A Major, Major Blow To The Banking Paper Cartel: Get Your House In Order.

I really planned to not write this week, whilst on my first true vacation in nearly three years. However, with the exception of Wednesday – when I awoke early for an excursion – I have written every day; including now, Thursday afternoon, with Sylvie watching TV (taking a brief break from swimming), and Diana out cold in the hammock.

The reason being, that “Admiral Sprott” (yes, it was I that coined that term four years ago) finally pulled the trigger on a secondary offering of the Sprott Physical Silver Trust (ticker PSLV) this afternoon, directly after the NYSE close.

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Per today’s article title – let alone, on a day when Precious Metals prices surged, whilst commodities plunged; along with stocks (such as DEUTSCHEBANK and GLENCORE, mere days after the first quarter ended!); Treasury yields, high yield bonds, and Central bank credibility – such an event is a MASSIVE, MASSIVE blow to not just the [PAPER] gold and [PAPER] silver Cartel, but “the powers that be” in general.

To wit, in my February 2013 article, “PM bullion closed-end funds, helping or harming?,” I wrote of how the Sprott (PSLV and PHYS) and Spicer (CEF, SVRZF, and at the time GTU, which has since been acquired by PHYS) bullion trusts had seen their premiums to net asset value (NAV) nearly disappear. In it, I warned that the [PAPER] Cartel, deathly afraid of what these funds had done for physical demand, would do anything in their [PAPER] power (i.e, limitless naked shorting) to push their respective prices well below NAV; and thus, prevent Stefan Spicer and “Admiral Sprott” from issuing new shares, and using the [prices well below NAV] proceeds to purchase large amounts of metal in the market [to pay back their ‘paper promises’ of metal that they sold at a higher price but physically did not have yet]. In my view, PSLV’s October 2010 IPO was the principal event catalyzing silver’s initial run to $50/oz (from $24/oz at the time the deal was announced), as it exposed just how tight the institutional market for actual physical silver was.

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As it turns out, I could not have been more right – as until recently, all five funds traded at significant discounts to NAV for the past three years; particularly the Spicer funds, which are not redeemable for metal, which traded as low as 15% below NAV; and secondarily the Sprott funds, which were in the 2%-5% range below NAV.

However, when “dollar-priced” gold and silver definitively bottomed this winter – joining the markets for metal in all other currencies; institutional demand surged anew, joining already record levels of buying in the Central bank and retail bullion sectors. This prompted me to write “institutional gold and silver demand, the final piece of the puzzle” on February 22nd; and “Admiral Sprott rides again!” on March 7th, when I saw PSLV’s premium to NAV surge to the 3%-4% range.

In other words, the [PAPER] Cartel’s (I assure you, equally relentless) naked shorting is being overwhelmed by institutional [PHYSICAL] demand, to the point that PHYS now trades at NAV, and PSLV at 5.5%.

Trust me, if major institutions like Munich Re – one of the world’s largest re-insurance companies – are buying physical metal and announcing it publicly, there are countless others doing so secretly.
And in the financial markets, thousands of public and private funds can only invest in “paper assets,” which is why demand for closed-end funds is now soaring, just like the retail bullion market.
Not to mention, mining shares, which have had their first big move higher since 2011.

To that end, this afternoon, right after the NYSE close – in this press release – PSLV announced an overnight secondary offering. In other words, it will likely be priced this evening, with the proceeds used to fund metal purchases by no later than early tomorrow morning.

Again, this is a MONSTER blow to the Cartel – and the size of this offering, which is constrained only by the size of PSLV’s authorized shares (which I assure you, is a big number), will tell us just how strong institutional demand is. And thus, just how close the Cartel is to being destroyed.

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To that end, to give you a frame of reference, PSLV’s October 2010 IPO – at a time when global physical demand was roughly half of what it is today, was $575 million. If this offering – which until tomorrow, we won’t know how big it will be – is anywhere near $575 million, the Cartel is going to be in big, big, BIG trouble.

Irrespective, the writing is on the wall – that the END GAME has commenced, for the [PAPER] Cartel and all manipulation operations; but particularly in the ultra-tight physical gold, silver, and platinum markets, where no manipulation can manufacture actual metal. Frankly, if you are not considering protecting yourself from what’s coming NOW, I don’t know what you can possibly be waiting for!

Author : Andrew Hoffman
Published: April 8th, 2016

Miles Franklin