Gold and Silver flow east [Video]

The latest Live from the Vault episode delves into the tightening gold and silver markets, highlighting the growing physical shortages and structural imbalances driving price movements.

The gold market is under intense pressure, with soaring demand from the East and rapidly depleting Western reserves. Throughout 2024, significant amounts of gold have left Western vaults, triggering liquidity shortages and refinery delays of up to 12 weeks. Despite official reports, much of the gold held in London is already allocated, leaving the US scrambling to secure bullion for fractionally backed reserves.

Physical supply tightness has widened spreads between paper and physical gold, exposing risks of severe price dislocations. The recent surge past $2,850 marks the seventh consecutive all-time high, confirming that physical demand is outstripping supply.

Structural market imbalances

Despite ongoing efforts to suppress prices, Asian market activity regularly exposes short-lived interventions by Western institutions. The Bank of England is leasing gold at historically high costs to manage supply deficits, while institutional buyers continue to view sub-$3,000 gold as an opportunity.

Intervention efforts have only exacerbated shortages, as central banks continue aggressive accumulation.

Silver on the brink of a short squeeze

In silver, market inefficiencies are becoming increasingly pronounced. Despite record-tight supply conditions, COMEX spreads have reached unprecedented levels, reflecting extreme paper-to-physical dislocations. Strategic hoarding is accelerating, as liquidity providers anticipate a minimum silver price of $38 in the short term, with potential for a breakout towards $50–$90 per ounce.

The looming Gold revaluation

The Federal Reserve’s ongoing gold borrowing from the BIS further underscores the strain in the system, with mounting evidence suggesting covert interventions to cap dollar-denominated gold prices. With physical supply running thin, a revaluation event could emerge suddenly, potentially triggering a sharp upward repricing of both gold and silver.

As supply constraints tighten and physical premiums rise, the market is edging closer to a major reset. The implications are clear: gold and silver remain significantly undervalued, and the growing imbalance between paper and physical markets is setting the stage for a dramatic repricing event in the near future.