I would like for you to have an opportunity to talk a little bit about your publication and where folks can follow you and follow your work and get more of the valuable insights that you have.

Ed Steer: Well, I started writing on the internet back in around 2001 on Bill Murphy's La Metropole Cafe. And then, I got hired by Casey Research to write their daily precious metals column back in 2007. And when Stansberry bought them out in, I think it was 2015 or '16, I went my own way and I have my own subscription based website, Ed Steer Gold and Silver Digest. And I publish five columns a week, which is about 260 a year. It goes into the gold, silver, and platinum markets on a daily basis. And you can go to my search me under Ed Steer Gold and Silver, and my website will pop up. And I have a sample column there. You click on that, and you can read what I post five days a week. And the cost is US $100 per year, and if you're interested, you can sign up.

Mike Maharrey: That is not a bad price for good solid analysis, because I know, for me, especially when you get into things like COMEX and the paper market, it's intricate and complicated and it's hard to find good information on that. So the fact that we have somebody out there that is knowledgeable and competent and has the time to really delve into that stuff is a valuable thing. So appreciate the fact that you're out there doing that work.

Ed Steer: Well, when you jump in right at the beginning, it appears complicated, but it's really very simple once you follow along for a while and you can sort of get into the flow of it. It's like jumping into a fast moving river when you sign up, it seems like there's all kinds of stuff to learn, but you start reading the column for three or four weeks, then all of a sudden, things start to fall into place. It's complicated in some ways, but in the end, it's very simple.

Mike Maharrey: Well, and I think you've done a very good job, just in our short conversation, of making that clear, because you digested things down to where even I can understand it. So we're in good shape here. So I know you're a busy man, and I'm going to let you go, but I really do appreciate you taking the time to chat with us today and for sharing our insights. And hopefully, we can get you back on in the near future and continue following as things unfold, because as we saw on Sunday with this assassination attempt, things change really quick in the world that we live in today. So it's important to try to keep up.

Ed Steer: Thanks for having me on, Mike.

Mike Maharrey: You're very welcome.