Potential Silver Squeeze, page-2

The threat of Trump's potential bullion tariffs are one of the reasons for gold at near all-time-highs. 'We cannot ignore the massive increase in Comex gold stands-for-delivery, and to a lesser extent silver. As of last night, a total of 43.5 tonnes had stood for delivery in January’s15 trading sessions so far. That’s an annualised rate of 725tonnes, an enormous quantity, about 20% of annual world mining output. For silver, it’s 175.4 tonnes so far, significant but not so great in terms of global supply. While not dismissing rumours of tariffs on gold imports entirely, the increasing use of Comex futures contracts as a means of obtaining physical suggests a valid alternative explanation.Bearing in mind the leverage of futures over physical, at some point the drainage of physical liquidity backing short positions is bound to have an impact, creating an urgent need for replacement bullion.Hence the panic raids through EFPs on London’s liquidity, driving up effective lease rates. The drive in gold lease rates on Comex spiking to over 10% is reminiscent of a different context — the scramble of liquidity in September 2019, when repo rates soared, and the Fed had to intervene providing liquidity to a distressed banking system.At its root the current situation in gold futures has similarities to that repo crisis, being a lack of physical liquidity to back highly leveraged derivative positions. Nearly all the world’s newly refined gold is pre-ordered by very large buyers, leaving the rest of us scrambling for what remains. It drives buyers into buying futures with the express objective of taking delivery. It results in growing strains in the market, leading potentially to counterparty failures.It is a very uncomfortable squeeze on the establishment, with the prospect of intensifying even more.'