Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
How to Play Interest Rates in US Real Estate - 20th Aug 19
Stocks Likely to Breakout Instead of Gold - 20th Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 20th Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 20th Aug 19
Holiday Nightmares - Your Caravan is Missing! - 20th Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Why Samsung Is Not Buying Silver - REDUX

Commodities / Gold and Silver 2016 Jun 11, 2016 - 02:55 PM GMT

By: Dr_Jeff_Lewis

Commodities

Actually… that old headline above is not quite accurate.

However, the implications have not changed - and could be playing out as I write this.

(Silver, despite bearish COMEX positioning, has broken out of a key moving average and seems to be accelerating…)

Samsung, the giant electronics conglomerate, formed an agreement with Avino Silver and Gold Mines Ltd. in July 2015.


As of September, Avino has been delivering concentrates as per the original deal.

While silver prices have remained under the exclusive control of the big 8 commercial traders on the world’s largest and most important exchange, things may now be in flux.

Market corners, by nature, (and with or without regulation or enforcement), are unsustainable.

And now we’ve crossed the rubicon, where a major commercial user is forced to source metal away from the exchange rather disrupt prices to the point of systemic disaster.

Taking delivery of silver futures contracts from the COMEX is hard enough of as it is.

And once the light of awareness illuminates the precariousness of this, COMEX will cease to be the primary source of price discovery.

“And we just might be there yet!”

**********

Cluff Gold (now Amaro), a gold mining concern focused on West African assets, recently signed a Memorandum of Understanding with Samsung. Under the unusual agreement, the huge Seoul, South Korea based industrial company will be offering substantial funding to the mining concern to help develop its mining portfolio in the initial form of a $20 million unhedged loan facility.

This is the very first financing deal of its kind, where a non-mining concern has shown an interest in a mining company to help provide it with a reliable supply of bullion over the longer term.

For whatever reason, capital from outside the mining industry is now starting to become available to it. Interestingly, the well-known shorts in the mining shares could well be in trouble, although the fact that Samsung is buying into a gold miner highlights the fact that it is probably too late to do the same for silver.

Silver Miners are Spread Thin and at the Mercy of the Banks

Although a desperate need for consolidation exists in the silver mining sector, the capital to do so seems quite hard to come by since miners are typically viewed as risky borrowers by funding banks. This situation creates significant problems for the supply of silver going forward.

If a tech company announced a similar joint venture with a silver miner, it would very likely create an industrial panic and see the price of silver push sharply higher. This move could be large enough to break the global financial system, especially if the famously short bullion banks are not as hedged by offsetting transactions in the OTC sector as they claim to be.

Basically, the worldwide surge in investment demand for silver is competing with constant industrial demand for a metal that is universally believed to be vastly more ubiquitous than it is due to years of extreme price distortion.

Furthermore, silver’s monetary history ties it to gold, even though they have different intrinsic values. Nevertheless, no central banks own silver in comparable quantities to their gold holdings.

Impact of the Samsung/Cluff Gold Deal

Overall, as noted by many, including the legendary gold mining CEO, Jim Sinclair, the story is a major game changer that demonstrates substantial international corporate investment in a monetary metal.

It also highlights the persistent undervaluation in the sector, and the desire by industrial concerns to secure their long term supply of a precious metal.

Furthermore, the creative financing deal demonstrates the recognition of the facts that:

(1) Gold mines mine money,
(2) The supply of gold is dwindling and
(3) Gold plays an important role in the high tech industry, which is actually quite minimal compared with silver’s broader industrial importance.

The deal also indicates that the precious metals bear market inflicted by widespread hedging of gold shares is now coming to a close. Just think about it, if Samsung or another large tech company tried to source silver in this way, it could very well trigger a spreading crisis.

Precious Metals in the Rehypothecation Era

The Samsung/Cluff Gold deal also comes in the era of rehypothecation, which involves a broker pledging as collateral for a bank loan the securities in customer margin accounts.

Basically, the rehypothecation of assets, which infinitely dilutes claims on real assets, can and will ultimately lead to total losses even for investors who thought that they had strong collateral backing.

Furthermore, the inventory of the world's credible assets is literally evaporating in absence of CapEx spending, which is also one of the reasons behind the ECB's seemingly endless lowering of its collateral requirements.

Why Buy Silver?

Within this investing and supply environment for silver, a substantial buying interest could well have a remarkable upwards impact on the price of silver for the following reasons:

(1) Not much silver left. This is the same reason that central banks are not buying silver. Basically, silver has been dis-hoarded and any major buyer would immediately induce a short covering panic that would end all panics.

(2) Silver miners are spread thin. The supply of silver is largely a byproduct of the mining of other metals because the primary silver producers are still viewed as risky. They also often have trouble finding funding for their mining operations and exploration activities.

(3) Strategic threat. No one wants to be the one that blows the silver market sky high with large purchases, so gradual accumulation often seems a more prudent investment strategy in the relatively thin silver market.

Although Samsung may not be buying silver — yet — this innovative deal with Cluff Gold indicates that conditions are favorable for more “finance for supply” transactions of this type over the years to come.

For more on buying silver.

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com

    Copyright © 2015 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dr. Jeff Lewis Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules