China Silver Demand —
One Step Closer to the Edge
By Dr. Jeffrey Lewis
The Hong Kong based Chinese Gold and Silver
Exchange Society or CGSE announced recently that it will launch Yuan-based
silver spot trading in Hong Kong in the first part of next year. The exchange
says growing demand for silver has prompted the decision.
This move shows that China is inching closer
and closer to the silver market and is quietly nibbling away at Western demand
When Will This Shift Influence Global
It's already well known that Chinese citizens
are not only allowed, but encouraged to own precious metals like silver and
While no one truly understands China, it has
become increasingly clear that demand for precious metals and the monetary
safety they provide has remained culturally and socially significant for much of
the country’s huge populace.
The significance of precious metals in China
has persisted even throughout the last 100 years while wealth in Western
countries has been gradually eroded, extracted and now effectively transferred.
Much of this has been a direct result of the
great Western fiat currency experience, which is rapidly unraveling, going bad,
and threatening to become even worse.
Comex- Death by a Thousand Cuts
Some astute observers are wondering exactly
when growing Chinese demand will begin to make an impact on physical inventories
at COMEX warehouses, which are tiny relative to the available supply of physical
metal reported in other official warehouses.
Furthermore, according to long time silver and
commodities analyst Ted Butler, recent reports have shown that in and out
inventory movement, has been nothing less than frantic.
At what point will the already low inventories
diminish to the point of quiet, cash-offered deliveries only? This would amount
to a technical default in the precious metals market that would further erode
confidence in the paper based metals markets.
CME’s Force Majeure May Foreshadow Future
The day of “force majeure” also seems to be
upon us, asa recent CME Group announcement demonstrates. On November 26th,
the huge commodity exchange group declared a force majeure at its New York
precious metals depositor operated by bullion and coin dealer Manfra, Tordella
and Brooks, commonly referred to as MTB.
The Group claimed that delays in MTB’s
precious metal deliveries werea result of “operational limitations” due to
Hurricane Sandy, even though that severe weather event occurred over a month
The announcement affected MTB’s deliveries of
physical gold, palladium and platinum bullion, although at least some of the
deliveries could be obtained from Brinks Co. instead.
One can only wonder what will be the final
straw that moves such defaults (blamed on the weather) into affecting the
public’s confidence in paper precious metals markets.
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