Exponential Debt Cycle is Past the Point of no Return
Steve St. Angelo: Exponential Debt Cycle is Past the Point of no Return
Palisades Gold Radio: 9-27-2024
Tom welcomes back Steve St. Angelo of the SRSrocco Report for a discussion on the record-high prices of gold and silver.
St. Angelo suggests these levels for silver could be a new floor as they've historically returned to production costs following price spikes. The average cost of primary silver production is around $26 an ounce, taking taxes and developmental costs into account.
St. Angelo stresses the importance of distinguishing investment demand from industrial demand when analyzing the silver market dynamics.
A decade ago, there was a significant silver surplus due to decreased industrial demand which has since reversed with increased investment demand. Industrial demand is expected to consume all available supply, making additional investment demand potentially price-volatile.
Steve explores the impact of energy scarcity and continued money printing on production costs, driving up gold and silver prices due to inflationary pressures.
They discuss the possibility of a market correction offering the last chance to buy silver at present rates.
Steve and Tom delve into the relationship between expanding money supply, debt, federal funds rate, and silver price. Looking towards the period leading up to 2025, a market correction is anticipated due to increasing unemployment and possible employment data revisions.
Economic weakness could lead to reduced interest rates and more money printing, instigating inflation and purchasing power reduction. However, Commitment of Traders reports may not accurately reflect demand.
The global silver mine supply and output have been declining since 2015, necessitating existing inventories to bridge the deficit. This imbalance could lead to a substantial correction when prices significantly surpass production costs.
Concerns about marginal silver supply include transparent and non-transparent inventories, solar industry demand, and copper prices as indicators of industrial demand and potential recession. Steve discusses the shift from LBMA to ETF silver inventories.
Pre-pandemic, there was significant physical buying leading to expanded ETF inventories. However, in 2022, overall LBMA inventories decreased due to Indian purchasing and ETF withdrawals. Finally, Steve discusses the merits of assets such as Bitcoin, gold, and silver.
While some view Bitcoin as a digital counterpart to gold, Steve contends that saving in Bitcoin is not the same as saving in precious metals. This is due to Bitcoin mining causing considerable share dilution and due to the energy costs.
Steve advocates understanding asset worth based on economic progress versus past activity, emphasizing energy's role in asset value, and preparing for future energy realities.
Talking Points From This Episode
- Silver's new floor could be around average production cost ($26/oz).
- Industrial demand vs investment demand crucial in analyzing silver market dynamics.
- Economic instability, the energy cliff, inflation, and supply concerns may lead to significant price volatility.
Time Stamp References:
0:00 – Introduction
1:22 - New Silver Price Floor
3:30 - Miners & All-In Costs
5:55 - Energy & Money Supply
8:44 - Types of Metal Demand
11:35 - Money Printing & Silver
15:13 - Purchasing Power & Rates
17:06 - Fed Cuts & Corrections
21:37 - Utility of COT Reports
23:52 - Mine Supply & Output
28:44 - Silver & Manufacturing
31:54 - Grid Stability & Solar
34:40 - LBMA Silver Trends
37:06 - Miner Production & Shares
40:35 - Dedollarization & Gold
47:50 - Dr. Copper & Economy
51:34 - Energy & Volatile Mkts.
54:13 - Energy, GDP, & Debt
55:20 - Federal Deficits Chart
57:10 - Trends & Collapse
1:00:48 - U.S. Spending & Budget
1:02:50 - Bitcoin & Precious Metals
1:06:10 - Energy Store of Value
1:09:25 - Wrap Up