Silver To S&P 500 Ratio: Why It Signals A Historic Low

Silver priced against the S&P 500 is sitting near its lowest reading in half a century, a level that has preceded every major multi-year silver rally of the past fifty years. In this episode Felix Nikolas Prehn traces two rule changes driving the shift. First, Basel 3 net stable funding requirements now force banks to hold 85 per cent cash backing against unallocated paper silver, pushing them towards physical metal and raising costs on what was once a profit centre. Second, China replaced its 25 year old silver export regime at the start of this year with tight licensing, restricting outflows from refiners that handle an estimated 60 to 70 per cent of global refined silver exports. Meanwhile COMEX registered inventories have fallen from 114 million ounces to roughly 76 million, the world has run a silver supply deficit for six consecutive years, and the solar industry alone consumes about 20 per cent of annual mine output. Felix outlines a three signal framework and stresses that silver remains highly volatile.

In this episode:
00:00 Silver to S&P 500 ratio near a 50 year low
03:00 How the ratio chart has preceded past silver rallies
07:00 Basel 3 and the 85 per cent unallocated silver funding rule
10:52 China tightens silver export licensing after 25 years
14:11 Chinese silver imports surge and solar demand at 20 per cent of supply
16:36 COMEX vault drawdowns and paper leverage at 7.6 to 1
19:00 Three signal framework for silver and stocks
22:47 Volatility warning and risk management guidance

Sources mentioned:
Bank for International Settlements (Basel 3), https://www.bis.org
Silver Institute (World Silver Survey), https://www.silverinstitute.org
COMEX (CME Group), https://www.cmegroup.com
Bloomberg, https://www.bloomberg.com
Brinks, https://www.brinks.com

Felix Nikolas Prehn is an economist and former investment banker. He co-founded TradeVision.io and founded Winston Daily and The Prehn Institute. The Prehn Institute gives no financial advice, and neither does this podcast.

Newsletter: Winston Daily, https://winstondaily.com
Research: https://prehninstitute.com
Author site: https://felixprehn.com

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