‘Unheard Of’ Fiscal Irresponsibility Drives Surge in Silver Buying

Schectman highlights an intense "battle going on right now" within the precious metals exchanges. Despite a recent price pullback, the physical demand for silver is astronomical. He notes that the amount of silver being physically delivered from COMEX in October is on pace to be "one of the top three biggest delivery months ever."

This massive physical off-take is occurring simultaneously with strategic price suppression tactics. Schectman points out that price declines are often engineered after New York trading hours, in thinly-traded, illiquid markets, move "done for effect, not the way that it should have been done over hours or days." This action guarantees a low settlement price but ignores market liquidity fundamentals.

"When you see these kinds of movements where the paper price gets driven down and there's tremendous physical buying, it should be eye-opening," Schectman asserts.

Adding to the complexity, he noted the unusual buying activity from major commercial banks like Morgan Stanley and Bank of America, which bought huge amounts of physical metal at the same time the paper price was being driven down. These are the same institutions whose chief investment officers have recently been advising clients to drastically increase their gold allocation, as high as 20% to 25%, shifting away from the traditional 60/40 stock-to-bond portfolio. This suggests sophisticated Western traders are repositioning, taking advantage of the manipulated low prices to acquire physical metal.

Schectman connects the accelerating shift toward physical metal acquisition to the "non-stop continued deterioration" in the United States' fiscal condition. He calls the government's financial management "fiscal irresponsibility [that] is off the charts." He cites the staggering pace of debt accumulation, $1 trillion added in just 71 days, and notes the interest cost on the national debt is now the largest budget item.

"Our fiscal irresponsibility is off the charts, and you can see that by the continued shutdown of the government," he warns, adding that the country is "rapidly approaching 130% debt to GDP," a level from which few nations have ever recovered.

This lack of fiscal sanity is driving foreign governments and central banks to front-run the market. They view the dollar system's reliance on "trust and confidence" as compromised, especially since 1971 when the dollar was fully decoupled from gold.

The expert highlights that the global system is actively seeking alternatives to the U.S. dollar. China, for example, is building its own financial plumbing through the Cross-Border Interbank Payment System (CIPS). More significantly, Schectman explains that the Chinese yuan has an effective "Yuan-to-Gold back door," where exporters who receive yuan for commodities can immediately convert those balances into gold bars via the Shanghai Gold Exchange.

"The system is finding an alternative to the dollar-based system, which, since 1971, has only been backed by trust and confidence. And you can see that that’s slipping on many levels," Schectman states.

This methodical off-taking by large players is not designed to "spook the whole market," but rather to exploit the metal out of the system "slowly... before there is a mad dash for them." The underlying reality is that the foundation of the dollar-based system is slipping.

Schectman's analysis paints a clear picture: while paper prices for gold and silver may experience short-term volatility and manipulation, the fundamental case for precious metals is crystal clear. The increasing physical deliveries and the public recommendations from major financial institutions to allocate heavily into gold demonstrate that the "most sophisticated traders in the West" are concerned about the growing debt crisis and the inevitable devaluation of the dollar. The "battle" currently raging in the markets is a sign that the clock is ticking on a system struggling to maintain solvency and trust.