In this essay, I attempt to explain why the ill fated experiment in the leasing of gold and silver will end soon and why the demise will be violent and have an impact on price well beyond conventional reasoning. We have set the stage for an unavoidable major market event. While they might be comparable, leasing is about to impact the price of gold and silver in a more profound way. I've written extensively about how the law of supply and demand has been compromised in gold and silver for many years because the supply at the margin, provided by leasing, has circumvented the price per ounce, by substituting an interest rate instead. Since the central banks involved in leasing refuse to recognize that their gold and silver that is sold as a necessary first step of the leasing process is actually a sale and not a loan, they can ignore the price per ounce and focus on an interest rate.
Supply flows at the margin controlled by an interest rate.
This is the explanation, and the only explanation, for how a market could be in a physical deficit for years with prices declining. Let me try and explain this by using an analogy involving a water faucet. In the normal equation for a physical commodity, the price is the fulcrum that balances demand versus supply and vice versa. This is the cornerstone of the free market and the rule of law that supports it. In spite of record demand for gold and silver, and an actual deficit measured against the free market sources of supply unable to keep pace with that demand, the price of each fails to respond because of the leasing water faucet.