Economists Uncut

Gold, Silver EFP Surge (Uncut) 01-23-2025

Craig Hemke: Gold, Silver EFP Surge Just Latest Sign Of Pressure In Fractionalized Metals System

Gap shouldn’t be there because there should be enough confidence in the system if you buy a spot that you actually have the metal to deliver against the short that you established. Well, hello there, my friends. Chris Marcus here with you for Arcadia Economics as we are now.

 

We’re recording on Tuesday, day two of the second Trump administration. And fortunately, to tell us exactly how it’s going to go with future prices, exact dates of policies and everything, rates, Fed decisions before it all happens, because he just put out his 2025 macrocast, which is something that I enjoy each year. And I know a lot of our viewers enjoy each year.

 

And as Jim Willie would say, we have the great Lord Hemke joining us on the show today. That is, of course, Craig Hemke of the TF Metals Report. And Craig, Happy New Year.

 

And nice to see he’s calling in from vacation. So there’s some dedication, although he’s still bringing us the silver and gold. Craig, how are you today, my friend? Well, I’m all right.

 

It’s kind of a working vacation, just trying to escape and find some sunshine. Yeah, I’ve got all the answers. That’s why, you know, I’m Nostradamus in the house, as they call me.

 

We’ll try to project, you know, I write this forecast every year and I always warn people, you know, this is not, I’m not like trying to get clicks and all that kind of, I write this stuff down because I’m going to be wrong to a certain degree, some more in some years than others. And I want to go back, you know, because by the time you get to be my age, you forget what you had for lunch. I was about to say you’re changing the story.

 

I thought you write it down because you want to remember it a couple of months later. Right. And that’s exactly right.

 

I want to be able to go back by, you know, this fall and say, God, why the hell? And I think that was going to happen. Then I can go back and here, I at least have a fossil record. I can go back and see what I was thinking and get wrong.

 

It’s like the one last year. I thought gold would go up, but I thought it would wait until the Fed started cutting rates. And, you know, as you know, it took off in March instead.

 

And I was like, well, what did I miss? And I tried to write about this year. I think I mainly missed the central bank demand and the impact that was having. But nonetheless, it’s out there.

 

It’s in the wild. You can go to my. The easiest way to find it is on my Twitter profile page, T.F. Metals at T.F. Metals.

 

And it’s the pin tweet. So anybody can just go there, pull that up and you get it looks like that and direct you to my site. And you can I’m just glad it’s over, Chris.

 

Man, it is a pain in the neck to write every year. I just dread it because it’s too much with too hard on my ADHD brain to focus that long to write the damn thing. But it’s over and I don’t have to do it again now for a while.

 

Well, I hear you. I’m actually writing a silver report as we speak and see if I can get a item, maybe do some of the nice. Well, use a for the editing more so.

 

But I know what you mean when you have a big file and you’re sorting it out, although I think that’s a helpful thing internally for the person writing it, but certainly also for people who are trying to understand the markets. And Craig, I’ll do you one better. Even easier is that we have linked to the macro cast in the description field below.

 

And as I’ve learned from YouTube experts point, it’s even more likely that people will click on it. So it’s down there. And fortunately, we will dig into that today.

 

Although, like you mentioned, with twenty twenty four, I’d like to get some of your thoughts on that. Well, the first question is an important one. You said you’re in California.

 

Am I assuming you’re going to be back in Kansas City by Sunday when you and your chefs have a big playoff game against the seemingly mighty Buffalo Bills? That surprised me because they lost a lot of guys last year. But I know that’s a big event for you. And are you going to the game or what’s going to happen on that? I will not be at the game.

 

Get blocked by too many fans. It’s like. Right.

 

Like still Patrick Mahomes is crowd. Right. I got his autograph.

 

I actually, you know, I this is going to sound disingenuous, but it won’t break my heart. If Buffalo wins, they’ve they’ve fought and for so long and the Chiefs have just driven them bananas. So if they break the ice, they beat him in the regular season, but they lose in the playoffs.

 

The Chiefs all the time. They get through this year. We’ll see.

 

I actually it’s funny. I was texting with Eric Sprott this morning because living in Toronto, he’s a Buffalo fan. And so we always kind of give it back and forth to each other when they’re playing.

 

And I actually found a thing. I sent it to him over the last 10 times the Chiefs and the Bills have played. It’s five to five.

 

Both teams have scored 251 points. They have it’s almost I mean, there’s almost everything’s identical. So if I were to give any betting advice, expect a very close game again.

 

You know, if you can tease the line to get the Chiefs or the Bills getting like a touchdown, that’s probably a good good way to go because it’s I can’t imagine not going down to the wire again. Should be fun. Well, I’m just impressed to say when I’m texting Eric Sprott.

 

I mean, that’s that’s pretty cool right there. I mean, you put that on your resume. Right.

 

In your 50s. Dude, I laugh. I still joke.

 

I mean, I’ve been doing this now for whatever, 14 or 15 years, you know, and I I’ve I’ve still just amazed the people I know with people I’ve met. I’m just an idiot. I’m just this dope that lives out in the middle of nowhere, you know, that bangs on his keyboard.

 

But everybody, you know, that subscribed to my site and all this stuff has granted me with this platform. And so the the people, it just seems so strange still to this day. But he’s a Michael Jackson of precious metals.

 

Just got it. Roll with it. And so I’m glad you’re excited now.

 

I think that’s nice. Having some sympathy for the Bills fans, although if they were concerned how you’re going to deal with this guy later on that evening. And I know he was giving you some guff when his Broncos beat your backup squad.

 

But yeah, yeah, yeah. He I will not be pulling for the Broncos anytime soon. But but yeah, and I this comes from a position of all the winning that the Chiefs have done.

 

You know, well, OK, we’ll share this with Buffalo. But and I will say I’ve been living in that area for better part of three decades. So I have, like the Bills fans, slugged it out through a lot of crappy football.

 

So the fact that it is not been so crappy for the last six or seven years is fun. Well, I’m happy for you. Gives us Jets fans hope.

 

And last football comment, because I know people are saying, oh, for the football, it’s good to see the football. I remember before you guys won, it was probably like seven or eight years ago. I was thinking that one one day I was walking around.

 

I’m like, there’s some teams I know they’re just never going to win. And the Chiefs were the example that came to mind. So maybe there’s hope for the rest of us.

 

And with that said, all right, enough of the sports talk, folks. Let’s get to it. Craig, first, before we get into what you expect to happen in twenty twenty five, you touched on twenty twenty four a little bit.

 

And I think we talked about this a little bit a couple of months ago when I had you on. But now that the year is complete, it’s almost strange that you had such a big move that year when it wasn’t like we got more easing than expected. We was delayed.

 

We got less. Jerome’s even saying, well, we might take interest rates as you look back on twenty twenty four. Any thoughts? And what do you think it was that in particular, the prices went up as much as they did last year? Well, I mean, starting with gold, because silver didn’t keep up and, you know, some mining shares are great and we can talk about those, too.

 

But, you know, if you measure by the GDX, I mean, the GDX was up a third, maybe what gold was. So regarding gold, I think what I didn’t give enough credence to is something that you and I have talked about multiple times over the last couple of years. And that is one, that central bank demand, you know, where central banks are doing what you and I do.

 

We take our excess reserves, which is, you know, our savings that are in dollars and where we carve off some and put in the precious metals. And that’s what China and Turkey and India, you know, when you go down the list, that’s what they’re doing. This would be the third year in a row of record central bank demand.

 

And that underpins to me the paper price so that as paper price sells off, all of a sudden there’s all this physical demand that remains and you kind of keeps the restraints, the ability of the banks to really wash it out. And so that keeps gold moving in kind of two steps forward, one step back. And that one step back is pretty shallow.

 

So then when you get another leg higher, you just keep moving into these higher and higher prices and that demand continues. But the other thing, Chris, that I’m, I think, I don’t know, I gave a lot of thought to and thought it was very important at the time, but I think now I’m seeing it more and more in other places. Other people starting to go, yep, that was a big deal.

 

When the Ukraine war started back in 2022, in that first weekend of March after the war had been going on for about 10 days, the US did two things. They kicked Russia out of SWIFT and they confiscated. And now Yellen, before she was finally kicked to the curb yesterday, was starting to use the Russian assets for loans.

 

They’re basically stealing those assets now that they froze. I mean, Russia had estimates $300 billion, $350 billion of their own foreign currency reserves that were held outside of Russia. And the US and the EU, the IMF froze those assets that Russia couldn’t have them.

 

And now they’re starting to use them to raise cash, to rebuild Ukraine, all this kind of stuff. Anyway, look, I don’t want to get in the merits of the political part of this. The message that those two things sent to the rest of the world that said, wait a second, hold on, we might be getting along fine with the US right now, but there’s probably going to come a time where our interests conflict with theirs.

 

Are they going to cut us off too? We better start being a little more proactive about this. And so I think that has driven this demand for gold to get out of dollars. We talk about the gold price going up 26% last year versus the dollar.

 

Well, actually, that’s a dollar devaluation of 26% versus gold. I mean, that’s the way we have to look at it. And so all of these factors contributed to breaking out gold well before I thought it would break out.

 

Back in March, I thought it’d be summertime before it did. And then driving it higher because the dips were so shallow. And now here we sit, $2,700 gold, looking another good year this year too.

 

Yeah. And along those lines, as we head, you know, I guess we’re already in 2025, but based on what you said, let’s say that Trump seems like he has a better relationship with Putin than Biden. Not hard to do that.

 

Let’s say that the war in Ukraine ends. Do you see that trend reversing at all? You mean like they could unfreeze those assets and that kind of thing? Well, we’ll leave that. I mean, I guess that would be, let’s say they unfreeze the assets and Russia, some sort of end to the war exists.

 

Do you see the trend of other countries that changing where they don’t feel safe because of sanction risk? I tend to think that, you know, once you do something like that, maybe it slows a little bit, but I don’t see that trend stopping, especially because you place it in the middle of all the other things that are going on with the surging debt and 8 million other factors. Yeah. It might be a reprieve in some regard, but remember Trump’s only around for four more years and God, you know, who knows who’s going to follow him.

 

Right. And I think it’s a lesson learned and nobody wants to be, you know, the old adage of fool me once, shame on me, or shame on you, fool me twice, shame on me. You know, if they did this to Russia, they’re obviously willing, not only US, but the EU willing to do this to anybody that gets sideways with them.

 

So I don’t think it’ll impact it. And in a bigger picture, that debt that you mentioned, which the new US fiscal year began on October the 1st, so we’re three months into it, and we’ve already run a deficit of sort of $721 billion in just the first three months. That constant devaluation of the currency by issuing more of it through all of this debt, I think keeps that train rolling.

 

I mean, that math is the math. And so do the central banks continue to buy at the rate that they’ve been buying? Probably. You probably saw Chris, that article, it was a Goldman Sachs research piece from late December that said when the Chinese came back after officially suspending their gold purchases in May, when they came back in November, they said they bought five tons and Goldman Sachs said, no, actually, they bought 55.

 

And then when they reported for December, they said 10 tons. So that overall central bank bid, I think, remains. And so long as it does, it’s going to really handicap the ability of the banks to smash the paper price.

 

And in doing so, again, the pullbacks remain shallow. Your next 90-day rally launches from a higher level than it would have otherwise. And you keep making these new highs.

 

It’s pretty cool. Yeah. And you touched on the Chinese central bank gold buying.

 

I know that’s been a topic of debate. What they reported was a pause. Jan Nieuwenhuis has done a great job of going through some of the data, which would suggest that the buying continued.

 

And obviously, you and I have talked about this before. I think most people in the gold and silver industry can document that China has purchased a lot more gold over the years than they report. So you kind of answered that.

 

But it sounds like you’re of the school of thought that they were purchasing even when they stopped. Would that be fair to say? Yeah. It’s like the thing.

 

What are their official reserves now? Like 2,000 tons or 2,100, whatever they’re up to. Nobody in their right mind thinks that that’s the only gold that they have. I mean, it’s like we all laugh about, oh, look at Chinese GDP is 8% when they report last week 5%.

 

And nobody really believes it because they’ve got their own propaganda that they’re trying to promote. So anyway, I would imagine it’s considerable what they have. And I would imagine that one day they will use that to their advantage.

 

But for now, they’re using Western pricing scheme to their advantage. And they continue to accumulate at what is still a pretty inexpensive price. Yeah.

 

And I’ll just pull this up real quick from Gold Charts or Us. There’s SGE withdrawals since about 1980. Or no, the withdrawals started in 2008.

 

Between domestic gold production and SGE withdrawals, we have 35,000 tons. So not saying that all of it went to the PBOC, but I’ll take the over on two. Right.

 

Right. And in the end, Chris, this gets to what we probably spoke about the first time we met. This pricing scheme is a fractional reserve scheme that relies a lot of times on kind of just-in-time delivery.

 

The futures contracts determine a price. The spot price generally follows that. It’s that futures tail wagging the spot dog that Ned Naylor-Leland first talked about in 2011.

 

And then to give the system legitimacy, you have to be able to deliver metal. Mary knows. Whatever leverage is used on the COMEX and the futures exchange, it’s not one-to-one.

 

So that price that’s determined through the futures contract, you have to at least deliver some. And so what ultimately will take that pricing power away is stretching that leverage so tight or so wide because of the lack of the physical metal, it eventually breaks. And you find out just how much metal there really is with clear title between all the unallocated accounts and the futures accounts and all these other forms of good as gold, just as good as gold that has been alchemized over the decades.

 

So any type of physical demand that moves out of the London vaults, out of New York, moves to the East, that is stressing the system. And one day the system will be exposed. So that’s why we like to see those trends continue.

 

Yeah. Well then I think 2025 could be shaping up as your year because I know you’ve been following this. We’ve talked about it a bit here with the situation in the EFP market, which is the spread between London spot market and the COMEX futures, which has surged.

 

And I showed you this one before we started, but I’ll just read what Robert Gottlieb of renowned investment bank JP Morgan. I’m sure you got his poster on your wall there. So this is a former managing director and he mentions that this is not the overall system perhaps, but in regards to this EFP situation, markets are in total dislocation.

 

There seems to be a scarcity of available stocks in both gold and silver. We did also see the gold lease rates have recently surged to the highest level in decades. And again, I will get your opinion in just a second, but I don’t know that this is the event that that you’re sitting here saying this is code red for COMEX futures in gold and silver.

 

Although when you put it inside the context of, like you said, a fractional reserve system, and I don’t know if you saw when I got Rick Rule on about a month ago and was asking him about, because I had heard him talk about what happened during silver squeeze in the next couple of months as PSLV was buying silver. He talks about, we cleared out Chicago, we cleared out Boston, we cleared out New York. And it was interesting.

 

I know he doesn’t seem to look at the manipulation aspect the same as some others. Yet with all that said, I was surprised because he said more than once that it’s a matter of when rather than if, when there is a mismatch. Now, could some of these conditions we’re seeing here spark that? I would say that’s a possibility, but let me stop there, and I’d love to hear your thoughts on any of that.

 

This Gottlieb guy, at least he’s a JP Morgan trader that’s not in jail. So that’s kind of nice to see that there are still some guys. I assume it wasn’t like through the glass on a phone somebody was asking him this stuff.

 

It sounds like he’s, but you know, Michael Nowak, I think is still in the hole. You should go visit him, see if he wants to talk. Wouldn’t that be fun? Go track him down.

 

Mr. Nowak, you have a visitor. I’ll tell you what, let’s, after we wrap up here, we’ll see if there’s a way to contact, see if he wants to do an interview. He says, yes, I’ll meet you there.

 

I’m sure he’d love to talk with us. Some minimum security, federal prison, you know, with a golf course in the back. I’m sure that’s where he’s at.

 

But anyway, I digress. What’s going on here? I go back to 2017 with these EFPs. I used to do these weekly calls for Sprott Money with Eric Sprott, and we’d record every Friday.

 

And there was a Friday in November of 2017. He says, have you been watching the volume of these exchanges for physical? And I’m like, well, I keep track of open interest every day, but I don’t watch those because it’s been surging. So I started watching and, you know, some days they do a thousand EFPs in volume and then, you know, just do more and more and more.

 

And by the time we got into early 2020, we were doing like 30,000 of these exchange for physical trades in March, February and March. And open interest was at all time highs up near 800,000 contracts. And, you know, I know, I guess if you look at the market and say it’s legitimate, people look at it and say, yes, that’s actual physical metal that’s being settled, you know, through this process.

 

And I always thought it was bullshit. Craig, I apologize for interrupting, but could you possibly just briefly explain when you see EFP contracts going up or down, what that actually means in case anyone is unclear? Well, when you do an exchange for physical, it’s you’re selling the futures contract. And a lot of times you can do this across all the different ETFs.

 

If you look it up, the definition on Investopedia or whatever it is, they talk about, you know, getting baskets of shares of equity ETFs, that kind of thing. So allegedly that’s what’s happening. And I guess you could say it’s legitimate in that that’s why there’s this sudden spread, you know, where you’ve got and it should be arbitrage is what I’m getting at.

 

The trade should be you’re exchanging a, you’re buying the spot and you’re selling the futures contract. Okay. And that’s what these banks were doing back in 2020 for like a $2 spread.

 

It was just being a bit, it was like free money. You know, they’re again, buying spot, selling the futures, closing that gap down to nothing. And it was almost like an abuse of the system at that point.

 

Well, now the volume is still there, but the spreads are wide. It began to widen back in December. And everyone’s like, well, this is weird.

 

The spread between a spot versus futures is $30. It shouldn’t be $30. Well, then it widened again here in January.

 

And there’s articles written about how it’s due to the possible imposition of tariffs and can gold be, you know, settled in New York versus a spot contract in London. And how are we going to do that? Because again, if you’re going to narrow that spread, if you’re going to arbitrage that thing with, with, and I get my hands all going all over the place, Chris, but the spread is spot is say 2720 and the February front month futures contract is 2760, right? With the February contract being the front month going off and going off the board and into its delivery phase next week, that spread should be like $2, right? But instead last week, it was 40. Why? Because again, you should be, if you’re, if you have inside, if you have enough cash in size, and if you have confidence that you’re going to get the metal to deliver against your futures contract you’re selling, then you can, you can affect that trade and you can close that spread again.

 

And what are you doing? You’re selling the February futures contract. You’re buying at spot, sell, buy, sell, buy, sell, buy, sell, buy. And that gap narrows.

 

That makes sense. Okay. So that gap shouldn’t be there because there should be enough confidence in the system.

 

If you buy at spot that you actually have the metal to deliver against the short that you established. If you, I hope I’m not making this as clear as mud. I feel like I’m talking myself in circles.

 

Am I doing it? You, you follow me? So, cause if you follow me, I’m sure, I’m sure everybody else’s is making. I’m with you and I’m trying to point along cause I got the commodity prices here so you can see the futures and. Put my glasses on cause this is current.

 

All right. So there you go. It’s a $15 spread.

 

Last week it was as high as 43. Well, why did it come down? Well, yesterday, Monday, the 20th was Martin Luther King day. And though there was no Comex trading, there were still trading on the Globex and which is off exchange, like after hours trading.

 

And when the news came out that Trump wasn’t immediately going to impose tariffs, you know, it was one of the first things that he was going to do as president. Well, the dollar plunged and gold futures rapidly sold off by like $25. Spot was unaffected.

 

It was the futures that sold off. And that spread, as you can see, is now narrowed down to 15. It will continue to narrow now because that February contract is going to go off the board on the 30th, which is seven trading days from now, eight trading days from now.

 

And all the hedge funds and whatever, banks, swap dealers, whatever that are long that February, if they don’t, if they’re not standing for delivery and putting up full margin, they got to be out of that contract. And so they’ll be selling the February and they’ll be rolling into April or June. Well, just that selling pressure in the February, which we saw a bunch of yesterday on Monday when the Trump tariff thing was that report came out, there weren’t going to be tariffs.

 

We’ll close that gap. OK, this will happen. I have no doubt in my mind.

 

And then we’ll start looking at the gap versus April. Most important is why is there a gap? That’s what we can’t lose track of. Why is that spread so wide? It should never be more than a couple of dollars, maybe five, six, eight.

 

Why did it get to 43? Why was there a sudden lack of confidence that if you bought today at Spot, you’d have the metal to deliver against that futures contract that you sold in February? You see what I mean? Yeah, and I think that’s why it’s interesting that we’re seeing also the surge in the lease rate, because that would indicate that we do have an issue there. And Craig, the other thing I wanted to ask you as you were saying that, do you think this could potentially, and we’ll find out for sure, but is there at least a possibility that there could be an issue with the February deliveries? No, I doubt it. To me, it’s only just a sign, and this is how we got to the subject, it’s only a sign of stress in the system, a lack of confidence in the system, that just-in-time delivery.

 

Because again, if you have confidence that you can deliver gold against your short of the February, well then hell, that’s $43 per ounce, every contract’s 100 ounces, that’s 4,300 bucks. You do that, do 100 contracts, that’s $430,000. Riskless.

 

That’s a riskless transaction. You’re buying here and you’re going to deliver it out eight days from now. The fact that it’s not, that arbitrage isn’t getting close shows you it’s not riskless.

 

People don’t have the confidence and the faith that they’ll have that metal. That’s why the spreads blew out back in March of 2020, when that first round of EFP abuse blew up, because again, remember it was on logistics, COVID was setting in, could we get the metal to New York to settle and all that stuff, and so spreads widened out. Theoretically, that’s what’s happening now too.

 

That’s why the lease rates are up, because of the tariffs, would metal be here in New York to settle against that short of the February contract? And so this lack of confidence drove that wider. Again, to me now, will it appear again? Are we going to have the same thing crop up? Will the April contract open up $50, $60 versus spot, that sort of thing? Because now we’re getting it, because it happened in December, it happened in this month, it’s going to happen in February or March. Now we’re getting into systemic thing, a systemic lack of confidence that that metal is going to flow and it disrupts the functioning of the market.

 

So we’ll see. Will there be enough people to stand? That’s the thing. Usually, and I’ve always kept track of these things, I have a front month, a delivery month in Comex Gold, you might get six, 10,000 contracts standing for delivery.

 

This is pre-2020. After all this happened in 2020 with COVID, all of a sudden, like the April contract, the June contract, there were like 50,000 standing for delivery. Okay.

 

Which, I mean, a lot more, that’s trended back down. We’re back down now. The average month is maybe 15 to 20,000.

 

So what’s it going to be this month? It could be more again. In a similar to 2020, we could have 40,000 standing for delivery, but that’s still not enough. It’s going to break the Comex kind of thing.

 

Could it be 100,000? I suppose. But now then we start running into position limits, right? I mean, the actual stated position limit in the front delivery month is 6,000 contracts. So how many entities would have to be standing for the full 6,000 to actually get to where we have 100,000 standing? You see what I mean? So I don’t suspect that will happen.

 

What I do suspect is like what happened yesterday, enough selling in the futures contract, just simply do the contract rule, will lead to the futures contract coming down toward the spot price. And then we’ll get to next week at this time, it’ll be down to two or three dollars. If enough selling comes up, it’ll even go into backwardation.

 

We’ve seen that happen too. And then what we’ll want to watch is if now versus the April contract, if that spread widens out again, because like I said, now we’re getting into this kind of what could be a systemic lack of trust of future delivery. And that would be noteworthy.

 

Yeah, well, that’s a great point. And I appreciate you bringing that up because we will just by the nature of February coming up here, see that start to go to zero. So like you said, keeping an eye on April will be the way to keep track of that.

 

So appreciate you breaking that down. Long answer. God, sorry.

 

Well, you explain it well. Well, I don’t know if I did or not. I feel like I kind of talked myself in circles.

 

Anyway, there’s a lot about this on that spread that’s wide. It should never have been that wide. It will trend back down toward flat.

 

And it is a sign, the fact that it existed and that it kept getting wider rather than narrowing is a sign of a lack of confidence that I can buy a spot to deliver versus that futures contract that I sold to narrow it to capture the arbitrage. That’s how I see it. Anyway, sorry.

 

Okay. Well, here’s another one. I’d love to see if you’re able to draw a conclusion from it yet.

 

I’m not quite sure what to think, although we look at the COMEX stocks. So here in gold, we’ve seen total inventories go up quite a bit over the past month. You see registered is up about three million ounces.

 

Eligible has a spike, too. That’s on the gold side. Silver, it’s a little different where here the total has gone up from about 260 to 330.

 

Yet the picture in registered, we had that jump in the beginning of December, yet the metal has been coming out of there so far. Any thoughts on anything we can draw from that, or we need a little more data to see what might be happening and why there’s a difference in the pattern? Well, because silver spread has widened out, too. It got over a dollar last month, and it got over a dollar this month.

 

The spread from spot versus the March contract in COMEX silver, which is a front month, and there’s a little more time involved, which effect widens that spread, too. The gold that you see, there have been articles, I think you even tweeted the article from mining.com that had all these mainstream sources about all this gold that’s flowing into New York. And that’s why, again, if you’re going to deliver metal on the futures exchange, there’s got to be metal in the vault.

 

Now, what’s delivery? Is it a warrant in a delivery seat with a warrant attached? And is it out of the register? It’s got to be out of the registered. That’s what registered metal is. Is it actual physical delivery that’s being off-take, an off-take from the vault and all that kind of stuff? Without getting into all that, this extra, what is it, a million ounces or whatever that’s come into the registered vault of COMEX, again, that’s metal that’s apparently come over out of London so that you can settle those shorts.

 

Because if you’re going to close that gap, you are selling the futures. And when you’re selling the future, you are short and you are on the hook to deliver that metal to someone who’s long during the delivery period. So this metal needs to come in if we’re going to somehow gain control of the situation.

 

And that’s why the stocks are going up. The fact that it’s not going up in silver tells you we don’t necessarily have the same situation. You could also, maybe they’re in the silver, I don’t know.

 

But we don’t have that same situation yet in silver. Silver, I don’t want to say it’s more plentiful than gold or anything like that. But we don’t have that same concern about future delivery.

 

Now, let’s see. Let’s see what happens as we get into February, because that March contract will go off the board, I don’t know, probably on 26th or 27th, whatever. I don’t know.

 

Maybe that’s a Saturday. I don’t know. Whatever.

 

Late in February, that March contract for silver will go off the board in delivery. And we may have the same situation develop. The spread may go out to a buck again in silver.

 

It’s currently back down to 65 cents or something. And we’ll be waiting for the arbitrage to close it. And to close it, you got to buy the spot and sell the future.

 

And then if you’re going to sell the future, you got to have metal to deliver. And so maybe that same spike in metal going into the COMEX vaults, silver will come across and go to the silver vaults in February. We’ll see.

 

But so far, it’s just been putting out the fire for a February goal. And that’s why you’ve seen the vault totals go up. Well, unfortunately, we can keep track of these things on tfmetals.com. And the CME site.

 

I mean, I look at it almost every day, but the CME puts those, I mean, you can look at the gold stocks and the silver stock report every day and see that metal allegedly moving around. And Craig, and to our audience, I know we said we were going to talk about the macrocast, which you’ve been talking about as we’ve been going along here. But I wanted to pull it up again, in case there’s anything that we did not highlight, or if you’d like to just walk people through again, anything else in particular here on the macrocast? Well, again, I would suspect we’re going to have an okay year in gold again this year.

 

Once you get through the old all time high, probably tack on another 10%. That’s generally how things work. That’s why I thought last year we’d go from 2000 to 2300 because that first 10% usually follows when you make a new all time high.

 

So I think that’s probably a good target for some point this year. Silver will be interesting. Unfortunately, Chris, we did not get an all time high annual close in silver that might have really ramped things up in silver this year, but we didn’t get that at the end of last year.

 

But it should still be a good year. The only other thing I would add that I wrote all the way, you can see what a labor of love this is. It just goes on and on and on.

 

If you get all the way to the end, God bless you for having the patience to read all the way to the end. I have another section about mining companies, which is that part there. And it’s such a disappointing year.

 

And if you measure by the GDX, GDX is only up 8%. Well, the big problem there is about 20% of the GDX portfolio is Newmont and Barrick. And those companies are ass.

 

I mean, they’re terrible. They can’t control their expenses. So their margins never seem to widen out.

 

Their expenses go up as fast as a gold price. And all they ever do is disappoint. And until they do better, I just was recording a thing for Sprott Money earlier this morning with Ronnie Sterfila.

 

And he was like, what we really need is Newmont and Barrick to do better. Because the generalist investor, that’s what they do. Even Stanley Druckenmiller, for God’s sake, who’s a million times smarter than I am.

 

But whenever you hear about Stanley Druckenmiller is getting into gold, he buys, not only does he foolishly buy the GLD, he buys Newmont. Like, Stan, don’t you have an army of analysts and shit that could look at you and go, don’t buy Newmont, buy Agnego Eagle instead. But Stan buys Newmont because it’s the only company he knows, Newmont and Barrick.

 

And that’s all these home offices and institutions and hedge funds. It’s the only one they know. We got to send them a copy of the mining stock journal, get them some crayons.

 

Exactly. But they buy Newmont. Newmont then reports earnings that are below expectations because they can’t control their costs.

 

The stock goes down, the hedge fund or Stan Druckenmiller goes, well, shit, these things are terrible. Gold prices going up and Newmont goes down. Why do I want to own them? And then so nobody owns them.

 

So one to Ronnie’s point this morning was we really need those two companies to perform better. Point made. I’ll take it.

 

That’s a good one. But we also need the investor to do their homework. You know, I got the charts right there.

 

Look, there’s Newmont and Barrick versus gold prices. Scroll down a little bit further and you’ll see the exact same charts for AEM and for, oh, maybe that, wait, go back up. Oh, okay.

 

Those are AEM and Ken Ross. I didn’t have my, I’m going to keep my glasses on this time, but go up further. Look at, look, that’s gold in candlesticks and Newmont as a red line.

 

I mean, that’s just terrible. Gold’s up 26% and Newmont’s down 10. Look, Barrick’s even worse.

 

Gold’s up 26%. Newmont was down. What is that? 14%.

 

I mean, this is terrible. But if you go down further and you can see the chart, look at AEM. Okay.

 

So there’s AEM’s doing, Ken Ross is doing even better than that. So the point that I wrote about this year is I said, like you said, mining stock journal, you and I know multiple people that work their ass off studying, you know, assay reports, you know, they know about length and grand per ton and drill length and what that means and all this other stuff that I’m by no means a mine expert in. If you want to invest in this sector, find some people to help you.

 

Don’t just go, oh, I’m going to buy Newmont. Do your homework. If you do your homework, if you’re willing to do your homework, spend a little money for someone, you know, that has a great newsletter, you’ll be rewarded as gold goes up and silver goes up.

 

But if you’re just going to be a dope and stick your thumb in your butt and buy the GDX, you’re going to continue to be pissed off. Anyway, I don’t think that’s exactly how I wrote it. I think you should have mixed that in there.

 

That would have been a good conclusion to the article. If you’re thinking about buying the GDX, that’s what it feels like. Thumb in your butt.

 

So anyway, sorry, I’m getting salty with my language, but it’s true. I mean, all the people that complain about the mining shares would not be complaining if they bought low cost. I mean, go back, scroll up one more time, Chris.

 

I know we’re almost done, but scroll up one more time. I included this chart for mining visuals. This one? Next one down.

 

Nope. There it is. Look at Newmont, 1611 for their third quarter all in sustaining costs.

 

Look at Agnico Eagle, 1286. So why did AEM go up 50% last year and Newmont goes down 14%? Because their margins are that much wider. Look at Kinross, 1350 versus Barrick at 1507.

 

Do your homework and you’ll be fine. Don’t just buy it. Anyway, I made that point.

 

I’m just rambling now. Sorry. Well, Craig, I guess my final question for you today is that ties into what you were just saying, because great year for gold and silver, still not really so much for the mining stocks.

 

I talk with Steve Cope from Silver Viper every month who is on the exploration side. He says the same thing that you and many of the other folks in mining that you talk to, especially on the junior side. There is not money coming in there yet.

 

And here we sit in silver where, I don’t know, we’re three, two and a half months away from Silver Institute’s latest report where they’re going to show another big deficit. I understand the numbers. It’s an imperfect science, although I continue to talk to people in various capacities.

 

Rick Rule thought the deficit might be even bigger than what’s being reported. So we have a deficit, but we’re also on track where it’s hard to see what is the way that’s resolved, because, I mean, A, it’s going to take longer than a month or two to get that silver out of the ground. So you already have the time lag there.

 

You don’t have money going in. Oxford Economics did a report for the Silver Institute last year where they calculated over the next 10 years they expect industrial demand to grow 46%. So I preface this with, I remember we had the stockpiles decline from 1990 to 2005 and then it reversed.

 

So the time isn’t done. We’re in the third quarter maybe. But I’m wondering if you’ve come up with any way that gets resolved and perhaps the other part to add on to there.

 

We’ve seen a wave of retail silver selling, which on one hand, maybe, I don’t know how much it actually did hold the price back. Yet to some degree, those inventories are still coming down because we saw it first in COMEX, then LBMA, then it was coming out of the ETS for a while. I haven’t found anyone who even has a good starting point of how to judge how much retail has been sold.

 

But if you use the 3 billion estimate of how much is out there, there’s some amount coming down. So also at some point, have the people who want to sell around 30, have they sold already? So curious how you combine all of that and where that leaves us. Well, that is an overhang of supply.

 

When we talk about whatever it is, above ground stockpiles being 2 billion ounces or what, I always see these numbers. I mean, they’re counting grandma’s candlesticks, right? And her silver platter that’s all tarnished from sitting in the whatever with all the rest of her silver stuff. That assumes, again, that at some point someone’s going to take grandma’s candlesticks and go sell them to the, we buy gold people down the street.

 

And that’s going to be, maybe not, I use that example, but there’s always going to be people that bought silver in 2011 at $40 an ounce and have been frustrated like crazy for the 14 years since. And if it ever gets to $40 an ounce, man, they are going to sell that crap and go buy themselves some Nvidia. That’s always going to be there.

 

I guess my answer is that that’s just going to take time to chew through. It’s probably a part of why, you know, you’ve seen cocoa, lumber, zinc, I mean, nickel, go down the list. I think everything but sugar and silver have made new nominal all-time highs in the last decade.

 

And so sugar may have just almost, I don’t know if silver just did it or not. That’s all part of why silver hasn’t, I suppose, is that every time you get into any kind of supply squeeze, like cocoa has been through, some of this stuff magically appears, you know, and it gets melted down and feeds through the system. So you just kind of have to chew through that.

 

And that continues to take time. I’m not sitting here trying to say, so you’ve got to be patient and all that kind of stuff. But I do think, for me personally, I’ve done okay because over the last 12 years, I’ve just kept buying it on a regular basis.

 

And so my basis is like $20 an ounce. And so, and I have not sold, I don’t think I’ve ever sold a single ounce ever of all the metal that I’ve acquired. So, you know, it just, if you like the fundamentals, you like that story, then it unfortunately does require kind of a long-term point of view because of what you mentioned, this supply overhang that’s out there and you got to let this supply deficit from mine supply chew through that in the years to come as demand for physical silver and all its electrical applications continues to increase.

 

Do you think we hit 40 this year? I do. I do. I wrote that into the macrocast.

 

I don’t think we finished there. You know, again, especially in a market like silver, bull markets unfold in a two-step forward, one-step back routine. Silver is, you could say doing that now.

 

I mean, it broke out from 23 or 24 Easter Sunday night last year, March 31st. It took off and finally about a month after gold. And then ultimately kind of stair-step pattern all the way up to 35, but it’s been in this kind of long-term uptrend that is punctuated or with these kind of continuation pattern of what we call bull flags or whatever, where it goes up and consolidates and up and consolidates and up and consolidates.

 

And that’s what it continues to do. It gets through 35. When it does, it’ll probably go to 38 or 9 and it’ll consolidate and then it’ll probably actually bust up through 40 and then pull back again.

 

And I think I have it probably finishing closer to 38 would be my thought. Now, again, a lot of the other stuff that I wrote about in that macrocast is going to have to come to fruition. I mean, we’re going to have to actually be heading toward recession, which is what I think we are.

 

We’re going to have the Fed actually cutting more than what people are expecting at this point because of said recession. And then we’ll see what happens in the mod market, because you want a wild, far out prediction for this year. I’ll give you one.

 

What if by the December FOMC meeting, the Fed is actually taking questions about the possibility of a yield curve control program? Nobody’s thinking about that right now. But boy, if we are, all those things come to pass, yeah, $40 silver won’t be a problem. But if the economy chugs along and Trump is able to actually cut $500 billion in spending and the dollar index goes to $120, we’re probably not seeing $40 silver this year.

 

Well, in terms of that yield curve control, there is someone who has been on it. In fact, I’ll have to send you something I wrote about this. But Ben Bernanke apparently was writing a column for the Brookings Institute back in 2016, and a three-part series of what tools does the Fed have left.

 

First was negative interest rates. He didn’t call it yield curve control, but targeting longer-term interest rates. And believe it or not, the third part was he actually wrote an article about helicopter money and how it shouldn’t be ruled out as a last-ditch option.

 

So, Craig, I will leave you with that. Show everybody a helicopter, Ben. That’s a great lead-in, Chris.

 

You got it right there? Well, all right. Where I think I got him pulled up. Give me a minute.

 

I’ll pull him up. While you pull that up, I’ll add some color. I actually have the link in the macrocast to the Chicago Fed report about the history of yield curve control, because this is not unprecedented.

 

The Fed did this coming out of World War II when debt to GDP got crazy, is they instituted yield curve control for like nine years. And what is it? And they may not call it that, but if yields keep rising, and that’s an untenable thing, not only for the economy, but for servicing all that debt, the Fed will basically say, and that’s what the article that Bernanke wrote, they’re just going to cap yields. They are a buyer of all treasuries above 4%, whatever.

 

And they’ll cap yields. And that’s yield curve control. It’s the Japanese we’re doing for decades.

 

Yeah, that’ll be next. And if we get into a buyer strike, if rates continue higher through 5% to 6%, that is a non-starter. They cannot, they being the Fed and the politicians and the bankers, cannot have that.

 

And so that’s what I mean. That could very well be on the table. That could be an open topic of discussion by the time we get into later part of this year.

 

So anyway, helicopter bend. Everybody should buy themselves one in preparation for that step three. Come on, where is it, Chris? Oh, there he is.

 

There he is. And look at the superstar we got for the commercial. Here is the silver chopper Ben Bernanke.

 

Not that superstar. That is so cool. Con Air Craig Kempke.

 

There he is, Con Air Craig. So yeah, we finally got that launched and got the first batch almost completely out. By the way, I know there’s a few people still waiting for theirs.

 

Little delays on some of them, but we’re getting that all finished up. And yeah, at least if you want to have Ben Bernanke flying around in your kitchen, covering you with $100 bills. And as I said here, his familiar brand of easy money love.

 

At least it helps when you have to, on those rare occasions, when you read a Janet Yellen quote about how she’s sorry. But most importantly, again, I will mention one more time that you can find Craig at a great participant of today’s interview at tfmetalsreport.com. And the link for the macrocast, which explains everything that’s going to be happening in 2025 is in the description field below. So Craig, I thank you.

 

I guess we went a little longer than expected today, but great to have you on here and catch up with you again. And we’ll see in a couple of months where that leaves us, but great foundation to be prepared for what’s going on this year. So I thank you for that, my friend.

 

It’s always a pleasure, Chris. And it was the football talk at the beginning that dragged us out. No, there’s a lot to cover.

 

And so thank you for the additional time. And hopefully it’s at least of some help to everybody. Well, I think so.

 

And we will catch up and do this again, my friend. You got it. Well, thank you to Craig for today’s call.

 

Sure is always fun to catch up with him as he is one of my favorites in the gold and silver industry. And still remember my days listening to Craig even before we had an arcade economics or a show. So really appreciate that.

 

He made a lot of time and we got the extended version today and hopefully had fun with that one at home. And real quick, before we wrap up, would also just like to thank Fortuna Mining who kindly brought us today’s show. And Fortuna actually had their 2024 full year and fourth quarter production results out.

 

And as you may have imagined, if you’ve been following Fortuna, especially with the progress of their flagship, Seguela Mine, they did have a record production result in 2024 and a lot of interesting things shaping up for the company in 2025, which Fortuna Mining CEO Jorge Genoza came by and joined me on the show yesterday. And certainly if you are a Fortuna shareholder or looking for mining stock exposure, I think it’s a great call that really lays out what they are doing and highlights why they have put themselves in a great position, especially in the midst of this gold rally. And to find out more, well, just click on that call that we did yesterday, because it’s coming your way now.

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