Silver goes ballistic and shakes the financial system

[dennis]

Bobo08:
An explanation I've seen is that in an unstable environment, people are selling ALL asset classes for dollar (or short term Treasury bonds). This will become even more pronounced if there's a major market crash.

Investors in the private credit market are seeking to get out and the fund managers are putting limits on withdrawals, effectively holding them hostage. These are pools of investor funds that make loans (software, AI and data centers are the latest big thing?), it seems many participants want out of those to do something else with their capital.

BlackRock's $26 billion HPS Corporate Lending Fund, one of the industry’s largest non-traded business development companies, and not to be confused with the BlackRock TCP Capital Corp which just repriced one of its loans from 100 to 0, said shareholders requested 9.3% of their shares, but management decided to cap the repurchase at 5%, the company said in a statement on Friday. The total amount of shares would have been around $1.2 billion, according to Bloomberg calculations.

Private Credit Firesale Begins: World's Largest Asset Manager Gates Investors In $26 Billion Fund<!-- --> | ZeroHedge

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[Aeneas]

In the latest substack by No01 he discusses gold and silver.
He explains why gold and silver hasn't been rising.

...When those positions started bleeding, you don't get to choose what you sell. You sell what's liquid. Gold is liquid. Silver is liquid. High-grade bonds are liquid. You sell what has a bid. And fast! Before your broker does it for you.

That’s why gold fell during a war. Not because anyone changed their view on gold. Because someone needed cash before the close.

Silver fell harder because it always does - smaller market, thinner book, more violent moves in both directions. Although with this specific war, there’s another dimension to it. A metallurgic one.

In regard to gold and the war on Iran, he says:

Now gold. Because gold’s week looked like a failure but wasn’t.

It fell less than silver. It recovered faster. The physical bid never actually went away. To understand why, you have to understand who has been buying gold for years and why a bad week changes nothing for them.

Since 2022 - when the West froze Russia’s dollar reserves and showed every non-aligned government exactly how conditional dollar neutrality was - central banks have been buying gold at a pace not seen in decades. Poland. Czech Republic. China. India. Turkey. Singapore. Gulf states. Not as a portfolio trade. As a policy decision. Gold has no counterparty. It can’t be frozen, sanctioned, or conjured out of thin air. When the margin call hit and traders sold, the sovereigns bought the dip. They bought every dip since 2022. They’ll buy the next one.

This matters because it means gold has a structural floor that silver doesn’t. Not a price level - a constant source of demand that absorbs selling pressure and compresses the downside. It’s why gold at $5,000 isn’t a bubble. It’s a re-rating of gold’s monetary role in a world where it has to carry weight that Treasuries used to carry for countries that no longer fully trust Washington with their savings.
https://no01.substack.com/p/the-bretton-whoops

The petrodollar stress makes this worse for dollars and better for gold. An Iran war that puts Gulf states in the crossfire of a conflict they didn’t choose, closes the strait their oil revenues flow through, and makes them quietly question the value of the security arrangement they’ve been paying for - that’s not a normal geopolitical event. That’s a stress test of the entire architecture. When petrodollar recycling slows, the natural destination for that sovereign wealth isn’t euros or yuan. It’s gold.

Western retail still hasn’t properly arrived at this trade. Global portfolio gold allocations sit around 2%. Historical bull market peaks have seen 8%. The gold rush, as it were, hasn’t even started yet.

With regard to silver, he points out that silver has a dual use and how the conflict, collapsing market also can affect the need in industrial. There is however another factor about silver, which is that it needs sulfuric acid to be extracted. Sulfuric acid is a byproduct from oil processing. 50% of global seaborne sulphur trade passes through the Hormuz strait. That is problem.

No01 writes:

Silver is the acute version. Without the floor.

Until very recently, no central bank was holding silver as a reserve asset. Russia started the trend in ‘24. Saudi Arabia followed in ‘25. India recently started as well. But in the grand scheme of things, this is only a drop. The floor is pure physical demand - industrial, investment, delivery - and it’s being measured now in trading days, not months.

COMEX registered silver has collapsed 59.5% since October 1 - from 193.7 million ounces to 78.3 million. 600~800 thousand ounces per day, leaving, no deposits, no reversal. Run-rate to zero: late July to early September. Shanghai trading at a 12-14% premium above LBMA for weeks, with the arbitrage channel that used to close that gap having stopped functioning around 2023. The SGE briefly pulled silver inventory from its weekly report - then quietly put it back, as if hoping No1 would notice the gap.

And then there’s the supply side, which almost nobody is talking about.

Most silver doesn’t come from silver mines. It comes out as a byproduct of copper, lead, and zinc refining - operations that depend on hydrometallurgical processes requiring industrial quantities of sulfuric acid. Sulfuric acid is produced as a byproduct of sour crude refining. The same Hormuz closure that’s strangling oil flow is, with a lag of weeks to months, also strangling the chemical inputs that base metal smelters depend on. Refineries shuttered around the Gulf means sulfuric acid production dropping means hydrometallurgical operations halting means silver byproduct output falling.

The crisis that is draining the vaults is simultaneously choking the pipeline that would normally refill them. A vice, closing from both ends.

The COMEX - the same week every major private credit fund was gating - cut silver margin requirements by 22%. Open interest at a 13-year low. They are not suppressing a rally. They are begging for volume. The exchange that set the global silver price for decades is becoming a rounding error.