I always drop what I'm doing to soak up your analysis. It's clear you've thought through the various possibilities. An interesting graphic would be tons of gold & silver moving about the world each year - to visualize the enormity of change occurring behind the scenes.
In past decades, silver investment has usually led to tears, but I think this time IS different. The industries driving the economy consume lots of silver. The Chinese government has made their policy clear - silver supplies are a national resource. Anything a government wants will become scarce, and therefore expensive.
Thank you, Thomas. Much appreciated. And I agree... especially with that last bit: anything a government wants will become scarce, and therefore expensive. Well put. And I'll keep your idea for the graphic in mind.
The tension you're seeing is pretty much the whole publication. In a SNAFU world, the things that do well are rarely good news for the world at large. But I'd rather be positioned for it than surprised by it. And I wish the same for my subscribers. Thanks, Jay.
I will push back a little on the reason for the difference in Shanghai silver prices and western prices. This information comes from Metal Charts and is being used by Claude. The Shanghai premium is largely a structural feature of China's market. The PBOC controls silver import quotas, limiting supply, while strong domestic demand from jewelry manufacturing and industrial applications, especially solar panels pushes prices higher. Capital controls on the yuan also limit cross-border arbitrage, which is what normally closes price gaps between markets.
Maybe you have other information but this seemed to be the story on several publications that follow silver. Arbitrage is very tough to do in China with silver at least. I'm sure some have figured it out. I enjoy your newsletter. Thanks.
Hey. I don't think we're actually disagreeing on the main point. I'm not at all saying the VAT is why the premium exists. In fact, I spend a good chunk of the essay explaining why Chinese demand for silver is so strong. The VAT comes in later, to explain why arbitrage doesn't immediately wipe that premium out, and why silver tends to move into China in waves rather than in a steady stream.
Again, that's the nuance I find sorely missing in a lot of non-mainstream financial commentary, which tends to paint the whole situation with a broad brush, as if the metal just moves from West to East in a straight line. It doesn't. The fact that the premium keeps gravitating toward the 13% tax line is a pretty good tell. The record import spike earlier this year, when the premium blew well past that line, is another.
The bigger point of the essay, though, is that I don't think this premium is going away. As long as it's there, it'll keep pulling silver into China... albeit not in a straight line, in waves. And with Beijing now tightening its grip on exports, I think a lot of that Western silver is probably leaving the West for good.
I don't want to put words in your mouth, but I have a feeling we're probably in agreement on most of this. Either way, thanks for reading, and for the comment. 🙂
I always drop what I'm doing to soak up your analysis. It's clear you've thought through the various possibilities. An interesting graphic would be tons of gold & silver moving about the world each year - to visualize the enormity of change occurring behind the scenes.
In past decades, silver investment has usually led to tears, but I think this time IS different. The industries driving the economy consume lots of silver. The Chinese government has made their policy clear - silver supplies are a national resource. Anything a government wants will become scarce, and therefore expensive.
Thank you, Thomas. Much appreciated. And I agree... especially with that last bit: anything a government wants will become scarce, and therefore expensive. Well put. And I'll keep your idea for the graphic in mind.
It is the biggest elephant of them all!
I truly enjoy your column, Lau..............and you have been most generous with gratis info. Blessings on the new venture.
Thank you, Lauran. Blessings received and gladly accepted 🙂
Interesting. Better for me personally if silver finally takes off, again. For the world? Well, that's more complex. Thanks.
The tension you're seeing is pretty much the whole publication. In a SNAFU world, the things that do well are rarely good news for the world at large. But I'd rather be positioned for it than surprised by it. And I wish the same for my subscribers. Thanks, Jay.
I will push back a little on the reason for the difference in Shanghai silver prices and western prices. This information comes from Metal Charts and is being used by Claude. The Shanghai premium is largely a structural feature of China's market. The PBOC controls silver import quotas, limiting supply, while strong domestic demand from jewelry manufacturing and industrial applications, especially solar panels pushes prices higher. Capital controls on the yuan also limit cross-border arbitrage, which is what normally closes price gaps between markets.
Maybe you have other information but this seemed to be the story on several publications that follow silver. Arbitrage is very tough to do in China with silver at least. I'm sure some have figured it out. I enjoy your newsletter. Thanks.
Hey. I don't think we're actually disagreeing on the main point. I'm not at all saying the VAT is why the premium exists. In fact, I spend a good chunk of the essay explaining why Chinese demand for silver is so strong. The VAT comes in later, to explain why arbitrage doesn't immediately wipe that premium out, and why silver tends to move into China in waves rather than in a steady stream.
Again, that's the nuance I find sorely missing in a lot of non-mainstream financial commentary, which tends to paint the whole situation with a broad brush, as if the metal just moves from West to East in a straight line. It doesn't. The fact that the premium keeps gravitating toward the 13% tax line is a pretty good tell. The record import spike earlier this year, when the premium blew well past that line, is another.
The bigger point of the essay, though, is that I don't think this premium is going away. As long as it's there, it'll keep pulling silver into China... albeit not in a straight line, in waves. And with Beijing now tightening its grip on exports, I think a lot of that Western silver is probably leaving the West for good.
I don't want to put words in your mouth, but I have a feeling we're probably in agreement on most of this. Either way, thanks for reading, and for the comment. 🙂