COMEX SILVER To Default In May? | David Morgan

135 million ounce open interest versus 77 million ounces available, but the ultimate stocks

can be converted to registered, but how many would, and how that depends.

And metal can be brought into the system quickly if spreads justified.

In other words, supply is not static.

It responds to price spreads and arbitrage incentives.

Hello, hello there, my friends.

Chris Marcus here with you for our Katie economics on a Monday afternoon.

Hope you're doing well out there.

Had a great weekend.

Quick update.

Straight still closed.

So we'll leave that aside for today.

Although David Morgan, who kindly allows us to repost his weekly updates, did a video

because there's been a lot of talk on whether the May silver contract on the comics is going

to default.

There are many months where there is a lot of talk about that.

At the same time, there have been those cool and shut downs in the past couple of months.

So all valid perspectives.

And in either case, David did last weeks, yeah, last week's weekly update on that topic.

And especially with David's great experience, I thought you would enjoy that.

So for today's show, let us hand it over to my dear friend David Morgan.

The Morgan report with David Morgan, discover how to build and protect your wealth at the

Morgan report.com.

David Morgan of the Morgan report.com.

Well, I want to do a review of where the metals and oil stand at this point in time.

So let's run through a few of these.

Let's see at the base metal side, aluminum is up 24% for the year.

Copper's up about 6% for the year.

That is flat, nickel's up 13% on the year, 10 is up 23% on the year, and zinc is up

about 14% on the year.

Moving to the precious metals, the best performer so far is gold, up 9% this year.

Paladium is off 7% for the year.

Potlum is down 2% for the year, and silver is almost at 6% up for the year.

The HUI index is up 14% and the XAU is about 12%.

So the XAU is just slightly better than gold itself at 9%.

Crude oil, no surprise here, it's up 64% for the year.

Heat oil is up 82% for the year.

Natural gas, bit of a surprise, down 24% for the year, and gasoline is almost doubled

up 95% for the year.

It seems that all of the precious metals have established trading ranges, and that means

sideways action between now and when it stops doing it.

My conjecture is it's going to take some time, would not be surprised to see some large

trading range for both gold, silver, and other white metals.

Until the end of the summer, perhaps longer, obviously there's always a caveat, could

be a black swan or something that takes place that would ignite the precious metals markets.

But there's so much news to boost them higher right now, and it's not having an effect

that I doubt anything outside of something extraordinary.

It takes something extraordinary to move the metals from here, in my view.

Talk about this ad right here that, you know, big mistake is thinking silver's already

had its run.

It has had a heck of a run.

I just don't think it's had the final run.

So a lot of people cashed out, and good for them, I suggest taking partial profits going

into the $100 level, many of my members did so.

But the big, big picture is still intact, in other words, the fiat system coming to an

end is obviously unraveling as we speak has been for some time, and we'll continue

to do so.

So that's why this silver is not near the final top, not even close well, maybe close.

I mean, maybe 150 is the total top, maybe 200, but you know, there's people out there

well-respected, talking, you know, $600, and higher, my take on the whole thing has always

been before we get to $100, silver, let's see, 50 again, well, we did, and it went to 50

really quickly, it bounced around there for a little bit, some people dumped it 50, thinking

that's it'll never get higher than that, after that overhead resistance has worn through

it, shot up as we all know, well, beyond 100 in the month of January, and now, as I just

explained, we're sitting there in the 80s or so, for the silver market, I think we'll

continue to do so, to finalize this, about where silver is going, and reading from this

editorial hill, you understand what capital is like with the flow next, and I'll be doing

an update at the money show live in a few months, talking about money flows and where

they're going and why so much moving into the precious metals has been by the central

banks, most of you listening to me would know, however, we're going well beyond that,

and it will continue to do so, so the sector is still undervalued, it's still under

element, it's still misunderstood, and that is the basic window that we're looking for,

have an opportunity for the next advance, I do think it'll take some time to build a base

before we move forward, and again, this week, I want to talk a little bit again about

the constant drumbeat that we get again and again and again, and it's been for at least

a decade, that the comics is going to fail, we can't deliver, and there is true to it,

I mean, there is the fundamental possibility that enough contracts stand for delivery, and

the comics doesn't have the amount of metal, and they don't match, and therefore there

is a quote unquote default, the reason I put it in quotations is because by contract,

the comics can settle in paper, therefore it's not a default, because you individually

or you're a corporation or an LLC or hedge fund or whomever has a contract with the

comics knows or at least should know that they can't default, they can always settle

in cash, so let's get out of the way, I think everyone understands that part of it, but

there's a lot going on again for this month, we had it happen a couple months ago, I was

one of the few that stood up and said it's not going to happen, now that doesn't negate

the fact that there's been some very interesting glitches in the comics, I don't deny those,

in fact, I call them shenanigans in a podcast, very recent to the time that those took place,

but nonetheless, let's talk about what actually happens, first of all, the headline comics

is going to run out of silver, it does sound compelling, but you got to understand how

the comics actually works, remember the comics is not a bullion on dealer, it's a futures

exchange, it's derivatives markets, market, it's used for hedging, miners, refiners, industrial

users, and primarily bullion banks, it's a speculative play field, there's so many more

contracts of natural metal, it's been that way, it all commodities, silver just happens

to be the tip, meaning it's the top one, there's more paper versus actual metal than

there is, paper versus actual oil, or paper versus actual wheat, or paper versus actual

copper, but nonetheless, it's an arbitrage market as well, because there are different global

markets, there's arbitrage opportunities between the LBMA, Shanghai exchange and the comics

that go all aware of that, if you've been in the silver market for at least a year or

two, remember the vast majority of contracts never intend to take delivery, and that means

in ten, they never intend to take delivery, so massive amount of contracts that comes every

month, particularly in the delivery months are big numbers, and if you did the math, they

would fail, but they don't, why not? And the reason is, historically, only a small percentage

often 1% of the open interest actually results in a delivery, but it can be higher and it

has been, but most of the time, all commodities are around that 1% level, so right away, we're

comparing the total open interest to available physical metal, it's kind of gurgly an error,

it's really looking, you should look at 1% of that and say what that would do relative

to the amount on the comics, or if you go to 5%, second, 135 million ounce open interest

versus 77 million ounces available, and that 77 million is in the dealer's inventory, and

this argument sounds fantastic, and mathematically it sounds great, but under scrutiny, we've

got to look at it, open interest is the top number of open contracts both long and short,

not a measure of immediate delivery demand, available registered is metal that's eligible for

delivery if needed, but the ultimate stocks can be converted to registered, some can, some can,

all theoretically can, but how many would, now that depends, and metal can be brought into the system

quickly if spreads justified, in other words, supply is not static, it responds to price spreads

and arbitrage incentives, looking at all the metal that came over from the LBMA, you could argue

the reason why, but you can't misrepresent the fact that tons of silver came over from the LBMA

into the comics, and then shortly thereafter after a couple of months, it left the comics in

other places, third to misunderstanding about delivery, even when deliveries occur, much of the

delivery, and I'm not on the episode, the word much of it is bullion, bank to bullion, bank,

this is something that just does not seem to get into the general discussion about silver and the

comics, so many deliveries are implied to take metal off the exchange and drain the comics,

right now as I said, I haven't checked it, 77 million, this is off a Twitter feed I read,

it could be less time I looked, it was 85 or so, regardless, that's a pretty big number,

relative out low it's been, I've seen around 30, and it's been at 30 for months and nothing happened,

and if there was a way to attack the register category, that would be the time, now could it happen

in the future, of course it could, but the idea is that most of this metal was bullion, bank to bullion,

bank, remains in the comics, the medallion changes, it goes from HSBC to JP Morgan, or JP Morgan

coins and things, or whatever, the metal often does not move, it moves on paper, they can show you

the deliveries on paper, but it doesn't leave the exchange, the warehouse warrant, just called

the medallion ownership title simply changes hands, this is what is referred to as medallion changing,

and that's exactly right, so counting deliveries as if they represent trucks leaving the

comics is misleading, and fourth cash settlement, this is one more persistent of the fears online,

and justifiably so, because if you couldn't deliver a good or service that you contracted for,

that would be a default, and I don't want to negate that, however, as I said at the beginning,

once you're in their game, you're playing their game under their rules,

so could it exchange first cash settlement, of course, in extreme conditions it would,

but here's the reality, it would be the last resort systemic event, it would damage the credibility

of CME due globally, so chances of them letting that happen are pretty small, and it would impact

all futures markets, not just the silver markets, it happens in silver, it could happen in other

markets, and most importantly, we've seen tight markets before, we've seen high delivery months before,

and the system has continued to function, I don't want to sound like an apologist for the CME,

I'm not, however, I do think hedging this legitimate, I just think that the rules need to be changed

whether equitable, they're fair and meaningful, across the board, not just silver, as I said earlier,

silver's the extreme case, but it could hold in all the commodity sector because there's way too

much speculation and a little price discovery, and the rules favor those that are, let's say,

on the side of the shorts from almost all the commodities you can name,

there's no evidence that we are going to have an imminent failure on the next delivery,

and the deadline narrative, this is something that's a bit of a nuance, in reality futures markets operate

on a well-known notice periods and role cycles, participants are fully aware of timelines, most

these tweets are not, there's nothing sudden or hidden about it, deadlines are not surprises,

the part of the structure, and you can go well past final notice day and still make good on it,

I know I've done it, does it happen a lot, not that much, but it can, so even the final numbers are

not necessarily final, just want you to bear that in mind, so what's really going on,

the type of post thrives because it gets the idea into silver investors particularly,

but other commodities and vectors that they have a real positive movement coming up that's

imminent because it's just a few days away, the thing's going to blow up, and then the price

explosion's going to take place, and of course, as I've said, I'm tired of it, I've seen this so

many times and it hasn't happened, again could it, yes will it, I doubt it, basically this is not

analysis, it's narrative engineering, they're controlling the narrative, the ground to take away

there are legitimate things to watch in silver, least rates would be one spreads and backwardation

would be two physical premiums in London, New York and Shanghai, in other words that arbitrage

opportunity, we saw high lease rates, big backwardation, and big premiums that differ between London

New York and Shanghai and ETF flows, that would indicate that, aha, maybe we are getting a point

where it's really going to be hard to meet the delivery, we're not seeing that, and of course,

we finally throughput and arbitrage flows, one thing to keep in mind is the amount of silver

that retail investors sold for 50 upwards, it's a lot, I haven't got a number for you yet,

but it's substantial, I've talked to many of the major dealers throughout the United States and

one in Europe, and there are silver sitting there, backlog rating to be refined into,

basically 999 fine commercial bars, although some could be manufactured into retail silver products

or whatever, usually they don't, we refine those type of products, just put them back on the shelves,

we'll sell them out to my metals dealers, so the bottom line is everyone wants delivery at once,

the supplies fixed in the games over, but that's not what really happens, the Comax doesn't fail

because of a spreadsheet, it only fails if confidence in the entire pricing mechanism collapses,

and if that ever happens, the story will be much bigger than we have 77 million ounces

in the register category, and 135 million ounces standing for delivery. When you understand

the mechanics of the silver market, you think you can understand that, not to believe everything

you read, and the last question might be the motivation to why, David, you sound like an

apologist for the CME, again I am not, however, the reason I'm doing this is because how many people

that communicated with me that heard from very prominent, well known, and well respected,

pretty well studied, personality in this space, and we were pretty convinced that the failure

of the Comax was imminent, this is a couple of months ago, and took more money than they should

have on a bet of that possibility, or in their case they thought it was a probability, a high

probability, and it just isn't true, and therefore they lost their money, now I'm free market,

if you want a bet of make a bet or a gamble, or what you think is an investment, that's your choice,

but I think you need all the information, and not all the information that is out there is valid.

I don't have the final say on this, but I've been around for more than 40 years, I traded futures

for a living, I've been on the floor of the exchange, I know brokers on a first name basis,

again I don't know everything, but I have, it's been interesting because I've had discussions

with brokers on the floor, which there aren't hardly any more, it's all electronic,

I would say I knew more than them, but let's say I had a different look at the markets

and they did, being from the investing side, regardless I don't want to go on and on too long,

this has gone longer than I expected it to, but I just want people to be aware that

you're probably going to hear the same song and dance from now until there is a failure.

Will there be one, I don't know, I think there will be another repricing, but right now,

kind of quiet, both the metals as you know, the China factor is there, but it doesn't seem to have

any strength anymore, the deliveries into the Shanghai market, where they are, where they stand

right now, not really sure, we saw a lot going into China recently, that's been all over the web,

and a lot of that silver was not financially available, it's called unwrought silver,

you can look up unwrought silver if you want, it's not silver in investible form, in other words,

it's not 999 fine, LBMA bars that are approved, it's other forms, so that's called unwrought,

so that silver that went into China for the most part was unwrought, which doesn't mean it's

meaningless, it's still silver, but what it does mean is it isn't financialized, which anything

on the comics, or the LBMA, or the Shanghai futures exchange is, I'll leave it at that, I'll

be with you next week with another weekly perspective, this is David Morgan signing out.

The US government debt is about to cross $37 trillion, that's not a typo, that's trillion with a

T, tariffs are being used to try and even the playing fields, global supply chains are shifting,

inflation isn't going away, and the value of your dollar, it's quietly being drained while

no one is really talking about this, the truth is we're living through the early stages of

a financial reset, whether anyone wants to admit it or not, and if you're still relying on

mainstream headlines or financial advisors who just tell you to write it out, you could be blind

cited when things really shift, that's where the Morgan report comes in, for over 25 years,

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