The Comex Is in Far Worse Shape Than SVB if the Run on Physical Accelerates
- The Comex Is in Far Worse Shape Than SVB if the Run on Physical Accelerates
Given the potential impacts of the ongoing banking crisis, I will start this article with the conclusion.
The current banking crisis could not have come at a worse time for the Comex system. Inventories have seen massive depletion over the last 2+ years as investors have slowly been pulling physical out of the vaults. I have previously called this a run on the vault but labeled it as a stealthy one. As though certain investors did not want to raise the alarm, but slowly take possession while inventory was still available.
Now that confidence in the banking system has been put to the test, people will look to alternative means to store their wealth and get their money out of the financial system. The easiest and safest way to do this would be to own physical precious metals, as people have done for thousands of years.
It is likely that demand for physical metal could increase significantly in the months ahead. The futures market is already showing a massive move in the price of gold, which is knocking on the door of $2,000. It’s only a matter of time before this moves into the physical market. When it does, the Comex vault run will pick up steam.
Investors looked at SVB and saw that it was undercapitalized and people could only get 80-90 cents on the dollar. If investors were to do the same due diligence on the Comex they would find an even worse fractional reserve system in the metals market. The recent discovery by the LME that some of their inventory was stones rather than nickel should only serve as another wake-up call that the supply of physical metal is extremely tight. If everyone rushes for physical at the same time, there won’t be nearly enough to satisfy demand at current prices (silver has 15 paper ounces per 1 physical ounce!).
We could be only months away from seeing a break in the Comex system. SchiffGold will be working all weekend to take orders. Best to get physical locked in at current prices while you still can.