It may have come to your attention that the price of gold and silver has increased significantly over the last month.
There has been some reporting on the issue, but mainstream analysis of the trend is largely limited to the “usual suspects” – geopolitical tensions (check), reckless and unsustainable government spending (check), and fears about the banking system (check).
All these factors are absolutely relevant. But there is another huge factor entirely missing from the official story.
Gold and silver is traded in futures markets in NYC (COMEX) and London.
It is also traded in Shanghai on the Shanghai Metals Exchange.
Since around September of last year, Shanghai has been paying a significant premium on gold (around 2%) and silver (around 8-10%). Currently, silver in China is well over $30 an ounce.
Now, price spreads between COMEX and Shanghai Metals Exchange have happened before, but never for so long and for so much. (See Shanghai vs COMEX silver price chart here)
Arbitrage should have sorted this situation out by now. Let’s ask ourselves why it hasn’t.
Markets are carefully, and sometimes tightly, “managed” by the Chinese government.
For some reason, they are allowing their markets to pay more for gold and silver than the American and UK markets. This effectively allows China to set the price for precious metals and slurp up global supply, as miners in South America, Mexico, Poland, South Africa ect. can simply sell their gold and silver to China instead of America.
This is likely an intentional gambit by the Chinese government. It is probably related to geopolitical tensions between America and China, and Chinese fears that the American government will weaponize the dollar to undermine Beijing’s interests.
Raw data on Shanghai silver prices is available here: www.sge.com.cn/sjzx/shyjzj (Note, these are in yuan/kilo, so math is required to figure out the corresponding COMEX prices).