Q: Investing in silver since 1993 and reading your newsletter/blog almost every day since 3 or 4 years; thanks for the knowledge you at Miles Franklin share with us, worldwide, and for free!
Could you shortly explain the difference between eligible vs. registered gold and/or silver? I don’t seem to get it. Why these terms? What do they mean?
Thanks in advance. You help me be aware of all the manipulation in these (and all) rigged markets and to stay put and not selling, instead buying at these suppressed prices!
David Schectman’s Answer:
Here is a very clear and concise explanation courtesy of Silver Doctors:
“The Eligible category means that the silver meets the exchange requirements. Exchange requirements include purity, size (eligible silver bars must weigh within 10% plus or minus of 1000 ounces), and also must be from (stamped with) an exchange-approved refiner. Eligible silver essentially means that the silver is stored in COMEX warehouses, and conforms to exchange standards. It is being stored in the COMEX warehouse for a private party, but it is NOT available for delivery to contracts.
For example, Warren Buffet decides to store 30 million ounces of silver owned by Berkshire Hathaway (he has no intention of making the silver available for sale at current prices) in a COMEX vault rather than his Omaha basement, he could do so, and the silver would be eligible inventory.
Registered silver means that the silver is fully available for delivery to longs who stand for bullion delivery.
Registered silver used to have a paper bearer warrant attached for delivery, but these paper warrants are reportedly being phased out. To simplify, registered silver is deliverable- or available for delivery to a long-standing or demanding bullion delivery.
Eligible silver can become registered, and vice-versa. (i.e. the owner can decide to make his silver available for sale at a certain price)
This is seen almost daily in the adjustments section of the COMEX inventory data reports.
In order for eligible silver to become registered, the owner must have an exchange-licensed depository (Brink’s, The Delaware Depository, HSBC, JPM, or Scotia Mocotta) issue a depository receipt (warrant).
In addition, the bars must total 5,000 ounces (size of 1 contract) plus or minus 6%.
As far as the silver manipulation and the dwindling COMEX silver supplies, registered and Total COMEX inventories have been substantially decreasing over the past few years. Just in the last few years registered silver has declined from 70 million + ounces to 33 million ounces (touching a low of 25 million oz in July), and Total inventories have declined from 140 million oz + to ~ 100 million oz. Eligible inventories meanwhile have been increasing.
The most emphasis on COMEX silver inventories is placed on registered, as technically, this is the only silver that is available for delivery to longs. Theoretically, if 34 million oz worth of longs stood for delivery in September, the COMEX would default, as only 33 million ounces of registered silver remain.
In actuality however, I believe that the TOTAL silver inventories are what matters. Eligible silver supplies meet exchange requirements- they are simply not currently offered for sale by the owners. Clearly this silver would become available at a certain price. I also believe it likely that the owners would likely be strong-armed or forced into converting their eligible supplies into registered should things become desperate for the cartel.
I hope I have been successful in clarifying the differences between the COMEX eligible and registered categories for you. Continue to keep an eye on both registered and total COMEX inventories for signs of the impending COMEX silver default finally coming to fruition.”
– Silver Doctors, August 27, 2011
Q: What if Congress passed a law that, in affect, removed gold and silver as tradable commodities on any exchange in the U.S. or required sellers to settle contracts in actual, deliverable gold instead of printed dollars? Interestingly, as per Bill Holter, if the East demands delivery, both of these events will happen by default. If so, then the price of gold and silver will be whatever the East wants it to be-for them, the higher the better! Am I right or wrong?
Bill Holter’s Answer:
Good questions though I am not sure your meaning of the initial assumption “if gold and silver were removed as tradable commodities”.
If the COMEX were to go 100% cash settlement the disruptions would be huge as all re hypothecated metal would then have to be “un” encumbered and the hypothecations reversed.
As for China and the East, they have accumulated as much or more in my opinion as the U.S. “says” they hold. If Russia were to require gold as payment for oil or China tell the West “we will be happy to trade with you but you must pay us in gold,” this would be a de facto re set. Yes, you are correct, in this manner they could basically “set” the price of gold at any level they wished unless another big holder were to come in and say “we will accept less gold for the same product or service.” The problem for the West is that a large portion of their collective holdings are held at the FRBNY. Is this gold still there or is it encumbered in some way? Does anyone in the West have enough gold to stop China from pegging its price? Probably not, within reasonable numbers. I think your understanding is pretty much on target.
Q: I am wondering what your position is on Russian Economist Mikhail Khazin’s position that the BRICS countries are an “artificial phenomenon” created by Goldman Sach to issue new securities onto the market. I tend to disagree with the recent statements of Foreign Minister Lavrov and Putin. Why would they willingly trade one master for another?
Granted this is an interesting read but with Russia being demonized by the west I find it hard to believe that they would be in complete cooperation with the western banks to form regional currencies.
Andy Hoffman’s Answer:
Frankly, I have no answer to this. To start, it is pure speculation – i.e., the “conspiracy theory” realm we stay as far away from as possible. At the Miles Franklin Blog, our job is to spread truth, not make wild, speculative theories.
As for the specific comments, not only do I have no idea who Mikhail Khazin is, but his theory in my view, borders on madness.