Silver Falls Sharply As Leverage Unwinds In China & US

Goldfix Market Rundown - Vince Lansancy: Detailed Summary

Key Concepts:

• Shanghai-New York Silver Spread: The price difference between silver traded in Shanghai and New York, indicating shifting pricing power.
• Backwardation (London Silver): A market condition where the current price of a commodity is higher than prices trading in the futures market, suggesting strong immediate demand.
• Deleveraging: The reduction of financial risk by reducing exposure to leveraged positions.
• Price Floors: A government or market-imposed minimum price for a commodity, often supported by buying activity.
• CFTC Reports (Commitment of Traders): Reports published by the Commodity Futures Trading Commission detailing positions held by different market participants.
• LBMA (London Bullion Market Association): The primary wholesale market for precious metals.
• Worsh (Federal Reserve): Reference to the Federal Reserve and its potential impact on markets.
• PA (Preliminary Economic Assessment): A study evaluating the economic viability of a mining project.
• IRR (Internal Rate of Return): A metric used to assess the profitability of an investment.

1. Market Overview & Regional Fragmentation

The market experienced a sharp sell-off in silver, driven by unwinding leverage in both China and the US. However, a significant divergence emerged: while US and Shanghai futures declined, London moved into backwardation and remained the best bid for physical silver. This suggests a global deleveraging of futures contracts alongside sustained physical demand. Vince Lansancy emphasizes that markets are fragmenting regionally, with China increasingly exerting pricing influence on the West, as demonstrated by the Shanghai-New York silver spread. The spread between Shanghai and spot is expanding, while the spread between Shanghai and London is narrowing, indicating metal potentially flowing from the US to London. Overall, the complex is lower, but London is more stable.

2. Shanghai’s Rising Pricing Power & Joint Analysis

A joint analysis by Eric Young ("King Kong") and Vince Lansancy (Goldfix/VBL) highlights Shanghai’s growing ability to dictate silver pricing globally. This analysis, now publicly available, explains the historical context and current dynamics of silver trading. The report details how China’s influence is reshaping the market structure. The analysis suggests that silver price discovery is now contested across regions, with China exporting signals into western markets.

3. Wyoming’s Sovereign Metal Storage & Constitutional Money

Wyoming has contracted with an in-state private vault, Wyoming Reserve (CEO Josh Far), to hold the state’s gold reserves, rather than traditional custodians like JP Morgan. This is framed as a “quiet but consequential shift” towards sovereign metal storage and a victory for “constitutional money.” The state is also removing taxes to encourage the use of gold as money. This move represents a broader trend of states seeking greater control over their financial infrastructure.

4. Silver’s Price Action & Potential Support Levels

Silver is currently trading at $76.79 (spot), with Comex silver down $9.45 and gold down $97. Lansancy points to a potential price floor around $75.76, referencing CFTC reports showing this is the level where JP Morgan flipped to a long position. He speculates that this level could act as support, potentially leading to a “whippy range.” He draws a parallel to grain markets, where announced price floors often trigger short covering and a temporary price spike. He acknowledges the possibility of further declines but emphasizes the significance of JP Morgan’s position as a potential buying zone.

5. Market Data & Performance (April 16th)

• 10-Year Yields: Down 2 basis points.
• Dollar Index: Up 11 basis points.
• S&P 500: Down 57 points.
• NASDAQ: Down 266 points.
• VIX: Up 2 points.
• Gold: Down $129.
• Silver: Down $11.40 (trading at $76.79).
• Comex Silver: Down $9.45.
• Gold: Down $97.
• Shanghai-Spot Spread: Approximately 20 (expanding).
• Shanghai-London Spread: Narrowing.
• Copper: Down 2.75% ($0.16).
• WTI Crude Oil: Down $0.75.
• Natural Gas: Up $0.06.
• Palladium: Down $56.
• Platinum: Down $182 (8%).
• Soybeans: Up 75 basis points (strongest grain).

6. Policy Intervention & Conflicting Signals

Lansancy notes rising policy intervention in the markets, leading to temporarily conflicting price signals. He suggests that the Federal Reserve’s potential actions (Worsh) – whether lowering rates or halting Quantitative Easing (QE) – are contributing to market uncertainty. He posits that the market is digesting these possibilities, and the situation is complex.

7. Technical Analysis – Gold & Silver

• Gold: Remains above the weekly trendline, but the recent sell-off could signal the beginning of a short-term or intermediate-term bear market. The CFTC’s lack of commentary on the market volatility is noted.
• Silver: Below the weekly trendline, but Lansancy highlights the $71-$75 area as a potential support zone, coinciding with JP Morgan’s long position and previous import activity. He emphasizes the importance of this level and suggests it could be a key area for a potential bounce. He notes the current market structure is bearish.

8. Fortuna Mining Update & Diamasude Project

The segment concludes with an update on Fortuna Mining, sponsored content. Jorge Genoza, Fortuna’s CEO, stated the company is on track for a positive construction decision on the Diamasude gold project in Sagal by mid-year. The Preliminary Economic Assessment (PA) showed a 72% Internal Rate of Return (IRR) at a gold price of $2,750/oz, with a rapid payback period. Genoza suggests the economics would be even more favorable at the current gold price of $4,600/oz.

9. Concluding Remarks & Trading Strategy

Lansancy advises physical metal holders to “sit back and enjoy the show,” while cautioning against excessive day-to-day trading. He advocates for ignoring volatility or actively trading it, but currently favors stacking physical metal. He emphasizes that volatility is detrimental to profits and encourages a long-term perspective. He concludes with a provocative statement: if silver falls below $70, one should consider significantly increasing their position (though he immediately qualifies this as a joke).

Notable Quote:

• “When a government announces intervention in a market, price floors, grain people know this better than I do, you get a spike in the price as shorts cover and the spike is almost always above where the price floor is.” – Vince Lansancy
• “The construction decision for the Ambassuit project…we are quite sure that we'll be making a positive decision and full investment decision by mid year.” – Jorge Genoza, Fortuna Mining CEO.

Synthesis/Conclusion:

The Goldfix Market Rundown paints a picture of a fragmented and volatile precious metals market. The unwinding of leverage, particularly in China and the US, is driving short-term price declines, but strong physical demand, especially in London, is providing support. The increasing influence of Shanghai on global silver pricing and the growing trend of states asserting control over their precious metal reserves are significant developments. Lansancy’s analysis suggests potential support levels for silver around $75, linked to JP Morgan’s positioning, and highlights the importance of a long-term perspective in navigating the current market turbulence. The Fortuna Mining update underscores the potential profitability of gold mining projects in the current price environment.