$80 Silver Ahead? COMEX Panic and Backwardation Crisis | Andrew Maguire

0:00 [Music] Hello again from Spratmoney, sproutmoney.com. We've reached the end of November. Doing a lot better than we were at the beginning of November, that's for sure. And it's time to wrap up the month. I'm your host, Craig Hemp, and joining us uh to see what happened in November is my old friend Andrew Magcguire. Andrew, of course, an adviser at Kinesis Money. Great expert in the precious metals. Been doing a lot longer than I have. And we're all in his debt for all of the information he's provided over the years. He's going to give you a little more today. Andy, nice to see you. >> Hey, great to be with you, Craig. Brother from another mother.

0:46 >> That's right. We only knew who that mother was. We could get her. It's really great to be with you and um I'm looking forward to your next trip over here. Uh you probably be a golfing trip. I'm sure it will be >> for sure. And and uh may we're from the last time I was over there. Things are sure looking different. We got to talk about some of that stuff today. Uh I want to remind everybody to get started. I mean we are here at the end of November. It's about ready for the holiday season. Andy and I are recording this on Wednesday the 26th. Friday is going to be Black Friday. Monday is going to be Cyber Monday. Uh, give the gift that keeps on giving the whole year. Stop by spotmoney.com. Uh, they'll soon have the holiday gift guide out. There's always great sales,

1:32 great gift ideas within that gift guide. Just go to spotmoney.com and uh set up your kids, your grandkids, get them stacking, get them get them to understand the what sound money is. And uh, a gift from Sprat Money is a great way to get started. Um, Andy, uh, let's do this. You know, we began this month with a rather sharp selloff in the back half of October. Gold was about 8% from its highs and silver was maybe 10 plus% from its highs and oh Andy the doom and the gloom and oh my gosh it's all over was a bubble that had popped. >> Well, as we record this here uh on the 26th, gold spot gold's back up to about 4,200 which makes it up 5% on the month.

2:17 silver spot. Silver's back up to 53, which places it up almost 10% on the month just a bounce or are we about ready to extend these rallies? >> Well, I mean, you've just outlined what was the classic wash and rinse cycle and and of course you know what it is. I mean, it really annoys me. um it's part of the system but it really annoys me when I call them pestilent a pestilent group of speculators who decide that hey I'll chase momentum in anyway now these guys control uh momentum traders control pretty much 85% of all the remaining open interest most of the open interest from real institutional guys disappeared I don't want anything to do with that comx anymore uh there are plenty more

3:04 physical exchanges and we know where they are where they get treated better. If I'm a refiner, a producer, um or or or anything anything that that anything where I depend on a a a real price, why would I have anything to do with this this toxic mix of prices that sort of comes together? Um if I'm if I'm take a position um um I'm it's visible. Um there's only a few couple of couple of big guys controlling the book. Of course, they're going to take you out. Of course, they will. And they do it on a regular basis. So, momentum traders, to answer your question, here's what happened. So, they they decide it finally breaks out. What do they do? Oh,

3:50 we're going up this time. So, they hang on to the coattails of what is actually a physically driven market, but they get so much bloated open interest. So what you need to do is of course in the meantime the coots the same guys that we know that operate the LPMCL pretty much same footprint in both markets and what do they do go short against every single one of those guys knowing guess what when we go to let's go to just about there margin call oh let's do another one bang out they go what they've done is they've literally popped the bubble bubble Thank goodness, good riddance to the whole lot of them because essentially all that did was put them

4:37 into the other mode of shorting the market with with the same commercials taking the long side of them. So by the time we get this equilibrium um that you're just talking about, these guys are pretty much out um long or short. They've just been rinsed of their shorts. Um, so I think it's what we've done is just establish the next in this in the series of higher physically supported steps. That's been the process. And my goodness be Greg. I mean, what we're two grand up from um I mean we're like 23 bucks higher than the beginning of the year. Uh 15 over $1,500 higher in gold for the beginning of the year. I mean, you only have to step back

5:23 and look and take the chart chatter out of it. what a good marketplace this is and it's not being driven by these western um uh well the western cartel basically and I think they've they've really um to me they've blown it they've lost all the good clients they've lost all the institutionals they're now reduced to gaming a very few declining open interest of the really any open interest that's in is just really mostly speculative and and I think the the the parameters of that are so contracted whereas before you could create a $500

6:08 of waterfall. Sorry, but in this is a lot of physical buyers where you have to who operate in physical exchanges as you know where you have to buy that bar if you want to sell it as opposed to just putting 4% of skin in the dame. um 96% leverage position which is just chasing a price. a dot on the screen >> and all we saw was this dot on the screen gets squared up and off we go to a much higher stairst step >> which is what seems to be throwing uh most of the people that do look at it as a dot on the screen throwing them off you know um is this time different would be my next question for you I've been writing about it all month at my spat money articles you know in 1980 silver

6:53 went from 10 to 48 in about four months and then back to 10 in two months uh 2011, which you and I recall rather clearly, uh went from 18 to 48 in about 8 months, then back down into the 20s in 4 months. Well, here we are. We first hit 48 back in early October, Andy, it's 2 months, and we're still, like I said, today 53. It sure feels different. >> Oh, completely different. And and I think the the difference is again pretty much what we've just discussed about gold. It's the same in silver. the real actors are gone. Um, and I think this open interest that's in that's in there, it's very limited as to what they can actually rinse out because we've got physical markets being set in um, China.

7:41 Um, I I we work with the liquidity providers um, who interact with the Shanghai International Exchange um, and and really looking at their what they're talking about, there's very little. It's interesting because I think what really sums it up and we you and I were talking about backquidations a little while ago. While we have unprecedented backidations, we've seen $3 backquidations in the past. It they they get arbitrageed one thing and another. But so close to first notice of the de of the largest delivery contract of the year, we're seeing on last Fridays, $3,000 per contract offside. Now we're still looking at 20 20 30 cents. I mean

8:27 ludicrous into first not through options expiry into first notice which is actually supposed to be tomorrow but it actually happening today because it's >> goes off the board on Wednesday and trades first notice on Friday. Yep. End of the month. >> Exa Exactly. So um so what it tells us what it screams at us is hey you can't have a backquidation um coming into a delivery month where it where it's not telegraphing to you it's mispriced severely mispriced and I think um and I think the reason for that Craig is because uh the LPMCL's CME relationship where they've got a

9:13 footprint in both market somewhere. >> Um the the liquidity spigot is broken. It's it's completely broken there. They they they don't have liquidity anymore to be able to pull this back. And what you got like 4 billion in SLV shorts and and some of that is some of that. Yeah, there's going to be some little bit legitimate hedging in there, but 4 billion in in in short positions. That means that if I own an SLV share, it it isn't there necessarily. Not if everyone wants it at the same time and and so I think it it's screaming. I mean, to be honest, I think these guys are turning in on themselves and and like I I I said today in an

9:59 episode, I think they're fighting like rats in a sack now, trying to short cover these massive shortfalls because nobody is there to help you anymore. And uh literally, you don't you can't print silver. You can you can print more money to buy more gold at a higher price, but there just isn't the silver there. it's just not there. >> So, how the hell are they going to extricate themselves from this position? That's why they're in backidation um into a delivery month. Where does that extrapolate out? >> Yeah. >> Um to me, it's 80 bucks. That's where it extrapolates. Well, let's talk about that because again, if this time is different, you know, gold consolidated below uh its all-time highs

10:44 for four years and then right at the end for about 3 months below 2100, broke out March of 2024 and now and it's doubled. Silver's kind of doing the same thing though, maybe a little bit above its all-time highs. You mentioned that backwardation and what Andy and I are talking about is the spot price being higher than the front month future contract price. The future has been the December contract for ComX silver and since October the 2nd. So now for two full months that spot price has been higher and that just shouldn't occur and if it does it should occur for like a day and arbitrage and close that. Andy, the fact that it hasn't and that it persists, is this the new normal? And it does this relate to what you're talking

11:29 about this kind of loss of leverage and control in that New York ComX um pricing scheme. >> Yeah. And I think I think silver is the Achilles heel of of this same group of people. RPMCL are just the four banks that basically control the cartel basically. Um, and I think their liquidity is completely blown to smitherines. >> All the institutional guys, as we've just said, they've exited. Um, and now you can still access now inst as an institutional trader. I can um I can then go in and and tag the um the SGI

12:17 gold corridor which is opening up big time can access uh the an increasing number of vaults gold and silver that can be uh traded um with a real physical price that is much more stable than this unbelievable paper toxic mix that is thrown in. and and it only serves and I think the reason that we're seeing less volatility and the reason we won't see these kind of um big sell-offs again, there's just simply not the liquidity to do so. It's gone. It's literally gone into physical markets. And if I'm a producer or as a refiner or something, why would I why would I want a a price that's so volatile? I just want to know supply

13:04 demand. People are owning a bar before it's put for sale. people, you have to own it before you can sell it. Which tells me that if you put it up for sale, that's a proper price. I don't care what that price is, it's the proper price. It's not a comx derived price. It's a physical price based on supply demand on the day based on u purely on uh on on that supply demand. That is how markets are supposed to trade. And we've been gaslighted or many people have been gaslighted into believing that this huge comx volatility is the market. It just amazes me. >> Right. Right. And if we've all been waiting for

13:49 that to change, that leverage that they apply gets stretched to a breaking point. We don't know what it is. All this talk about how much free float there is in London backing >> those games. And you always used to describe it to me that you they just take a forklift and move silver from one side of the vault to the other. Right. >> And they won't sell it. They won't sell it. They they literally will not sell it. And they don't if if you remember years ago we used to get we used to talk about we go we have a big client who wants go to UBS and we say can we have x amount they say no that's all you can have. Hang on. No we we'll pay you for it. It's just like you know just give us a price. No, you can't have it. And and it's like, okay, so then it tells us what the game is. The game is >> right,

14:34 >> make sure if I'm a seller, I'm UBS or JP Morgan, I I I've got silver at this price, I don't want to sell anybody. Um, but I've got to look like I'm making a market. So, make sure that Samsung, Nokia, and all these people get their silver because if they don't get it in time, they're going to come to the market and just buy everything that they can, and the price is going to spike higher. Their derivative positions that relate to these to these, the reason they're not selling is because there's derivative positions attached to these physical bars, multi-leveraged. You know, all about this. You you've been talking about it for years with your clients. And it's like well of course of course it's um it's mispriced. So I

15:19 think they can't actually they've lost they've lost the plot. There is literally nothing they can do. They might want to do it but there comes a point now where and I just it's just really interesting. I met a guy uh just a short while ago who just written a book I think a thousand reasons to buy silver and he's saying do you know that it's takes 20 tons of silver to make one gigabyte in photovoltics I say one 20 tons of silver to make one gigabyte and he said thousands of gigabytes are required he said so there's a supply shortage >> wow >> and now we've got another half a million ounces a here of stuff that doesn't include AI. I mean, where's

16:06 this silver going to come from? These guys have dug a hole for themselves. It's a multi-billion dollar hole. There isn't the silver there to to to fix that hole. Um, so it the market's just simply going to run off with the SGE are going to sell set the price. So if you have a mispriced position and it just happens to be a little bit backwardated at the moment, what happens when it is three, five, 10 bucks difference and permanent. What happens to the to the to the comx then? >> Yeah. Yeah. Um Andy, in our remaining time, I want to shift to gold. Uh >> this has been such an interesting year in that uh this century there have been four years where gold has had about a

16:53 25% gain. Uh one of them was last year. In all the previous instances uh you maybe eaked out a slight positive gain the next year if not or you've gave back 10% of it. Um this year we've added on another 60% or whatever it is. Andy, what the devil's going on here? Are are institutions kind of front running what's coming in 2026 by continuing to bid it higher? Is it physical issues? Is it central bank buying? Is it a combination of all this? What are what are you seeing? >> Yeah, absolutely. I think silver was just a little um was was just the more obvious version of that. But yes, because it's hard to hide the footprints, but absolutely um this is as we know central bank sovereign

17:40 institutional buying. Now all of a sudden we've got um for all the reasons you have the rot the cockroaches running around in your treasury markets now um and I think people are are are looking at it and going hey um yeah I never did I really have never had exposure to gold um and um so institutional um >> traders buyers are saying I need some exposure So the problem is, and this is what's confusing a lot of people, problem is a lot of these guys are not mandated to hold physical, especially the US guys, not mandated to hold physical. They they they can buy and sell shares and they can do it on a click of a mouse. They

18:27 are now, as we know, we're talking about the 40 um 2020. Um so we're looking at a lot of people coming out and saying 20% allocation to gold. Hey, can you remember any of this? I mean, it was like if you you wouldn't even have 1%. You wouldn't even remember half a percent. >> You're a lunatic to even bring it up. >> Exactly. So now you've got all these institutionals. Now the interesting thing is is they can't necessarily buy physical. They're buying the ETF. Now you and I are great. We we don't believe in the last place I want to go and buy gold is an ETF. However, they have no choice. So, but because they're buying for keeps, they're buying they they're

19:14 not going to take delivery. They are going to own that position and it's sticky. They cannot be rinsed. You cannot say in in fact you drop a price down, they'll buy more because they're buying more every day because they still have they're moving from zero allocation to 20 to 25% and more in some instances for obvious reasons. So therefore, we look at people look at it and go, "Oh, look, there's all this open interest building in the ETFs. It's not speculative. This is sticky stuff." And obviously the physical market is all we care about, but it actually is forcing even though there's shorting going on in the GLD and one thing and another, it's still a physical

19:59 market and it it's the physical supply demand is being set outside of the LBMA ring fence. >> Um, and so therefore, um, it it is is back to same as silver. If I have a bar and I have to own it before I can sell it, I need a real price. I want a real price. So, I will only sell it to you. And the more you want, the more I want, >> right? So Andy is uh you know given the pricing scheme and the structure of the silver market is the same way they you know that they structured the gold market. Is silver kind of the canary in the coal mine here in terms of the

20:46 leverage being finally overstretched and getting ready to snap? Should we if the silver backwardation persists into 2026? Do you think we'll start seeing that in gold too? >> Yeah, because the January contract is already at par. Shouldn't be. I mean so so you got you got you got backquidations in December >> although the next liquid contract is March but when you look at yeah silver sorry so but but then if you look at February January that's already that's already in technical backidation >> so it's it is happening it is happening already and now we're talking about 2026 and and they're not even done uh I think this morning I looked there was still I think 2,000 odd tons of uh silver

21:34 warrants floating around in there. And and the thing is there's a lot of people that I know and who are saying, "Well, yeah, we we've we've bought we've bought and we're taking delivery. We are taking delivery." >> Mhm. >> Why? Because isn't it's the only source of physical that I can get to my limit to my actual limit. I can I can buy that. Um, and so if that's the only source of physical be banging on that back door, out it goes. So how's how can that possibly be be and that's mispriced? That's so grossly mispriced. And furthermore, even if it was more expensive, it people would still be

22:20 loading uh lining up to get it because there's not enough on offer to meet all the demand. So, it is a toxic mix and as I say, that's why I think these guys are like rats fighting in a sack. >> Mhm. So, Andy, as we as we wrap up and like I said here, it's the end of November. We got one month to go. It's seasonally a very strong period for gold and silver and the mining shares. Um, the next breakout's going to really catch a lot of pe. I mean, like you said, it's been a re really steady accumulation over the last couple years of gold moving up in 20% surges and then, you know, these sideways consolidations and here comes another one. We're probably sitting on the doorstep of another. I would suspect you are pretty bullish for 2026. Um, but

23:06 in my final question, I what could upset the apple cart? um a a major economic slowdown that would ease the pressure on silver or maybe uh stopping the central bank reversing some of the central bank gold demand. What are some things that could potentially uh erase some of this really bullish scenarios for these metals? >> Well, I think as far as gold's concerned, um you've got two too for all the reasons that you've just said, what if there was a black swan event? What if things there are cockroaches running around? So, so if institutional buyers are in there and forget forget everyone else in Asia who who who views it differently to um people in the west have but need that exposure then

23:54 obviously for as far as gold's concerned then uh I they've still got to allocate more and more and more. The price is inelastic. It it doesn't matter. they're just going to dump more dollars and and and get that exposure because we'll go out of um we'll go out of risk into cash and into uh into gold. So, so that demand there is competing with Asian demand. Um and it's setting a physical price. So, I I can't see I I honestly believe um $8,000 gold it people say, "Oh, how can you get Well, okay. Well, we figured 4,500 gold by the end of this year and that was only at um you know it was 2900 or whatever it was. I mean >> you start breaking some of these

24:41 barriers and the race starts to really accelerate. Now as far as silver's concerned um you know how I mean we've already talking about a supply deficit now you're talking about the AI boom. So even if there's a slowdown it look you have to look at the look at the market as overvalued as it it may be AI is going to require a lot of silver >> um photovoltaic we just talked about um uh you know photo Baltic um supply >> um again we're talking about 20 tons for each gigabyte everyone is producing everyone wants green energy um not even talking about AI at this point. So I think you've got so much so much demand

25:29 in there into a supply shortage which has not factored into the price and and we've still got a gold price ratio that is so far away from God's ratio that it's even if it was to come back down to the 30s or I mean there's your price there's your 80 or 140 bucks. I mean, you just because how can that RA that ratio isn't a god ratio? It's a synthetic. >> It's a leverage ratio. Yeah. >> It can only be synthetic. It has nothing to do with reality. >> Yeah. So when that when this whole thing levels out because physical markets will determine that price, that price will

26:15 wash back into where the crooks are who have derivative bets that are based on bets made years ago and have been doubling down and figuring ah well it'll get better. It ain't got better. It's broken. I think >> I think I I can't see why. It's not just being optimistic here. It's just a question of how high will it go before real market real bullion comes to uh on offer to actually meet the actual demand. >> Yep. And you and I and everybody listening can help impact that scenario uh by acquiring our own metal and taking it out of those the talons of those rats

27:03 uh that you call them um the bankers and everybody else that operates these exchanges. Uh and we'll find some true true price discovery definitely trending in that direction. Andy, you do great work almost every week uh with your Live from the Vault podcast. Um, tell everybody where people can find those because every Friday it seems you've got a great new guest and great new analysis uh for everybody. >> Yeah, we do a market update every two weeks. So, we really drill down into all the charts and where the footprints are and the you the drivers and who's behind it and one thing and another. And then and then we always have an an a guest um and you've been a guest many times too. Um on on the on the on every alternate

27:49 week we we have a guest like yourself or uh somebody else and and and really just get their their opinion of everything to you know it's always useful to get multiple opinions about what's going on. Um so that other people and they are the whole object of this as much as you do uh you do you with your your site that you do and you represent spot spot here. He's a very very honest and integral guy uh that I would always always join in on a on a conference with him. He's truly truly respectable man. um and his organization is um so I would you know basically I I you know this it is about an amalgamation of information it's about education it's about giving people

28:35 information to make their own choices and if they don't believe in something great no problem but at least you're making a decision that you don't want to do something you do so we're just saying hey this is what we're doing um hey what do you want to do yourself go to Google or just straight to YouTube, search live from the vault or Andrew Maguire Kinesis, something like that will get you um to that site to their site. You can subscribe so you don't miss any content. And as we wrap up here, I will urge everybody to subscribe to the Spra Money site. Um Andy just mentioned the old man. I just was uh texting with him this week. I have confirmed that everybody's favorite retiree

29:20 uh will join me in a couple of weeks to discuss uh kind of a year in review 2025 and look ahead for gold, silver, and the mining shares. You're not going to want to miss it. We haven't recorded it yet, but I can already tell you you're going to want to make sure you watch. So, hit that like or subscribe button on whatever channel you've been watching this video so that once we publish that sometime mid to late December, uh you get to see it as soon as it's put up. In the meantime, though, we'll wrap uh November up. It's been a fun month and this has been a fun conversation. Andy, thanks so much for stopping by and sharing some of your valuable time with us. >> Bless you, brother. Look forward to seeing you soon. >> I hope we can do it again soon. And from all of us at Spratmoney, spratmoney.com, thanks for a great month of November, but keep an eye on this site for more information to come as we begin to

30:06 finish up 2025.