Something BIG Is Occurring in the Physical Market for Gold & Silver

(Text on Screen): The Morgan Report. David
Morgan. Silver-Investor. Exclusive Interview. Narrator: Welcome to Independent Living Bullion’s
Weekly Market Wrap podcast. Helping precious metals investors during these treacherous
times. And now here’s this week’s Market Wrap, with commentary and analysis from the fastest-growing
precious metals dealer in America; Independent Living Bullion. Mike Gleason: This is Mike Gleason with Independent
Living Bullion and it is my privilege now to be joined by our friend and colleague,
David Morgan, editor of the renowned Money, Metals and Mining newsletter, to get his thoughts
on what has been a rather tumultuous year so far for precious metals investors. David, welcome back and thanks for joining
us. David Morgan: My pleasure, Mike. Mike Gleason: Well, here we are five months
into the year and many gold and silver bulls have been rather frustrated by the market
action that we’ve been seeing so far, not just in 2013 but going back some 24 months
now. For the year, silver’s down close to 25 percent and gold’s off nearly 18 percent. Meanwhile, unless I’m missing something, we
haven’t really seen any change whatsoever in the fundamental reasons for why someone
would want to own precious metals. So, how does one make sense of all the negative price
action in the metals markets, because we’ve seen nothing to indicate a slowing to the
currency-destructive measures by all the central banks? David Morgan: Well, I think the answer is,
how you reconcile this as investors and the answer is investors. I mean, an investor has
a long-term macro picture and they have power of their conviction. Basically, Jim Puplava
of the Financial Sense Newshour, and myself many, many years ago, early 2000s, talked
about the perfect investor. We didn’t use that exact word, but the idea was, if you
had bought into Japan from 1980 to 1990 and just bought and held through all the ups and
downs, you would have made a massive amount of money. If you redeployed it into technology
in 1990 to 2000 and held that 10 years, through the ups and downs, you would have made a massive
amount of money. And we suggested that if you got into metals in the early 2000s and
held all the way through the ups and downs, you would do very, very, well. But a question comes, is it over? And I’d
say absolutely not. The reason I can say that is, one, it had no signs of a top other than
the chart and even that didn’t look like much of a top compared to how the metals actually
can perform and sentiment is low and there was such little participation. So, we are still in an attitude that maybe
this is it. It’s really not, in my view. So, basically, you want to hold all the way up
and not get shaken out in a bull market. And this is something similar that took place
in the last bull market. We had gold go through a set price of near 35, all the way up almost
200, down to 100. It took almost three years before that recovery from the high of just
under 200 to come back up to 200 again. It visited a little over 100 and then made its
way back. And that was a long, long time relative to
the amount of market that had taken place thus far and many were convinced that the
bull market was over. And once it got back to the high, many were convinced that it was
a double top and yet that is not what happened. What happened was the market took off from
that roughly 200 figure all the way to 850. So, it quadrupled from that point. And I think
we’re into something similar here. But, basically you’ve got to have the power to hold and you’re
not getting new buyers. Mike Gleason: Yeah, patience is certainly
going to be, I think, a good thing for people in the long run here. Don’t lose your conviction.
Now, the last time we had you on the podcast you probably gave one of the best and most
honest answers I’ve heard on the idea of manipulation of precious metals markets and you talked
about The Working Group on Financial Markets and their edict to keep things under control,
I guess, for lack of a better word. But regardless of their efforts, you mentioned
that the overall trend can’t be manipulated, despite what they might achieve in the short
run. Now, it seems like they’ve maybe ratcheted up those measures here recently. So, do you
think the main purpose is maybe to shake out people to the point that gold and silver are
no longer viewed as safe havens? And if that is the case and one of their main goals, do
you think it’s working? Because obviously there’s been huge amount of buying in the
physical markets to suggest maybe it isn’t shaking the confidence of the key players. David Morgan: A great question. My opinion
is that The Working Group on Financial Markets is used to instill confidence in certain markets,
primarily the debt markets, which means the bond market and secondly the stock market.
These are what the establishment is concerned with. They want most investors to be taken
by the bond market or the stock market. The Working Group on Financial Markets was formed
after the 1987 stock market crash, because at that time the quote, unquote, “circuit
breakers” that were in place did not work and we’ve got this huge waterfall decline
and a big, big decline. In fact, I was involved in the market at that time, as I’ve been involved
in the markets for a very long time, and it was quite, quite scary. So, The Working Group of Financial Markets
was established so this couldn’t happen again and I think what you stated, Mike, is part
of the idea, that if they get the establishment to give market indicators for the stock market
and the bond market they’ll look good. Then a lot of these people that are short-term
orientated, that were in the metals, let’s say, not that long ago, are easily convinced
to go for the fast buck. Which means to dump the gold and silver markets, the ETFs and
anything associated with it and put it into the stock market and that’s what we are seeing
right now. If you’re not convinced that there’s any manipulation
in the markets, I suggest anyone listening to this, go to Google or any search engine
and verify what I’m saying. Look up under 1987 stock market crash or better yet, look
up The Working Group on Financial Markets. Mike Gleason: How much longer do you expect
it to go on? And ultimately, what do you think the tipping point will be to bring a shift
from where we have, say the paper market you know, sets the price for the physical market
and what sort of specific things should investors be looking for as signals of a trend change
in that dynamic of the paper market setting the price for the physical? David Morgan: Let me answer that kind of in
reverse. Look, first of all, we’re seeing several facts around the gold market that
the physical markets are breaking down. Germany being primary is not being able to receive
its gold for seven years. I mean, this is ridiculous. That’s what the Federal Reserve
told them. Then we have this Dutch bank that had physical gold for their clients and they
came out recently and said, nope you have to settle in cash, not in physical. Additionally there’s tons of antidotal evidence
all over the internet, on sites that are frequented by gold and silver people that have different
accounts of not being able to get gold, basically, that they’ve already bought, paid for, stored,
etc. They’re getting non-deliveries and they’re getting cash settlements. So, objectively, if you discount everything
I’ve said, you still have Germany, and so that is an irrefutable fact. So, that alone
is pretty loud and very clear that there’s something going on in the physical gold market.
If there weren’t any problems in physical delivery, then Germany would obviously be
getting its gold here very quickly. I expect the paper market’s, though, to continue,
through probably the end of 2013 and probably through 2014. We continue to see big differentials
between the retail price and the commercial bar price. But as long as the commercial bars
can be delivered in a somewhat timely matter the paper markets will maintain basic creditability.
Once that breaks down, then we know, that’s the point. And in the meantime lots of gold is coming
off the COMEX and out of the gold ETFs. So I could be wrong on my look of, you know,
another couple of years. Perhaps we’re going to see this gold delivery problem sooner than
later, but that’s where we’ll know. We’ll know when, and it will not be called the default;
it will be some lame excuse coming out of the mainstream press but basically what it
will amount to is another Germany type of situation. It might be a big hedge fund. It
might be Paulson buying more gold. One of these huge fund managers, David Einhorn, or
one of these types, Carl Bass, I don’t know who it’s going to be; no one else does. But
it could be something like that. It could be Sprott that says: Here, give me this much
gold and taking it off of a major bank, a major bullion bank, and a major bullion bank
can’t access it in time and they have to delay delivery and I think that’s going to be the
tipping point. Mike Gleason: Looking back at, again, some
of the fundamental drivers for precious metals and why it’s likely going to be a good asset
moving forward here as we go throughout this decade. Now we’ve got a Federal Reserve maybe
hinting at the end of QE, if you believe it or not, I tend to not put any water in what
Bernanke says, but it looks like the U.S. is currently falling behind here in the race
to devalue. What do you expect the Fed to be doing as a reaction to that and when will
they make some sort of a new measure that’s going to be very inflationary? David Morgan: Another great question. Let
me just state, this is my opinion, I look at using Japan as a test case. There’s already
strong indications that the Japanese government bond market is in trouble. I mean, we have
already seen volatility in the interest rates in the Japanese government bonds that are
unprecedented, and that’s when they’re just getting started in this two-two-two policy.
I mean this is absolutely, complete, and total, 100 percent insanity. I mean this two-two-two
policy will double the monetary base. That means the cash market. That is the amount
of printed money they want to generate 2 percent inflation and they want to do it within two
years. If that isn’t a signal to anybody that’s ever studied, even slightly, what happens
to a paper fiat system, then they don’t understand. I mean, people that don’t have any education
on this topic, they’re oblivious to it, which is probably 98 percent of the population.
But nonetheless the facts are right in front of us, so I think the Fed is looking at it.
Now the debt markets that exist, basically, the U.S. debt market is the biggest, but Japan
is not that far behind. The debt market in Japan is huge, so I think that maybe, this
is again, opinion, the Fed is looking ahead to see what is going to happen in the Japanese
debt markets and see how the reaction and how the markets taper over, what they do,
as an indicator how much more they can get away with. But again, that’s how I see it.
Regardless of my opinion the facts remain, the Japanese have taken a step here into absolute
financial suicide-slash-insanity. Mike Gleason: If you look at gold and yen
terms, I know it hit an all-time high last month shortly before that big price correction
that we saw mid-month. But, yeah, Japan is an interesting test case and it’s the world’s
third biggest economy, so it definitely matters quite a bit on the global scale. Looking at one of the metals here, I wanted
to speak to you about: Palladium has been holding up quite well in 2013 despite weakness
in the other metals. Year-to-date it’s up about 7 percent and it’s held above 700 quite
consistently here. Now, obviously, the dynamics for any of the platinum group metals are bit
different than for gold or silver and palladium is more of an industrial metal than a monetary
metal, but I’ve heard it said that the PGM’s often lead the way for silver and we haven’t
really seen that, despite palladium’s surge, so is that theory kind of thrown out the window
or do you think that eventually the strength in palladium will manifest itself in the more
well-known precious metals, meaning silver and gold? David Morgan: I was taught, when I started
trading futures very seriously, my broker was very good in the metals and he taught
me that whites lead the gold; lead the yellows, is the way he stated it. And I’ve witnessed
that over the years. Obviously I agree with you, Mike, that you really can’t look at platinum,
palladium, as monetary metals; the market doesn’t. They’re very, very small. So if there’s any place that you could really
manipulate a market from the long side it would be the platinum group metals. Having
said that, it has been a precursor in the past and I think it still has merit, but as
you all know and I just said, it really is considered not much of a monetary role. But if you look back at history, again I love
dealing with facts, and we see where Ford Motor Company bought a billion dollars worth
of physical palladium for the supply chain for the catalytic converters. The price went
crazy and the futures markets ceased to function, really. The reason I say it ceased to function
is that the top of the market; first of all, if it was going up to over $1,000 an ounce
and gold at the time was just in the hundred of dollars per ounce, went well over the gold
price at that time. You had to put up more than the full cash price to stay in the futures
market. Well, then, what’s the benefit of the futures market if you have to put up more
than the cash price? At the top of the market you had to put up
double the cash price to stay in the futures market. So, the futures market totally broke
down and since Jim Sinclair has talked about the gold and silver market triggering the
gold market then when the margin requirements are basically the cash price, then you don’t
have a futures market. And I didn’t mention that in your previous question but I think
it; I want to emphasis that now, because that’s another sure-fire indicator that there is
no futures market. They said, “Oh we’ve got a futures market but the volatility in gold
is so high that . . . I did put up some full cash price.” Well, now you have a cash market,
not a futures market. So, to my thinking it still is a precursor
and it’s also a precursor to probably what will take place in the silver market; almost
certain it can happen in the gold market, as well. Mike Gleason: Your current thinking on prices,
in the medium to longer term, has that changed any with the recent events and the declines
we’ve seen here recently? Is your outlook still bullish? David Morgan: Well, I wouldn’t go bullish
and somewhat bearish, I mean, I’m not a permabull. I mean I am for the long term and I’ll call
the top when I see it, if I see it and I trust I will get close. But as far as the short
term is concerned, I put out a video Monday to our members only for the very short term
and let’s just say I’m bullish and looking for a rally into June. I’m not going to mention
the exact time or the price I’m looking for, but I did do that and that’s, you know, what
I get paid for part of the service. Basically, the long-term investors but we do trade part
of the portfolio and I do like to put a trade on from time to time and I just updated everybody
on that. Mike Gleason: Long term, you’re still thinking
we’re going to see things moving a lot higher, I take it? David Morgan: Mike, I do allow myself the
option to adjust my thinking if the market reveals more, I mean no one’s perfect in this
business. I have said for the last, I think, several weeks, if not few months, that it
takes about two years for the silver market to work off that parabolic high that we saw
May 1, 2011, or the end of April 2011. That’s obviously been two years and a few days right
now. I think we’re going to probably see relief
rally here as I just mentioned, and it’ll probably come back down maybe in the, maybe,
August time frame, which is historically true for gold and silver, and then we’re going
to start up in September. So. I think that by the end of the year we’ll be past the breakdown
area, which for gold is roughly 15.50, for silver 26 and then we’ll be above both those
levels for both metals. And then I think 2014 is going to be a rebuilding
year, where interest comes back into the precious metals markets. And we’ll see an acceleration,
in my view, like we just saw in the last market, probably not as dramatic as we saw in the
70s to 1980 market, where we saw these huge moves in a very, very short amount of time.
I already gave a lecture up in British Columbia, that I’ll be going back to here this weekend,
about 90 percent of the move comes in the last 10 percent of the time for the silver
market and I’ve been saying that for a while, something that Jeff Christian had mentioned
early on in this bull market, and I actually never did the math, it’s quite simple to do,
and I did look at it recently, I mean about a year ago when I made the speech, and it
turned out that it’s almost exactly what it is. It’s like 87 and a half percent of the
move came in the last, like, 7 percent of the time. So I’m not going to say it’s going
to be exactly repeat; what I am suggesting strongly is that it will accelerate and you’ll
see these drastic moves and people will be coming on board late, rather than now when
they should be accumulating. Mike Gleason: Yeah, that’s great advice and
good insight. Well David, thanks for your time. As always and we look forward to speaking
with you now down the road, perhaps a bit more regularly than we have been. Now, before
we go, you alluded to it a moment ago, an upcoming speaking engagement. Let’s see, this
Monday, May 27th at the World Resource Investment Conference in British Columbia at 4:30, I
believe, is when you’re going to be speaking. And for those who are going to check that
out, what can they expect to hear from you? David Morgan: Well, it’s “Silver, The Move
Ahead,” that’s the name of the speech and it is the second day, the 27th at 4:30 in
the main auditorium. If you want more information, just go to my web site,,
it’s right at the top and there’s a couple of URLs you can click to register for the
event. Mike Gleason: Well, excellent. And having
seen you speak before, I can say that it’s sure to be both informative and entertaining
as well. So anyone checking it out will not be disappointed. Well, that will do it for this week’s market
wrap. Thanks again to David Morgan for joining us. Don’t forget to tune in next Friday for
our next Weekly Market Wrap podcast. Until then, this has been Mike Gleason with Independent
Living Bullion. Thanks for listening and have a great Memorial Day weekend, everybody. (Text on screen): Join us today!

44 thoughts on “Something BIG Is Occurring in the Physical Market for Gold & Silver

  1. The government and banks are saying gold and silver are foolish investments . Yet another lie , Keep Stackin .

  2. Ya, buying homes are where its at. The housing market is far from a bubble. Also, the DOW 25000! Fast eddie, could you please advise me so I can have your deep in sight.. I know gold and silver are in a bubble because almost everyone owns them, that is the real thing.


  4. I picked up a tube of 2013 ASE's for $540. Hope you wont feel to0 bad letting those GEM UNC. coins go for a loaf of bread and a full tank of gas, only to have someone throw them in their pocket and end up looking like a Barber half dollar in 40 years.

  5. Nobody owns gold & silver except the central banks, the wealthiest families and a few non sleeping citizens. Housing is a bubble of cheap newly printed fiat currency with nothing to back it. The Dow is a bubble, bonds are the king toilet paper of bubbles, what alternative reality do you live in?

  6. The government and banks are the biggest liars in the history of the world. They say gold & silver are bad yet they are buying them as much as they can get. They are inflating the housing real estate bubble yet the smart money is buying up farmland. NEVER DO WHAT A LIAR SAYS, WATCH WHAT THEY ACTUALLY DO, THEN DO THE SAME.

  7. I talked with my investment banker last week and he did not agree with me buying silver and gold, I laughed at him and said ok now lets close all my accounts! lol

  8. well said, they will be completely useless once money is no longer needed by people, oh hang on, they will still have value as jewelry, oops my bad

  9. Gov says gold is useless huh? Let's see:
    Texas as well as 3 other states trying to bring back gold and silver as legal currency, as well as make it non taxable. They also want to repatriate their gold from the Gov.
    CB's have been hoarding gold in record amounts.
    Germany wants it's gold back – U.S. said 'yah, right… in about 7 years…'
    China is rumoured to have around 4000 tons, in prep to ditch the U.S. dollar
    U.S. to ban gold to Iran to tighten sanctions(who the hell made them King?)…

  10. You'll pleased to know that the banks are going long on gold at the moment. All the while telling us it's lost it's lustre or its no longer a safe haven… more propaganda to cover their short to keep it down while the hoard it up.

  11. I keep posting the same thing myself. It's long term planning – not money grabbing short term speculation… πŸ˜‰
    Buy it and bury it. Let it see daylight again in a few years.

  12. Hey bone head! Read the link! Do you understand sarcasm? Also, time to grow up. Do you always respond before you read and study before you reply? Do you even own silver or gold? If you haven't been buying and holding silver since 2002 then you are the one who just woke up..

  13. I myself spend all of my money on my home in the country, new windows, doors, out buildings etc. I also buy silver…I started buying silver at $22 in 2010, sold 1600 ounces between the silver price of $29-$42…but with silver so cheap again, I'm buying like crazy…but this time I don't think I will sell any silver. Invest in a country home, land, tools, animals, guns, ammo, food stock, clothing stock…many boots and shoes, misc everyday stuff, and silver.

  14. Good for you , I cashed out my 401k in 2002 . I paid the 40% penalty . I put a good deal of the money in Silver coins , no regrets . If you don't hold it you don't own it . peace .

  15. just bought 153 ounce of silver. could have bought more, but the teaser rate on the credit card will run out before i can pay it off

  16. I wish I could do exactly what you are doing, but the difference between you and me is that I am 18. And as I get older, people in my generation (myself included) will likely not have the required capital to even start what you are planning.

  17. Funny how governments and banks around the world are buying precious metals at record levels. Must be just a hobby lol

  18. I'm not against silver or gold but damn let's keep beating this horse to death again.

    Buying silver and sitting on it without doing anything else will not make you rich. You need to be productive. Profit comes with risk. Yes buying silver has some risk but there are much more profitable things to do to increase your silver holdings.

  19. u paid that much last week? holy fck dude. why ? You could've gotten them for like 28 each.

  20. You've got the right idea! Im trying to get the hell out of the city as we speak. This underwater mortgage is a friggin ball-n-chain.

  21. I have been buying physical gold, silver for 4 years now. I dollar cost average but I really do not pay attention to price swings. I admit that I have made large purchases as of late due to the low prices. I am not buying with the expectation that I will be trading it in for dollars in the future. I expect I will be using the gold, silver as currency after the reset button is hit.

  22. only fools would buy paper gold and silver~ Chinese always buy physical gold and is benefiting from the fall of gold prices, thanks to the west which keeps playing with paper gold~

  23. Gold dealers sell gold because that's what they do for a living. They sell gold for profit. When they sell something, they can buy it back for less money. What they believe about the price in the future is completely irrelevant. A gold dealer can not stop selling gold and sit back and wait for the price to climb. That's not how dealers operate – they buy a commodity and sells it for more. Just like every other business.

  24. The reason why it's at 21 is because of the naked short selling and manipulation in the futures market and the paper market. It has nothing to do with the physical demand. Listen to the interview

Leave a Reply

Your email address will not be published. Required fields are marked *