Helicopter Musings on Gold and Silver
Gold
There are several concurrent things happening that lead me to think that LBMA gold free float vault stock might be more constrained than anyone thinks (at least - I'm not seeing anyone talk about it):
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The premium for SGE gold to LBMA gold has been increasing over the last few days. Looks like China's demand for gold is growing.
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The IBJA spot discount to LBMA spot is collapsing while MCX futures gold vault stock is on the rise over the last few days. It looks like Indian gold demand is growing while they are also buying gold again. I expect we'll learn later that Indian gold imports have surged here in late September.
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COMEX Exchange For Physical (EFP) spread went deeply negative (providing bullion banks a profit arbitrage for taking delivery of COMEX gold and shipping it to London to sell in the LBMA OTC market) and at the same time the COMEX delisted "Enhanced Delivery" gold vault stock to the tune of 4M ozt. This while delivery requests against the September contract have been consistently strong over the last few days. It looks to me like fallout from physical demand from India buying gold (either directly from the COMEX or indirectly via the LBMA and bullion banks need to shore up London vault stock with COMEX gold).
> GLD (and presumably most other gold ETFs, though I'm not watching them daily) vault stock has been growing with large inflows over the last week. That directly pressures the LBMA free float vault stock.
I'm guessing the COMEX's 4M ozt "Enhanced Delivery" vault stock is being used to cover some supply stress. I don't expect we get an transparency on it though.
Silver
Silver looks a lot more calm compared to gold at the moment and that's somewhat surprising as silver is usually the volatile metal. However, there are some things I'm paying attention to:
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SGE spot premium to LBMA has remained consistently high between $8 and $9 per ozt. Demand seems steady and strong.
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IBJA spot + MCX futures are both maintaining a premium to LBMA spot even after discounting the 15% import duty. At the same time, MCX silver (KG) vault stock is back on the rise indicating that India is buying and importing silver. Physical demand in India remains strong.
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In the last three days, COMEX silver withdrawals slowed down but prior to that, were very heavy. The 5 DMA of deposits and withdrawals is currently negative (a withdrawal rate). Will the drain pick up again as we head into October (a heavy demand month for silver)?
> SLV (and most other ETFs) has increased vault stock which directly pressures LBMA free float. The 1mo lease rate has responded rising from moderately negative back to positive or near zero in the last few days.
Looks to me like a pot of water that is simmering but not at a boil yet. Yet.