Silver And The Ongoing Monetary Reform

Stephen Leeb’s book “Red Alert”, published in 2012, argues that the Chinese understand the issue of resource scarcity much better than the West and as a result of their accumulation of vital resources may leave the West in a nearly untenable position within the next decade.

The silver market is already in this untenable position!

Leeb, in an interview on KWN, told that the Chinese, who have just 3% of the gold reserves and gold mines with very low-grade ores, are exploiting unprofitable mines. The reason given by his Chinese well-connected alter ego was:

“China needs the gold to back its currency“. Apparently, they have been in a hurry to fill that aim for years!

Nearly each argument for gold in that interview could be applied for silver. Analysts should think like the Chinese, while silver had been the only monetary stallion in China for centuries.

And we are just a few months away from a major monetary reform. China has clearly described what she wanted in that essay, published on the BIS’s website in May 2009. A kind of SDR backed by “30 representative commodities”.

“The allocation of the SDR can be shifted from a purely calculation-based system to a system backed by real assets, such as a reserve pool, to further boost market confidence in its value.” 

Analyzing the silver market, without taking into account the ongoing monetary reform, and the will expressed by the governor of China’s central bank, makes no sense.

LBMA

Below, the first chart shows you the LBMA’ members monthly silver transfers in Moz (blue) and the number of transfers during 2009 and 2010 (red).

100 Moz a month was a maximum at that time, and the average number of monthly transfers between members was about 300.

During the last two years, 2017-2018, you can see, on the chart below, that the number of transfers has been multiplied by 3.

The average monthly transfer is above 200 Moz, twice as much as in 2009-2010.