DEATH OF PAPER GOLD & SILVER: The Data Proves It

The death of paper gold and silver has arrived, however the public doesn’t realize it yet.  They will, it’s just a matter of time now.  This is like the poor slob whose diet of McFats, Done-Kin Doughnuts and Cancerette smokes, is just one heart-attack away from being six-feet under.  The paper precious metal market is also one serious fiat monetary attack away from certain death.

I say this with some conviction as the data already proves it.  Of course, there will always be a certain number of analysts and individuals who believe the Fed and Central Banks will be able to continue propping up the market until they retire and are playing golf or shuffleboard while under the care and maintenance of a dozen or more prescription drugs.

Unfortunately, for these shortsighted individuals, they fail to understand how ENERGY plays a vital role in this highly over-leveraged debt based financial market.  If we remove ENERGY from the equation, I would imagine the Fed and other assorted Central Banks could continue printing money and GDP growth forever. This is the downside of specialization, especially in the analyst community.

Basically …. THE BLIND LEADING THE BLIND… right over the cliff.

That being said, I am not going to focus on energy in this article as I believe many readers’ eyes would glaze over.  I will leave the detailed discussion for another day.

THE DEATH OF PAPER GOLD & SILVER

Okay, getting back to the Death of paper gold and silver, if we look at the change in paper gold and silver buying from 2006-2015, we will notice an interesting trend.  Let’s look at the forensic evidence presented in the following two charts:

Gold-ETF-Build-vs-Coin-Bar-Demand

Silver-ETF-Build-vs-Coin-Bar-Demand

As we can see, something interesting happened with the net build of both Gold and Silver ETF’s after 2010.  Basically, there wasn’t any.  And if we look at the gold chart, it was actually negative.

From 2006 to 2010, the Global Gold ETF’s experienced a net build of 61.4 million oz (Moz) versus 122.8 Moz of physical bar and coin demand.  In the silver market, Global Silver ETF’s reported a build of 569.3 Moz compared to 528.9 Moz of Official Coin & Bar demand during the same time period.

Now, let’s compare that to the second five-year time period after the precious metals prices peaked in 2011 and then declined to the present lows.

Not only did demand for Global Gold ETF’s decline 2011-2015 (2015 f = forecasted) compared to the previous five years, it went negative by 21.2 Moz.  This was in stark contrast to the huge increase in physical gold bar and coin demand of 208.8 Moz during the same time period.

Furthermore, we see the same trend taking place in the silver market.  Investors purchased a record 994.1 Moz of physical silver bar and coin demand during the 2011-2015 time period compared to a paltry 18.2 Moz build in the world Silver ETFs.

When we study the difference in paper gold and silver buying versus physical bar and coin in the past five years… there’s just no comparison.  Investors purchased record physical gold and silver bar and coin while staying away from the paper ETF’s with a ten foot pole.

I would imagine the knee-jerk reaction from the typical analyst, dug up from the Main Stream Media cemetery, is that demand for Gold or Silver ETF’s declined due to a lower price.  While this analysis makes just as much sense as saying 2 + 2 = 4, why did the lower price motivate record physical precious metal buying?  Ask this Wall Street analyst this same question, and watch his eyes glaze over.

Come on now, investors purchased a stunning 208.8 Moz of physical gold and nearly 1 billion oz of physical silver investment from 2011 to 2015 while demand for Global Gold & Silver ETF’s fell into the cesspool.

According to my analysis, this signifies the DEATH of PAPER Gold & Silver.  All we need now, is a good heart attack to finally get the overweight, flabby and inherently weak fiat monetary system to stumble and fall into the gutter.

Lastly, I get a kick going around and reading some of the comments on the alternative precious metal sites.  Seems as if some of these sites are now taken over by individuals who think the so-called “Gold & Silver Bugs” have been duped by precious metal pumping charlatans.  Never a dull moment nowadays.

These individuals are like the fickle nature of the public…. RIDING HIGH when times are GOOD and the first ones to crucify those when TIMES are TOUGH.  Regardless, these individuals, like many of the analysts they follow, do not truly understand the ENERGY DYNAMICS that are currently destroying every aspect of this highly leveraged debt-based financial economy.

While I could go on length as to why this is true, let’s just say…. GOD HATH A SENSE OF HUMOR.

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12 Comments on "DEATH OF PAPER GOLD & SILVER: The Data Proves It"

  1. Please excuse my lack of sophistication in these matters, but… The death of paper silver and gold is precisely why silver has been dicking around between the 13s and 17s for God knows how long?

    • Steve,

      Yes, I realize the low paper price doesn’t make sense, but if the price of the metals stayed high, it would have totally overwhelmed the physical market.

      Again… keep an eye on the ENERGY MARKET. This will be the factor that destroys the highly leveraged debt-based financial system.

      steve

  2. HEY!!! Cancerette Smokes? I resemble that remark !! but love these charts 🙂

  3. Seems the paper (tail) is wagging the physical (dog). This can’t and won’t last. Further proof centrally planned and manipulated markets are a distortion and don’t know and aren’t allowed to act. A real upheaval is in store as a payment for the false and contrived markets we have now. The Central Planners, the Fed and the monetary powers that be have “Bought” themselves some time but it will all come home to roost. They know this, the game now is to make sure someone else pays for their irresponsible, reckless behavior. Stack PM and it won’t be you stuck paying their bill. Good luck all.

  4. Steve,

    The clear reason that silver is trading so low is because the market is still treating silver as merely an industrial commodity. Most silver is a by product of copper, zinc and lead mining. According to Jeff Clark in his article today on Kitco “Avoid the Temptation to Buy This Beaten-Down Metal” he says “Copper is in freefall. The next significant support level is all the way down around $1.40 per pound. That’s 30% below Friday’s closing price.”

    Silver is being dragged down in the world deflationary cycle. By your own count only 1-2% of the public are buying silver coins and bars. And based on my local coin shop and the stackers I know, no one buys more than about 100 ounces at a time. They just buy regularly, as often as they can. They are not like portfolio and fund managers that buy ETFs in big blocks (and sell in big blocks too). It seems only JP Morgan has an actual appetite for hold in your hand silver.

    In MHO, the effects of EROI have not and will not contribute to the worldwide crash of “the highly leveraged debt-based financial system.”, it is already in motion. Where EROI will have its devastating effect is when the world tries to stabilize and rebuild after global revaluation. With an EROI of 5/1 or less the costs and inefficiencies make recovery a climb the cliff type of deal. Never mind the glut that we have now, it will totally evaporate by the time the world is trying to rebuild. The world burn rate even in a massive depression will wipe out the current massive surpluses because all of the US shale, all Canadian, most Russian, most Mexican, Iragi, and South American producers will be shut down. To the best of my recollection only the Saudis have wells that are profitable at $20/brl and oil could easily hit that. That is how massive this deflation and depression will be.

    It will only be after the fiat currency collapse that silver will shine. I believe that when the world starts treating silver like money again, the ratio of gold to silver will go back to around its historic level 16/1.

    Those of us that have stacked when it is dirt cheap will reap our reward.

    Thanks for all your hard work in sifting through the BS and telling us the truth.

    SteveW

    • PS: LUSAKA — Glencore’s Zambian unit has laid off 4,300 workers, union and company sources said on Tuesday, as the mining and trading company deepens cuts in copper output to support flagging prices.

    • SteveW,

      Good comments. A couple of mine:

      “According to Jeff Clark in his article today on Kitco “Avoid the Temptation to Buy This Beaten-Down Metal” he says “Copper is in freefall. The next significant support level is all the way down around $1.40 per pound. That’s 30% below Friday’s closing price”

      I don’t know if Jeff was referring to buying physical copper or not. But go to a metals dealer and see what you can buy physical 5 & 10 pound bars of .999 copper. It is a multiple of spot price. I don’t know what industry [like a manufacturer of copper wire] buys it for, but I’ll bet it is much higher than the spot price.

      “It will only be after the fiat currency collapse that silver will shine. I believe that when the world starts treating silver like money again, the ratio of gold to silver will go back to around its historic level 16/1”

      At this point I don’t see the historical monetary metals or platinum or palladium for that matter going up much in fiat valuation until right before, or in close proximity to, an economic crisis on par with 2008. Keeping PM prices down is as high a priority as propping up the stock markets. Both valuations are way off of fundamentals. I’m skeptical we will see a 16 to 1 GSR but no one can know. Some say if draconian laws are enacted around cash and PM’s that PM’s will have no value. Nonsense. They will just create black markets. And industry MUST have silver. They will buy it where they can for an appealing price.

      “Where EROI will have its devastating effect is when the world tries to stabilize and rebuild after global revaluation.”

      I think you are right about this. I think the _____ will hit before EROI is a major factor. I think we may be, as some writers have said, one major triggering event away from a financial crisis, while more time is needed for EROI to be felt.

  5. I have been a “Gold specialist” for the last 40 years.

    I have read thousands of articles but this one is so clear and straightforward this is what I like, give me good numbers and I will figure out the rest.

    I have started to “accumulate” physical Gold and Silver.

    I expect to make between 200% and 300% profit between now and 2018.

    Good show and keep on going.

    Yvon Sheridan

    MONTREAL

    • You won’t be selling your G & S ; you’ll spend them by 2018 !

    • $30-$45? chicken-scratch.
      .see much much higher prices down the road..
      $150 an oz. for starters, and hoping to see$1,000 and beyond by 2018..BUT
      what will $1,000 in fiat buy? a coke? THAT is another big variable..in Zimbabwe it took 100 trillion for a coke near the end of their super hyperinflation!
      all depends..so many variables and issues..possible new laws & regulations.. world turmoil..derivatives.. etc etc etc.. sooo many unknowable and/or unforseen factors, that can..could push the price up and/or down..,absolutely impossible to predict fir sure as we all well know..

  6. Tick, tick, tick…

    I await hyperinflation with glee. If silver goes to $1000 and can only buy a coke, so be it, I can still pay my mortgage off easily enough and live completely debt free.

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