Thread by @BambroughKevin

Today’s gold and silver action looked like a classic case of smack the metals and buy the stocks.

A nice divergence that showed stock purchasing strength in the face of a metal price decline.

In the past we see a rally follow such action. #gold #silver

Also, to comment on the action with the silver etfs and coin dealers. There has undoubtedly been a large draw down in inventories.

The etfs have expanded and coin dealer inventories drained. Both of these entities have purchased silver in the option market to offset sales

Historically when the major metals etfs experience a large capital influx, issue new shares and purchase metal, their is a lag effect in the spot market

Real time when the capital flows into the etfs they want to purchase the metal ASAP and secure pricing so they can issue shares and preserve NAV per share as best possible. (Tracking the underlying metal as closely as possible)

This is accomplished by calling a major bullion dealer and getting a quotation to purchase a need quantity of their desired metal.

But the bullion dealer is almost never sitting in that inventory ready to satisfy the purchases. Instead they look to the option markets in major exchanges and estimate a price that they can secure the order and provide the quote.

As soon as it’s agreed the bullion dealer locks in the order with option contracts of with a willing Comercial seller. This metal isn’t delivered the next day. We are talking huge quantities of metal that take time to deliver

When I was at Sprott, at times we had metal orders that too many months to deliver. We were routinely promised it would arrive in a month only to find out a month later that it was being promised to be deliver the next month.

I remember one instance when we were told it would come from New York. Then Chicago. Then the UK. And ultimately it took 6 months to get or silver deliver. We were told it would come from China, to Vancouver and arrive via train across Canada to Toronto.

Point is that when the etfs and coin dealers get cleaned out the result isn’t necessary an immediate price rise. But what actually happens is a massive draw down in inventory and sales commitments that often take months to fulfill.

So we should watch inventory levels at the major commodity exchanges the world over and see how many of the current owners of option contracts request deliver in the coming weeks and months.

Also, some Comercial purchasers might be surprised when they see to secure silver for their manufacturing needs in the coming months. They may find that have to pay high premium for immediate delivery. I expect many may find that if they purchase silver today

They won’t be guaranteed delivery for many months. Sure there may be willing sellers today. Some miners happy with today’s price. Even bullion dealers happy to lock in profits by selling silver they agreed to purchase when some miners hedged by product silver with them.

But,these are all some what artificial prices. Etfs don’t advertise the difficulty they have purchasing and the time lag they experience getting deliveries. In the end they trust the bullion dealers will come through in the end and aren’t overly concerned about counter party risk

Anyhow, I expect we will see a ramp up in pricing in the coming months as those that need silver in a timely fashion pay up to get it and pull it off exchanges. If you need it for manufacturing and can’t source it any other way you’ll be left with no choice but

Purchasing option contracts and pulling it out of exchange inventories

Sorry I don’t number my tweets as a thread. I have no clue how long they will be and I’m not much for form and style. Hope they are appreciated and some find them helpful