Silver lease rates reach record high of 10.6%

High lease rates mean bottoms in silver.

1 year silver lease rates are hitting record highs and they have never hit 10.6%. Every time when lease rates spike, silver bottoms out.

Currently the 1 year silver forward rate is -7.1%. Lease rate = SOFR - forward rate = 3.5% + 7.1% = 10.6%

The road to $8000 gold

Negative real rates will push up gold to $5000-$8000. 

Collapsing USD.

Gold juniors will soar 10X.

Stocks will underperform.

Rig rates Vs. Rig utilization

Rig rates Vs. Rig utilization. 

HARPEX Index Container Rates

The HARPEX index shows the container shipping rates. When it rises, this means there is demand for container ships or it is a sign that there are supply chain problems contributing to inflation.

Overnight Reverse Repo Exceeds Limit

The limit of $500 billion has been exceeded on the reverse repo operations. This tells me there is an imminent USD collapse. 

Also, the Fed won't hike rates because it has too many bonds which they would need to pay interest on. So the first thing that will have to happen is tapering of bond purchases. The Fed purchased 54% of the $4.6 trillion increase in the Treasury’s publicly held debt from February of last year through April 2021. The Fed now holds a record 25.7% of the Treasury’s outstanding publicly held debt.

And for tapering to happen, Biden needs to stop issuing new infrastructure bills, mortgage moratoria and unemployment checks. Moreover, tapering can only start when lending increases (which it isn't, see chart below), because when you taper, bond yields will rise and lending stops.

Gold miners hedging Vs. Gold lease rates

Gold miners hedge their gold production in case the gold price drops. This increases demand for borrowing gold. Gold lease rates rise.

In the year 2000, everyone was hedging gold, because the gold price kept falling. Gold lease rates peaked in 2000.

After 2000, the gold price went up and hedging decreased. When the price of gold rises, gold miners typically decrease their gold hedging, because they want to profit from the rise in gold. The decrease in hedging led to a decrease in lease rates.

Palladium lease rates signal shortage

Palladium lease rates have been rising tremendously and signal that there is a shortage of palladium.

 

JP Morgan is fleeing and reducing eligible palladium stock at the COMEX.

When this shortage persists and automakers won't have access to palladium anymore, they won't be able to produce cars, because they simply don't have palladium anymore.

So what do you think they will do when this happens? Answer:

Platinum is going to shoot past $1000/ounce as I predicted.

Spiking Repo Rates: More QE Coming

Lynette answers my question: Why are rising repo rates bad?

 

Repossession rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation. A rising repo rate acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in arresting inflation.

The repo rate shot up on 17 September 2019 because of shortfall of funds and liquidity. It shows that there is a cash shortage. Normally, the repo rate should follow the fed funds rate. If it doesn't, something is wrong. The Fed is about to do more QE to supply more cash into the markets. This spike in repo rates is the symptom of that.

The discount rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country's monetary system. To temporarily expand the money supply, the central bank decreases repo rates (so that banks can swap their holdings of government securities for cash). To contract the money supply it increases the repo rates. Alternatively, the central bank decides on a desired level of money supply and lets the market determine the appropriate repo rate. Repo is short for repossession.

Read more: http://www.businessdictionary.com/definition/repo-rate.html

The discount rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country's monetary system. To temporarily expand the money supply, the central bank decreases repo rates (so that banks can swap their holdings of government securities for cash). To contract the money supply it increases the repo rates. Alternatively, the central bank decides on a desired level of money supply and lets the market determine the appropriate repo rate. Repo is short for repossession.

Read more: http://www.businessdictionary.com/definition/repo-rate.html

The discount rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country's monetary system. To temporarily expand the money supply, the central bank decreases repo rates (so that banks can swap their holdings of government securities for cash). To contract the money supply it increases the repo rates. Alternatively, the central bank decides on a desired level of money supply and lets the market determine the appropriate repo rate. Repo is short for repossession.

Read more: http://www.businessdictionary.com/definition/repo-rate.html

Real interest rates

Real interest rates are not at an all time low. Rate cuts are very possible.

Alasdair Macleod explains why the Fed can't increase interest rates

I'm just putting up this conversation of SD Metals because Alasdair Macleod is making good points on why the Fed won't increase interest rates and will unleash QE4.

For more info on interest rates see: http://www.federalreserve.gov/econresdata/feds/2015/files/2015010pap.pdf

Silver Inventories at CME and Lease Rates

Just a few weeks after I turned bullish on silver, articles are sprouting out of nowhere about silver inventories being historically low.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/8/17_Expect_Major_Silver_Price_Spike_As_COMEX_Inventories_Decline.html

However, I see signs of a temporary weakness in silver.

1) The silver stocks at the CME aren't actually going down anymore. They are going upwards (Chart 1).

Chart 1: Silver Stocks CME

2) The silver lease rates are actually going down, instead of going up. Historically, when silver lease rates plunge, the price of silver will go down a few months later.

Chart 2: Silver Lease Rate

Conclusion: I would be wary about the price of silver. If this trend continues this way, look out below!

How Likely is QE3? 70% likely.

Ben Bernanke has been saving his ammo in the past months. Each time the fed meeting was held, markets were hoping for QE3, but they didn't receive any. This is evidence by the U.S. federal reserve balance sheet on Chart 1.

Chart 1: U.S. Federal Reserve Balance Sheet

Today, we have passed several months and we already see that the economy is starting to deteriorate. Not only in Europe and the emerging markets, but especially in the United States. In this article I will focus on the key macroeconomic data in the U.S.