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.

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_Liq...ty_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