Tim Murphy
Precious Metals Advisor
Tim Murphy is a Precious Metals Advisor with over 15 years of experience. He started on the New York Commodity Exchange floor before founding his own brokerage firm. Tim joined Scottsdale Bullion & Coin to leverage the small-company feel with national exposure, focusing on personalized, client-first service and fostering long-term relationships.
Americans are getting stronger. Twenty years ago, it took two people to carry ten dollars’ worth of groceries. Today, a five- year-old can do it.–Henny Youngman
Five months ago, my articles and weekly emails began jumping up and down about gold and silver making major bottoms. Why? Because the supply-demand fundamentals were extraordinarily bullish, talk of the US dollar beginning to lose its stronghold was escalating, interest in gold by central banks worldwide was on the upswing, and the average investor on the street was no longer engaged (at major bottoms, the public is always absent, and at major tops, the public is always excited. ALWAYS.) How did we know the public lost interest? Well, there were several tell-tale signs.
Firstly, the “Open Interest”, which calculates daily the number of longs and shorts on the COMEX, was at the bottom of a 20-year range (exactly where the Open Interest numbers were in 2010/2011 when silver went from $10oz to $50oz and gold went from $700oz to $1,900oz.)
Secondly, the public, acting out of fear, wanted very little to do with gold and silver.
So, fast forward to today; the price of gold is up 20% and the price of silver is up 25%. However, the great news is the “major bottom dynamics” have changed very little. The Open Interest in silver has not changed a lick and gold is up only modestly. Plus, the public interest is only just beginning to pick up this week. According to Ted Butler of Butler Research, “The rallies seem disbelieved, as if climbing a wall of worry – a sure sign of further gains to come.” The potential for higher prices remains staggering, especially silver.
Another factor that must be addressed is the daily manipulation of gold and silver prices by the bullion banks, led by JP Morgan. No doubt, the metal prices on the NY COMEX would be much higher if the bullion banks were not constantly knocking down the paper prices. Fortunately, these banks are losing control. The physical gold market has overpowered the paper gold selling (with much thanks to China) and the physical silver market appears to be on the cusp. We know from Andy Schectman of Miles Franklin, “There has been a massive bleed down of inventories from the COMEX and London Exchange in the face of declining prices. The biggest money in the world is front running a squeeze by loading up on metal under the cover of price suppression and more relevant, removing the counterparty risk by removing metal from the exchanges.” Again, as per Ted Butler, “The extraordinary large COMEX silver warehouse inventory turnover – a phenomenon that exists in no other commodity – is the purest sign possible that the physical shortage is very close at hand.” The world is waking up to high inflation EVERYWHERE and we are seeing a massive buying of gold and silver from the central banks.
Finally, let’s finish up with the plight of the US dollar. Since 1971, the power of the US Dollar/Petrodollar has allowed for complete control over international commerce. However, China and Russia are saying, NO MORE! For the last few years now, there has been a great deal of chatter from the leading countries in trade, such as China, Russia, India, Saudi Arabia, etc. …. regarding the use of other currencies and gold in trade transactions. In that context, Bloomberg recently reported about a recent meeting of Southeast Asian officials in Singapore that the US has gone too far in weaponizing the dollar to apply pressure in geopolitical disputes. Perhaps the best summary of the dollar demise comes from Jim Richards of The Daily Reckoning:
“If friendly countries in places like Southeast Asia join serious rivals such as Russia and China in reducing their reliance on the US dollar, it can only mean a weaker dollar and possibly more inflation ahead. It will also mean much higher gold prices because gold is the only alternative to dollars or other currencies such as the euro that can be weaponized against them. The massive buying from China and Russia alone has put a de facto floor under the gold price. Russia and China could be acting in concert to send a message to the world that dollars are yesterday’s news, and gold is the new foundational reserve asset. We could be witnessing a critical turning point in the International Monetary System. And that’s the recipe for consistently higher gold prices. It’s not too late for astute investors to acquire gold if you are not fully allocated already.”