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​Physical Gold and Silver to Continue to Soar on Massive Demand - David Brady (April 17, 2020)

Image of Gold and Silver arrows pointing skyward.

The only reason I follow paper prices for Gold and Silver is that they provide valuable insight into how big the premiums are for the physical metals. The combination of higher paper prices and higher premiums means an ultimately higher physical price. This is what we are seeing thanks to the persistent scarcity of Gold and Silver and a nice rally in both Gold and Silver paper futures and ETFs recently.

Despite the partial re-opening of the Swiss refineries, we’re still seeing little to no inventory and premiums are rising again. Gold Eagle coins are available but in limited quantities and are selling at premiums of ~10% or more. Gold bars of 10 ounces or more are near non-existent. There are more coins than bars available in Silver too, but bars tend to be a lot cheaper in price. That said, the lowest price I could find for a 10 ounce bar at one of the major dealers was $20.60, >30% over spot. The mere fact that all of these sites now have a tab saying “In Stock” Gold or Silver says it all, imho. The fact that there is so little available on it, even more so. One major dealer shows just 62 items in stock for Gold compared to 1506 out of stock.

We just received news that Canadian gold miners are now considered “essential” businesses and are reopening. Many are optimistic that physical prices will come down as a result. However, the partial re-opening of the Swiss refineries did little to boost supply so far. Then we got this announcement yesterday too:

 

“The clamor for retail investors to get hold of precious-metals coins is about to get more urgent.

The U.S. Mint said Wednesday it’s temporally halting production at its West Point facility in New York because of the risk to employees from the coronavirus. The site makes gold, silver, platinum, and palladium coins, which are sold through a network of distributors.

The shutdown comes as convulsive swings in financial markets spur a surge in demand among retail investors for precious metals as haven assets. Last month, the Mint said it sold out of American Eagle silver coins, while the gold coins it offers were snapped up in March at the fastest pace in over three years.

‘The timing is awful,’ said Everett Millman, a precious-metals specialist at Gainesville Coins in Florida. ‘It’s going to exacerbate the supply shortage’ in the coin market when demand is soaring.

Premiums for gold coins are at 5%-10% over spot gold, compared with less than 1% in normal circumstances, Millman said. Gold for immediate delivery slipped 0.6% to settle at $1,717.03 an ounce on Wednesday.

The jump in coin sales, along with a record high this week for holdings in exchange-traded funds backed by gold, suggests buyers are seeking physical metal amid the turbulence in equities.”

Proving once again that this is primarily a demand issue compounded by supply constraints. The argument that it’s just “logistics” holds no water. This was also clearly demonstrated in the fantastic and detailed analysis below of the smoke and mirror tactics used by the LBMA, CME, CFTC, and the COMEX to attempt to hide the loss of physical backing of futures “as the price of physical continues to detach from the paper pyramid.”

COMEX Bombshell – Most eligible vaulted gold has nothing to do with COMEX

https://www.bullionstar.com/blogs/ronan-manly/comex-bombshell-most-eligible-vaulted-gold-has-nothing-to-do-with-comex/

The LBMA and the COMEX have been at pains to say that they have plenty of inventory and the paper markets for Gold and Silver remain healthy. This article clearly refutes that. Simply put, it demonstrates that these authorities do not have the inventories that they say they have and that there is a significant strain on physical supply right now, even in London. It appears that they are becoming increasingly desperate to maintain the illusion of functioning paper markets as the demand for physical metals remains high and supply tight.

So why is demand so high? Headlines for several of my recent articles provide the answer loud and clear:

I mentioned the Bank of England’s foray directly into MMT (Modern Monetary Theory) policy last week, and now the Bank of Canada has joined in:

This comes on top of the Fed buying “everything” and new fiscal spending from the Trump administration in multiple trillions. If that weren’t enough, I give you Universal Basic Income, or UBI. Free money for everyone!!

“WASHINGTON, D.C. (WPDE) – Representatives Ro Khanna (CA-17) and Tim Ryan (OH-13) introduced the Emergency Money for the People Act Wednesday, April 15, to provide additional cash payments for Americans that have been impacted by the coronavirus pandemic, according to a release.

The act would provide more relief and includes a $2,000 monthly payment to every qualifying American over the age of 16 until employment returns to pre-COVID-19 levels. It also corrects a problem in the CARES Act to make sure college students and adults with disabilities can still receive the payments even if claimed as a dependant. It will also allow individuals to get money through direct deposit, check, pre-paid debit card, or mobile money platforms such as Venmo, Zelle, or PayPal.”

This is just the tip of the iceberg. Expect the same from governments and central banks all over the world. This is GLOBAL monetary and fiscal insanity on steroids! Still think we don’t see hyperinflation?

All fiat currencies are being debased against hard assets like Gold and Silver. And people still wonder why precious metals are hitting new record highs in almost all currencies?

There may come a time when physical supply comes back on line and false optimism with regard to stocks and the economy weakens demand for physical precious metals “temporarily”. If and when that time comes, grab them, in my opinion, because this global Ponzi scheme cannot survive without gargantuan money printing everywhere, causing the collapse of most if not all fiat currencies. The recent rally is primarily due to a surge in demand, assisted by a fall in supply. Regardless of what happens to supply, demand is going to increase substantially going forward.

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About the Author

David Brady has worked for major banks and corporate multinationals in Europe and the U.S. He has close to thirty years of experience managing multi-billion dollar portfolios including foreign currency, cash, bonds, equities, and commodities. David is also a CFA charter holder since 2004.

Using his extensive experience, he developed his own process utilizing multiple tools such as fundamental analysis, inter-market analysis, positioning, Elliott Wave Theory, sentiment, classical technical analysis, and trends. This approach has improved his forecasting capability, especially when they all point in the same direction.

His track record in forecasting Gold and Silver prices since has made him one of the top analysts in the precious metals sector, widely followed on Twitter and a regular contributor to the Sprott Money Blog.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

Comments

Ship Track
April 17, 2020 at 2:31 PM
I live in Switzerland and have both allocated and unallocated accounts at my local Kantonal Bank. In my unallocated account I have over 100kg of Silver 1kg bars. Today I called up my private banker to inquire about moving 100kg of silver from unallocated to allocated, and paying the VAT. This would require a 7.7% VAT surcharge. This is what my banker told me: No, it is not possible to make this transfer. He told me that the silver was pooled at Zürich Kantonal Bank, and they could not provide the silver bars. He said that currently the Swiss metal refineries were only making Gold bars, not platinum or silver. I told him that my unallocated account should have been a part of a pool of silver at ZKB, and that the silver should be available. He did not agree. So it is clearly the case that 1. The Swiss refiners have been allowed to start to produce gold bars violating current Swiss lockdown because of Comex/LBMA crisis. 2. Unallocated silver and gold is completely rehypothesized/fractionally reserved and is completely dependent on mine/refiner capacity.