Introduces topic: sustained Shanghai silver premium vs. Western benchmarks isn't closing via normal arbitrage, suggesting market structure issues.
Jeremy Saffron
David Morgan
Confirms the premium is due to localized strain, capital controls, and shipping costs. Arbitrage isn't fully happening despite the spread.
Asks why silver shows this tension but gold does not, if it's a broader monetary shift.
Jeremy Saffron
David Morgan
Explains structural differences: COMEX sets price via derivatives, LBMA is a physical club, Shanghai is for industrial users.
David Morgan
This time is different: China's big demand is for COMEX-style 1000-oz bars, causing the physical market to take over price discovery.
Asks about the physical impact of a 43-ton weekly drawdown from Shanghai vaults.
Jeremy Saffron
David Morgan
Low inventories cause users to bid up price to secure supply, tightening the market and shifting control to the physical side.
Asks how to distinguish a tightening trend from normal vault rotation.
Jeremy Saffron
David Morgan
Most COMEX deliveries are 'retagging' between banks; real stress is seen when metal leaves the exchange. Shanghai data is hard to get but suggests current stress.
Asks about the functional role of banks in COMEX: market makers or directional traders?
Jeremy Saffron
David Morgan
Banks control the market through leveraged physical metal but are not as massively naked short as often claimed. They dislike risk.
Asks if banks suppress price or facilitate flow, and who benefits in a physical squeeze.
Jeremy Saffron
David Morgan
You can't manipulate the long-term trend, but you can manage price within it (e.g., in thin trading). The January correction was normal market activity, not necessarily manipulation.
Asks if CME's percentage-based margin hikes act as a natural break on rallies.
Jeremy Saffron
David Morgan
Yes, margin hikes protect the exchange and everyone. Higher margins force out weak, leveraged players, moving the market toward a cash-only structure.
Asks if a cash-only market would cause a price spike or drop first.
Jeremy Saffron
David Morgan
Would probably drop initially as speculative capital exits, then level off, then rise steadily based on true physical demand from industry and investment.
Asks if Shanghai's stricter position limits (hedging quotas) make it less speculative than COMEX.
Jeremy Saffron
David Morgan
Yes, Shanghai is more aggressive. COMEX open interest is inflated by commercials rolling positions. Real stress is in Shanghai physical demand.
Asks what would disprove the 'regulatory squeeze' thesis if March 1st passes without change.
Jeremy Saffron
David Morgan
Thesis wouldn't lose credibility. Professionals (industry) care about ounces, not just price rules. Still expects higher prices; we are in the final phase of the bull market.
Asks about impact of high prices on industrial demand and substitution.
Jeremy Saffron
David Morgan
High prices are already affecting solar industry (silver is 40% of panel cost). Markets are efficient long-term; substitution (e.g., graphene) is possible but not imminent.
Asks about India's massive ETF inflows and if it permanently removes metal.
Jeremy Saffron
David Morgan
ETF accumulation is reversible but has a significant effect. Creates a 'double whammy' with industrial reserve building and increased investor access.
Asks when fiscal structure outweighs short-term macro noise for metals.
Jeremy Saffron
David Morgan
Eventually, physical demand truth wins. Government data is skewed toward inflationary bias to debase currency and manage debt.
David Morgan
We are at 'the end game' - a currency reset or new system is coming, possibly involving CBDCs/stablecoins to create demand for Treasuries before a loss of trust in dollars.
David Morgan
Outlook: Watch Shanghai premium, recycling rates, and sentiment. Expects trading range (e.g., $75-$85), then a move back toward $100, proving physical demand strength. We are in the final, violent phase of the bull market.