Newmont, one of the world's largest gold companies and a leading producer of copper, zinc, lead, and silver, declared a "force majeure" this week indicating that it will not be able to deliver on contractual agreements for at least some of its products.
Reuters picked up the story and reported that a union strike at Newmont's Peñasquito mine in Mexico is limiting delivery on some of the mine's products – except that report failed to mention silver as one of the metals that Newmont is failing to deliver to customers.
The report mentioned zinc, lead, and gold, but conveniently left out the silver portion, presumably to avoid spooking the silver or silver derivatives market. Now why would they do that if not to deceive the markets and avoid panic – or worse yet, to avoid silver customers demanding physical delivery of their assets?
As of July 23, Newmont's Elsinore mine is also under a force majeure, which seems to be part of the new normal for the markets post-Wuhan coronavirus (Covid-19). If companies are failing to deliver their contractually obligated product deliveries, then what has become of today's markets?
"The mammoth derivatives market of the financial industry has just reprogrammed the law its' members live by," writes Stan Szymanski for Encouraging Angels. "This way, they can tell the party on the other side of the trade in a faster and more pragmatic manner of their inability to deliver their part of the bargain."
(Related: Last summer, a manufacturing company declared force majeure on all grades of caustic plastic and chlorine across the United States.)
If the markets weren't rigged, precious metals would have a much higher market value
Everything from oil to chemicals to precious metals are seeing force majeures as true supply meets demand – or rather, as lack of supply catches up with demand for things that have already been purchased but not yet delivered.
Force majeure is supposed to be a last resort kind of thing, and something that you only declare once in a blue moon. When it becomes the norm like it is in today's markets, you know something is very wrong with the markets, which by all appearances are about to go bust.
"Force majeure is becoming 'a thing,'" Szymanski says. "The problem with this is that contracts struck after the exploitation of FM [force majeure] will contain a financial and even social risk premium. In entering into a contract with someone who has done you wrong once will cost the other party more to do business with you next time."
"This will lead to higher prices for the goods and commodities at the heart of these contracts. That is why I believe that Reuters did not mention that Newmont is a substantial producer of silver. A silver market that breaks hard to the upside will unhinge prices for the rest of the precious metals and urge them all substantially higher."
A major market correction is where all of this is headed, not to mention war. Otto Mallory famously stated that "when goods don't cross borders, armies will," and this is what we are now seeing culminate as the precious metals and commodities markets are approaching a breaking point.
"Contractual participants can back out of a contract-once," Szymanski says. "After that, they become radioactive (with WWIII starting it might be literal as well as figurative) and business partners back away (if not walk away) from doing business for a long, long time."
"For the individual: when you start to see FM in a marketplace, you can expect to see higher prices and unavailability of the commodity in question. While this is not particular financial advice to anyone-having physical precious metals (PM's) to preserve your wealth is an idea whose time has come. At a time when bank failures (in 2023, Silicon Valley Bank and others) [are] just another word for Force Majeure, one must seriously consider physical PM's so that you hold something that is no one else's liability."
The system as we currently know it is getting ready to implode. Learn more at Collapse.news.
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