Weekly Wrap Up

What Do You Really Own With Unallocated Precious Metal? - Weekly Wrap Up

WWU with Chris Marcus


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As the second quarter begins and the #silversqueeze movement continues, host Craig Hemke sits down with renowned expert and author Chris Marcus of Arcadia Economics to break down all the gold and silver news you need to understand the current state of the global silver market.

In this freewheeling edition of the Weekly Wrap Up, you’ll hear:

  • The latest concerns over unallocated accounts
  • The ongoing drama at the Perth Mint
  • Plus: where is all this headed?

“Well, I did call the Perth Mint, because I’ve been a little confused by Richard Hayes—he’s the CEO of the Perth Mint—and he had some rather cryptic comments in recent interviews that I was perplexed by….I’m curious, if customers call Sprott Money and are buying silver, do the brokers at Sprott Money act as if they’re offended by that?”

Man: You're listening to the "Weekly Wrap-up" on Sprott Money News.

Craig: Happy Friday from Sprott Money News. It's sprottmoney.com. It's Friday, April the 2nd, 2021. It's time for your "Weekly Wrap-up." I'm your host, Craig Henke. Joining us and sitting in for Eric this week is Chris Marcus. His website is Arcadia Economics. We've had Chris on before. He is a renowned expert and author. And it's great to have his input this week for the "Weekly Wrap-up." Chris, thank you so much for joining me.

Chris: Thanks, Craig. Sure is a pleasure to be here. Always fun to talk with you and especially with the interesting things going on in the market. So really having a lot of fun. And by the way, I called The Perth Mint yesterday. If you want to talk about that amongst other things, just let me know.

Craig: We're definitely going to talk about that, my friend. Before we get started, and we will focus on silver here and the ongoing shortages around the planet. Before we get started though, we got to talk about sprottmoney.com because we do have some silver in stock. You've been waiting for the right time to buy some precious metals. That time might be now. We've got Royal Canadian Mint and Gold and Silver Maples. We've got 100-ounce silver bars and many other bestsellers, such as our Sprott's silver rounds, all well-priced at sprottmoney.com.

You can buy them directly online, but if you want to talk to a human being and you've got some questions, just give us a call at (888) 861-0775. And someone from the Sprott team will be happy to help you. As we get rolling here this week, it's important to note that the U.S. markets are closed here on Friday. You'll see some trading electronically as the spot price moves. And then we'll also be seeing the Globex price action that kind of follows that, but it'll be very light volume again with the U.S. markets closed.

Of course, Friday also brings the latest employment report here in the U.S. That'll be driving both the bond market and the dollar, which in turn will move the precious metals, maybe have a bigger impact on Monday than it will on Friday, but we'll keep an eye on all of that today. It's been a very interesting week with the metals getting sold off sharply back on Monday and Tuesday but then rallying back and recapturing most of those losses Wednesday and Thursday. Finally appears that after a full three-point move in the dollar index over the course of the month of March, that maybe it's easing a little bit.

It certainly had gotten over-bought. Having the dollar come back down is helping as the computers to trade the futures contracts. That's one of their key inputs on a daily basis. And having a dollar fall sum has helped silver in particular, but also we've seen interest rates come back down too. 10-year note perhaps has double topped up near 1.75%. It's back down to about 1.68% as I speak. And so maybe we've got to get some easing of interest rates as well, and that might help the recovery if not just a bounce in the precious metals.

We've got a lot going on in the precious metals as the second quarter begins. But one of the themes that has carried with us out of the first quarter is the ongoing silver squeeze movement. Sprott Money and all of the other major North American dealers were simply sold out of product back in early February as the Reddit crowd and the Wall Street silver crowd and all the other silver and gold investors wiped out the inventory by buying it all up over the course of a weekend. And the industry has tried to catch up ever since. It has created all sorts of little supply squeezes, not only at the wholesale level but also at the retail level.

And now we're starting to really get some interest worldwide in taking a long hard look at some of the unallocated accounts that are run in Australia, in Canada, in Switzerland. What do you really own if you own a precious metal in an unallocated form? Oh, sure. The fees for storing it, insuring it are less, but do you really have a claim on that metal? Maybe if you wait 90 days, you have a claim, but what if there's a whole bunch of other people that have a claim and they show up before you? Would you rather not have actual physical metal in your hands now? And if that's the case, what kind of jam does that put in the mints and the bullion dealers that offer these unallocated accounts?

This is a very weak link in the pricing scheme that is used to price precious metals. And it's something that is suddenly getting exposed a little bit. I wrote about it a couple of months ago here at Sprott Money saying, "Watch these unallocated accounts. If they start to show stress and are being forced to make delivery of metal that they don't have on hand, that might really set up an interesting problem." So my friend here, Chris Marcus, has been sniffing this out over the last week or two. And Chris doesn't hold back. He just goes right in there and starts making phone calls and trying to find out directly for himself what people have to say whenever there's a big story like a good reporter should.

So, Chris, thank you for joining me today. I'm really interested to hear what you've learned as of late. Let's get right into The Perth Mint story. This is something that's been percolating on Reddit, on Twitter, and around the internet now for a couple of weeks as there is a lot of question about what holders of unallocated metal at The Perth Mint actually own. I know you've been, like I said, kinda doing some elbow work trying to find out what's actually going on. What do you have to share with us today?

Chris: Well, I did call The Perth Mint because I've been a little confused by Richard Hayes. He's the CEO of The Perth Mint. And he had some rather cryptic comments in recent interviews that I was perplexed by partly because, you know, I listened to some keyboard thumpers like you and John Adams. And I do talk to some of those Reddit ape buffoons. So, you know, I mean, by all means, I'm gonna be up front, completely transparent unlike some of the other people in the bullion industry in that, you know, if I'm a conspiracy theorist or a keyboard thumper, which is a new term or no keyboard...

Craig: Keyboard warrior.

Chis: Warrior. I like pretending you said keyboard thumper because it's just kind of funny. The whole thing is quite absurd in reality. Craig, I guess, actually, if I could ask you one question, you mentioned about the Sprott Money. I'm curious if customers call Sprott Money and are buying silver, do the brokers at Sprott Money act as if they're offended by that?

Craig: Well, I'm pretty sure they don't. They're in the business as an online dealer of actually filling orders, fulfilling orders. You can take delivery or that you can store it with Sprott Money, but they're happy to help you convert your fiat cash into physical metal. No doubt about that.

Chris: I mean, I've never met Eric Sprott. I've learned a lot from him. You know him pretty well. Have you ever heard him refer to his customers in a manner like keyboard warriors or basically express...? And don't take my word for it. People can go and listen to his interviews, but it sounds like outright disgust for his clients buying their products. And I was confused by that, which is part of why I called last night. But do you understand that, or am I missing something there?

Craig: No, you're not. Again, you're referring to Richard Hayes who is the CEO of The Perth Mint, and, yeah, he has shown apparent disdain for customers. I remember, Chris, a couple of years ago writing an article called "KITCO Commits Corporate Suicide." Because in a similar vein, Peter Hug of KITCO had put out a report that said, "Twenty-five percent to 50% of all precious metals investors are kooks and lunatics." And I thought, "Why would you describe your customers that way?" But, anyway, so maybe that's prevalent in the industry. I know Eric doesn't feel that way, but maybe that, you know, if you're in the insiders club, that's how you look at it.

Chris: I mean, I think, you know, Andy Shackman who I do business with. So I refer clients to them, and, you know, he's been doing gold and silver sales. I believe he did an interview with the Reddit Group. He looked at it as promotion. I'm confused why an institution that's advertising itself as one of the largest gold and silver dealers. Everyone else I know in the silver industry is incredible. I'm darn grateful. A year ago, you know, we had a business that we didn't know how to monetize, and now conditions for us have been great. And I'm incredibly grateful to that.

You know, a lot of people who work at bullion shops, filling orders, they're doing a lot of business, and they're making money, and everyone else seems to be happy about that. But Richard Hayes, what is he so pissed off about? I don't know the answer to that. Maybe I do, but I'll just say that, again, you know, the way I was raised, and maybe I'm a smart ass sometimes, maybe I don't get everything right, but I don't try to be accountable. I am accountable. If I say something, I don't go looking for fights. I understand. I spend time on Wall Street. I see when you get sucked into negative energy, the cost of that. And I left that for a reason and walked away without a salary for a reason.

So I'm not going around trying to get myself in legal trouble or pick fights because I have nothing better to do. But, frankly, the stuff the guy is saying doesn't make sense. We have John Adams who I've known, I think, it's at least over a year. So, I mean, it's not like it's the first time I've heard of John Adams, and he's reporting all this stuff. He's reporting customer is telling him this, customer is telling him that. I'm getting emails from... I have a lot of viewers in Australia, and I'm getting similar stories yet I'm thinking, "Well, there were some things already that didn't add up that I vocalized on my show, but then as I'm hearing more and more, you know, I don't want to sit there and say, 'Well, this guy is doing, this guy is doing that because John said it or because Craig said it or Santa Claus said it.''' But at least, you know, do things in a responsible way.

I understand my career is over if I ever become an, you know, incompetent journalist or just start doing an agenda. And I've gone through the parts of life, I like to think. So it's kind of nice. My life is good now. So just by doing honest reporting, so I don't have any interest in doing anything else. I've never had any interest. So I'm thinking, "All right, well, this stuff is really starting to sound weird." Because John Adams is... I don't want to say he called Richard Hayes a liar although he certainly presented a lot of evidence that let's say would make it seem like Richard Hayes was directly lying.

Craig: Certainly contradicts Richard Hayes.

Chris: I listened to your show last Friday on TF Metals Report. Great subscription, by the way. I see that there, Craig.

Craig: Thank you.

Chris: And you mentioned that you had interviewed him a couple of years earlier and didn't seem to be on the same page as him. Went back and listened to the interview you did with him. And I'm confused because then The Perth Mint a couple of days ago, they tweet out, you know, "We have plenty of silver, and we're inviting this journalist in to take pictures." I'm thinking, "Well, you know that's great." I didn't realize at the time someone else points out the guy that they're inviting in to take pictures has 72 Twitter followers, which I'm not trying to say that's the character of someone's work. But just, you know, there's, like, Craig, or, for example, you know, Rob Keens [SP], who's been doing this for a while. People know who he is.

They've heard his track record, and he has an auditing background. Would be a little more convincing to me yet, you know, I've heard Bicks Beard [SP] talk about how they do leases, and there's stuff on their website talking about leases. And here's John Adams basically accusing him of a lot of stuff that I sure wouldn't want people saying about me. I mean, Craig, if I have a downside, it's like, I'm, like, sometimes like Marty McFly when I catch someone, like, lying and ripping people off. I've never learned how to, like, handle that and be like, "Oh, I'm cool with that."

Craig: So you called down there, Chris. You got someone from The Perth Mint on the phone.

Chris: By the way, I'd suggest anybody call the number, verify what I'm saying, see what they tell you because rather than answer John Adams... I offered to host an interview with John Adams or Richard Hayes, no response. They just say they're going to do that. So I called last night, I don't know, about 11:00 central time. They had to put me on hold before I get a broker because of demand, and the message was talking about the accelerated demand and so forth. I'm like, "That's kind of amusing." Finally, a woman gets on the phone, and I was asking about the availability of silver because actually earlier in the day I had spoken with someone who's a gold and silver dealer that has the ability and was interested in trying to place a large order to see what's really available.

So I was being completely truthful when I said, "I'm active in the silver market. I have clients that are interested in silver. I've heard Richard Hayes and that there's plenty of silver available." And she says, "Yeah, there's plenty of silver." I said, "How many 1000 ounce bars?" She said somewhere between 50 and 100, but you have to have the account open, which USPS people can't do. So basically fast forward, I mentioned that I've seen people report and I saw for myself that there are limits. Like, for 1-kilo bars, there's a 10 per customer limit.

Think that's the same for 1000 ounce bars. I asked, "Why is there a limit?" She said, "To make sure that everybody can get some." Instead, but here's Richard Hayes saying they have plenty of silver. Why do you need to do a limit? Craig, I mean, maybe I'm missing something but you're active in the bullion industry. Like, if you have plenty of product and people are paying, you know, talk about it in a year about how the dealers are scalping, and which I disagree with, but people are paying 8, 9, 10 bucks over a spot. If they have all the silver, why is there a limit? Do you know that? I'm asking because I can't figure it out. I'll tell you what she said, but I still don't understand it. Do you have any idea?

Craig: I would suspect it's because you don't have it on hand.

Chris: Well, she just said so that some people could get some, and I said, "Was this always the case that there's been a limit?" She said, "No." She wasn't sure exactly when but about a week and a week and a half ago. So basically when Richard Hayes started doing interviews, calling anybody who says there's an issue a complete fruit loop is the exact same time when they placed the limit on the bars. Now, is it starting to sound like this guy is watching a little too much Goldman Sachs or CPM Group yet?

Craig: Well, Chris, remember that The Perth Mint has kind of an implied backing by the government of Western Australia. So I don't know if that allows them to feel a little more comfortable in their financial footing because it even says on their website, you know, if we're unable to deliver the actual metal out of these unallocated accounts that, "Hey, we're backed by the government of Western Australia. So we'll just give you cash." You know, like any other government bureaucrat, maybe that skews how they look at things.

Chris: Well, that's the government of Australia is hiring Keith Neumeyer on the weekends. I don't know what that means. I'll just say that doesn't make me feel comfortable.

Craig: No. Well, and see these unallocated accounts in the first place. They're really just exposure to price. People worldwide that think that they own actual metal. That's not the case. That's not what you signed up for. You signed up for, "Well, okay. If you ever didn't want some, give us 30, 60, 90 days, we'll get it to you." But if everybody shows up at once, there's no metal there. There's not enough for everybody. And that's what this broker is basically telling you. We got to have a little bit for everybody. Yeah. It's no different, Chris, when you say than a run on your local bank, you know, if they've got $1 million in the vault there, and one person shows up wanting $1 million withdrawal, they'll say, "No, we'll give you, you know, 10,000 so that when other people show up, we got some cash for them too." It's a fractional reserve system.

Chris: Well, Craig, I think those are valid questions. But when I mentioned to this woman, I was saying, you know, "Frankly, I don't know that I feel comfortable because what you're saying doesn't match what the CEO is saying. And I'm trying to understand that." And I mentioned, "I also do a silver show. I have thousands of people who watch each night. These are questions that they're asking. These are the people who are buying." I'm not trying to trick anyone. To be flat out honest, I'm trying to find the truth, but right now, incredibly hard for me to believe that Richard Hayes is telling the truth.

And so I said, "If he wants to come on, I have a show, and there's a guy, John Adams, that's basically saying what he's saying is not true. And if you'd like to have him discuss that, I'd be happy to host that." And she says, well, you can email the, something at orders at Perth Mint or something. I'm like, "I just told you that there's a lot of people accusing the CEO of your organization of saying basically a lot of stuff that he's saying is contradicting. You're telling me to send an email?" I said, "Do you want to put me on hold and talk to him and let him know what I'm telling you?" Because certainly if somebody worked for me and received that phone call, and they just hung up without getting that person's information or finding me immediately, they would not be working for me.

Craig: Sure.

Chris: Hold me to that standard for the rest of my time on this earth. And so I'm saying this sounds odd. I'm like, "Do you want to email him and let him know? Do you want my information?" And she's like, "Well, you can email Perth." And I'm like, "Right now, you know, it's about 11:00 here. I'm out walking my dog, and we're gonna go out for a while. What if I don't remember the email address or what if I get home and I feel like doing something else?" And she's like, "Well, I'll pass along the message." And I said, "What's my name?" She couldn't remember my name. Even if she did tell him, it's okay, "Some guy said you're lying."

Craig: Yeah, some guy.

Chris: And I'm trying, and she's saying, "Well, what is it you want me to do?" And I said, "At this point, I don't need you to do anything, but I'm letting you know that I'm a silver analyst. I left Wall Street because I've seen a ton of crap like this. What this guy is saying is increasingly becoming harder to believe. And instead of sending a journalist that nobody knows about to take pictures, I'm giving him a chance to defend himself because it sure seems like he's lying." And she lets me off the phone without taking my information. And by the way, I will add that I did have my assistant attempt to contact them. And she emailed orders at Perth Mint, and it got email returned as undeliverable.

Alexandra Lucchesi at Perth Mint as the media person got an out-of-office reply and said to email pureaflstat@perthmint. Pure there was no reply and info@perthmint autoresponder about delays due to COVID.

Craig: Well, Chris, let's kind of wrap up with this. It's not just The Perth Mint. There are credible reports, and this John Adams who works for a bullion company in Australia has checked out what are credible reports of trouble at ABC Bullion with their unallocated accounts. ABC Bullion, the largest private bullion dealer in Australia. But, again, this is not just an Australian problem. And, again, it is a carryover from what has been this fractured reserve scheme that has been persistent for decades, where there's far more beneficial owners to every ounce than there are ounces.

And with the limited amount of silver that's mined every year, getting completely devoured by industrial and investment demand, there's just not much room for error. So, again, as we wrap up, Chris, what... This is going to be an ongoing story. This isn't going to end in the next couple of days. Where do you see this headed? Let's put it that way. What else will you be looking for?

Chris: I guess the thing is, and the reason I felt it was important to call, is because it seems weird. And if this guy is not being truthful, and I've heard Andy Shackman talked about last year, Perth was supplying to COMEX and basically Perth Mint didn't ran out last year. Now we're getting reports of people can't get their metal from Perth. They're rationing on their website. They're confirming that. So if he's not telling the truth, that's a pretty darn important sign given what we've seen over the past two months, where we're seeing metal fly out of the COMEX coincidentally right after Jeff Currie and JP Morgan and Goldman Sachs pulled the same exact scheme where they went on TV lying about it.

So a couple of last notes, if I may, and the last of the thing I said to her is like, "Would he be interested in doing an interview?" And she says, "No, he already did his interviews." I said, "So he did some interviews where he gave stuff that certainly doesn't add up, and now he has nothing to say." So that says what it is. Another article in my research I found two of the world's largest banks, HSBC and JP Morgan have stopped buying gold from The Perth Mint. So I think potential damage to their reputation and concerns that the government-owned refiner could lose its London accreditation. JP Morgan and HSBC don't even want to do business with them.

So I tried to give Richard the chance to speak for himself. I don't have any interest in inappropriately dismissing someone, but the guy's saying stuff that's not true. And there's a lot of people who have already been cheated for decades. I tried to give him a chance to defend himself, and I'm reporting honestly and accurately what happened. And let me just say, after doing a little research over the past 24 hours, this is just the tip of the iceberg of what I've found. And if anyone wants to meet and discuss this in a courtroom with a honest, legal judge in a safe environment, you let me know, and I'll put my hand to a Bible on anything I've said here anytime.

Craig: Chris, I'm excited to see where this goes from here for the obvious reasons. You'll have more reporting on this in the days to come. Tell everybody again where they can find you both on the internet and on YouTube.

Chris: My website is arcadiaeconomics.com. We're in the process of making a PDF that we'll have. I'll keep updating this information. People can see the links for themselves. Some of these stories, I mean, Craig, you'll probably want to read the link about when Richard Hayes talks about one of the distinguishing features of The Perth Mint is that they were developing a futures contract. And then what was different about theirs is that you could actually get the metal. So we'll have that all organized. Again, it'll be covered on my show, Arcadia Economics on YouTube.

And I might add that I heard John Adams just got banned from Twitter, and I know there's a lot of issues going around. And fortunately, I have a lot of great people on my team, and we've been coming up with alternate solutions. Right now there's a fellow who's already built SilverGold.TV. And he's looking for great content providers. We're participating with them. Great fellow named Walter. So no matter what, I'm going to be out there doing what I feel is right and sharing the best information that I can about silver because there's a lot of stuff that frankly I think isn't true. And I think people deserve to know.

So I appreciate you having me on here. I appreciate everything you've done. You've been a great teacher to me. When I think back 2009, sitting on the New York Stock Exchange, reading Sprott articles, and now that I've been invited to be on the show, it's quite an honor. And I thank everyone involved for that.

Craig: Well, you're very kind to say that. And, again, just a reminder, everybody, this is a three-day weekend with Friday being the Christian observance of Good Friday.

Chris: Holiday weekend.

Craig: That's right. So we want to wish everybody a happy and safe Easter. And, again, we'll remind you, we've got to get the word out on these things. So if you like the "Weekly Wrap-up," if you like the Sprott "Ask The Expert" segment, if you like the monthly, I should say, video series with Chris Vermeulen, please make sure you like, you share, and you subscribe to whichever channel you're listening to that'll help us get the word out. And, of course, for all of your desires to get actual physical metal, none of this unallocated stuff, sprottmoney.com is where you want to check first or where you can always just call us, (888) 861-0775. What a fascinating discussion with Chris Marcus. Chris, thank you so much for your time.

Chris: Thank you, Craig. I appreciate it.

Craig: And from all of us at Sprott Money News and sprottmoney.com, thank you for listening. We'll talk to you again next Friday.

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About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

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