Several factors are converging for the Next Major Silver Bull Market. While the silver price has underperformed versus gold during the Russian-Ukraine War, that will change when large institutions and investors begin moving into silver to protect wealth as the Global Financial System breaks down.
We already see from the U.S. and Western sanctions against Russia that they are now erupting into various financial derivative defaults around the globe. The Dow Jones Index fell another 800 points today as energy prices skyrocketed, especially in Europe.
I don’t believe people realize just how bad the situation is in Europe as the Dutch TTF Gas price (in U.S. Dollars) is now 15 TIMES higher than the U.S. natural gas spot price.
The U.S. natural gas spot price closed at $4.80 per MMBtu, versus $72.53 in Europe. While Americans are finally feeling the high oil price at the pump, this is a fraction compared to Europeans’ natural gas and electricity prices. This is indeed a GAMECHANGER as high Natgas prices will begin to shut down parts of Europe’s economy.
The West has instituted more economic and financial sanctions against Russia with the continued Russian-Ukraine War. Today, the LBMA & CME have banned Russian Gold & Silver Refiners from their Market:
This is not just the London LBMA, but also the Chicago CME Group. If we looked at Russia’s annual silver production in 2020, it was over 40 million oz.
I also highlighted Kazakhstan, because it belongs to the Russian version of NATO, CSTO – Collective Security Treaty Organization that includes; Russia, Kazakhstan, Armenia, Kyrgyzstan, Tajikistan, and Uzbekistan. If we add up the total silver production from Russia, Kazakhstan, and Uzbekistan, it equals 66 million oz. If the Russian-Ukraine War continues to escalate, we could see the LBMA-CME or even CSTO Members banning silver on either side.
If countries start to hold back strategic metals, such as silver, this could add more fuel to the precious metals prices FIRE. As I mentioned at the beginning of the article, silver has underperformed gold due to it being also an industrial metal that is negatively impacted by a broader market selloff… which we are seeing. However, silver is holding up rather well by only falling $0.07 today when the Dow Jones Index lost nearly 800 points.
MARKET CARNAGE MAYBE JUST BEGINNING
Due to the highly complex financial system that is totally interwoven, sanctions on Russia are now causing significant disruptions throughout the entire Market. This will likely get even worse, as reported on Zerohedge:
The BIGGEST negative factor to the highly-leveraged global financial system is… VOLATILITY. When FEAR enters the markets, institutions and investors plow into GOLD first. However, due to the very small Silver Market, when Large Institutions start to move into silver, there is only just so much silver in the LBMA and New York Vaults. And, we are getting Volatility in spades.
And… with the banning of six Russian Gold & Silver refineries, this will make a bad situation worse. We must remember, Institutions control 80% of the Market Flow-Of-Funds. That is why flows INTO & OUT-OF Gold and Silver ETFs are the major drivers of price.
Take a look at the Institutional Ownership of the SLV vs. PSLV:
While many in the precious metals community continue to label the iShares SLV ETF as a fraud, this is really the only place Large Institutions can get exposure to silver. If we look at the Top Institutional Owner of the SLV ETF, it’s Morgan Stanley at $267 million. Now compare the top PSLV Institutional Owners, and it would take the combined Top 7 holders to equal the same as the top SLV holder.
Large Institutions trying to get a significant exposure in silver would select the SLV over the PSLV because if they decided to invest $500 million or $1 billion, it would act like a PENNY STOCK on the PSLV than the SLV. The PSLV just doesn’t have enough liquidity or available silver… regardless, if we believe JP Morgan doesn’t have all the silver bars that it claims.
Bullionstar tweeted this to my SRSroccoReport Twitter handle on the number of Russian Silver bars held by the SLV:
SLV (iShares Silver Trust) currently holds 39451 Silver bars from LBMA Russian refiners = 7% of SLV's total (SLV holds 557,730 silver bars) -> Krastsvetmet 24024, Prioksky 7044, Uralelectromed 3996, Shyolkovsky 2198, Novosibir 630, Ekaterinburg 1559 barshttps://t.co/2H3728KREI
— BullionStar (@BullionStar) March 4, 2022
The ENERGY CLIFF Will Force Institutions To Invest In Silver & Gold
Unfortunately, the world was trying to regain some normalcy after the Pandemic, which was all lost with this present war. The Russian-Ukraine War has sped up the Energy Cliff dynamics. With energy prices skyrocketing worldwide, this will cause serious HAVOC in the global financial system. Thus, it is extremely important for investors to own physical gold, especially silver.
Even when the Russian-Ukraine War ends and the situation gets resolved, the ENERGY CLIFF will continue to haunt us and will only get worse as time goes by. So, Europe is by far the most reliant on imported natural gas, with 40+% from Russia.
As we can see, the majority of Net Natural Gas exports come from Russia and the CIS countries (commonwealth of independent states). There is no easy way for Europe to cut energy supplies from Russia without totally destroying its economy.
THERE LIES THE RUB.
Investors need to be prepared for much higher gold and silver prices, even though we could see Volatility and lower prices. As time goes by, the ENERGY CLIFF will force Institutions and Investors to move away from BUILDING WEALTH, to PROTECTING IT.
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