West-to-East arbitrage drains physical precious metals
The guest argues that persistent price premiums in Eastern markets like Shanghai and Mumbai are acting as a vacuum, systematically transferring physical gold and silver from Western vaults to strong holders in the East.
The argument
Schechman pointed to a 12% premium on silver in Shanghai and over 13% in India, which incentivizes traders to buy cheap paper-backed metal in the West, stand for physical delivery on the COMEX, and export it East. He contends this structural drain is highly bullish for long-term physical prices despite short-term paper market volatility.
The thesis, stress-tested
✓ What validates it
- ✓COMEX registered silver inventories continue to decline
- ✓Shanghai and Mumbai premiums remain elevated above Western spot prices
▸ Risks discussed
- ▸Western exchanges could restrict physical deliveries or exports
- ▸Short-term paper market volatility can depress sentiment
Hear it yourself
"And when you talk about early in a major move, first of all, you get the older holders who sell into strength, and and they're, you know, they're relieved to finally take profits. They can't handle the volatility. They're they have the same tenor or or belief structure that you just mentioned, and they're getting disillusioned. But if if the if the price keeps steady and even rising, if you go back and look at it from a longer perspective, it is rising and with great volatility, not the way that we would all like, but it tells you the demand is far deeper than the visible retail market. I don't know."
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