From Silver to Central Banks

Tresmark – In the late 1970s, Texas oil billionaires Bunker and Herbert Hunt quietly began buying silver — first bars, then entire shipments.

By 1979, they controlled almost two-thirds of the world’s privately held silver. They flew bullion on armoured jets from Zurich to Tehran, stacking it in secure vaults. Prices surged from $6 to nearly $50 an ounce in under a year, forcing jewellers worldwide to shut shops as raw material became unaffordable.

Then in January 1980, regulators changed the rules — futures exchanges moved to “liquidation only,” banning new leveraged buys. Liquidity vanished overnight. One change by the regulator snapped everything

On Silver Thursday (27 March 1980), silver prices collapsed over 50% in four days. The Hunts, sitting on heavy leverage, faced margin calls they couldn’t meet. They were forced to sell off cattle, oil fields, and art just to avoid bankruptcy, with debts reaching $1.7 billion.

Silver Vs Gold
But silver isn’t traded like gold. Its supply is limited and it’s illiquid and bulky to store. It’s also used in industrial processes, which makes its demand more volatile. Yet the gold-to-silver ratio has mostly stayed in the 1.25% to 1.75%range (sometimes going as high as 2%) — and, just for perspective, it hit 6% at the peak of the silver cornering.

At current levels of 1.1%, if you can’t buy gold — try holding some silver for a while for a target of $55 an ounce.

Pakistan Monetary Policy — 15 Sep
In a Tresmark survey of financial traders, 78% expect no change in policy rates. 7% even expect a hike — the first time in months that hike expectations have surfaced.

65% believe flood-related damage will be low to moderate, mainly because global prices of key commodities are still stable to low compared to the last major flood.

While there are strong arguments to cut, the central bank has repeatedly said it wants to avoid boom-bust cycles and will prioritise stability. This could also support the rupee, attract FDI, and signal fiscal discipline to the IMF.

US Fed Policy — 17 Sep
The Federal Reserve is widely expected to cut by 25bps.

But if the cut is deeper, it could ignite stocks and inflation — and potentially push markets into a more perilous setup.

Currency Outlook
Forex liquidity has improved over the last two weeks. Most banks are now square or slightly long, pushing swaps higher across all tenors. This has encouraged exporters to sell forward, creating a loop of liquidity.
We see USDPKR stable through both policy events and possibly easing towards 281/$ by month-end.

Beyond that, the trend will depend on September remittance figures. We’ve had two consecutive months of lower remittances, and it remains to be seen whether this is a trend or just seasonal variance.

Global Macro Highlights — Week Ahead
• Fed: Markets expect a 25bps cut, with odds rising for more cuts this year as US labour data softens and inflation shows mixed signals.
• BoC: Likely to cut rates, citing weak growth and a cooling labour market.
• BoE: Expected to hold for now; sticky services inflation and wage growth keeping them cautious.
• ECB vs Fed convergence: With the European Central Bank holding steady and the Federal Reserve easing, the rate gap is narrowing, creating upside bias for EUR/USD.

Projections
USD/PKR
• 1 Week: 281.60
• 1 Month: 281.00
• 1 Quarter: 282.50
EUR/USD
• 1 Week: 1.1682 (Bearish)
• 1 Month: 1.1680 (Bearish)
• 1 Quarter: 1.1825 (Bullish)
GBP/USD
• 1 Week: 1.3507 (Bearish)
• 1 Month: 1.3606 (Bullish)
• 1 Quarter: 1.3768 (Bullish)
USD/JPY
• 1 Week: 147.65 (Bearish)
• 1 Month: 145.01 (Bearish)
• 1 Quarter: 143.01 (Bearish)
Oil WTI
• 1 Week: 62 (Bearish)
• 1 Month: 66.29 (Bullish)
• 1 Quarter: 66 (Bullish)
Gold
• 1 Week: 3665 (Sideways)
• 1 Month: 3535.83 (Neutral)
• 1 Quarter: 3580 (Neutral)