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Gold and silver markets face increasing pressure, with extended delivery times in London, rising tariffs, and a deepening silver shortage. Craig Hemke and Chris Marcus analyze the key factors driving these changes and their impact on investors. Could central bank gold accumulation and industrial silver demand drive prices upward? How will tariffs and monetary policies shape the future of precious metals? Watch now to stay ahead of the curve!
Craig Hemke (00:00) Greetings from Sprott Money News, SprottMoney.com. We've come to the end of the month of January, if you can believe that. Got one month of 2025 already in the books. So it's time to wrap it up. This is your monthly wrap-up. I'm your host, Craig Hemke. And joining us is my good longtime friend, Chris Marcus, Arcadia Economics, a very popular YouTube channel. He does great work and is somebody you should follow, not only on YouTube but on Twitter. Chris, always good to see you.
Chris Marcus (00:57) Craig, great to be back here with you today. And I'm honored, especially at the beginning of the year. I know you mentioned that the White House is opening up applications for a press pass. So before you take it to the next level, it's fun to be here with you. And a lot is happening right now in gold and silver.
Craig Hemke (01:14) Chris has been saying they have a new thing at the Trump White House where just about anybody with a blog or a website can apply. I'll let you know if somehow I...
Chris Marcus (01:22) I say we get you in the Fed press conference before the end of the Trump administration.
Craig Hemke (01:24) That would be even better. That would be even better. Hey, just remind everybody before we get started, we are at the end of the month of January, so it's time to start thinking about tax planning. It's never any fun. However, make sure you keep in mind Sprott Money when it comes to your RRSP. You can download a free investor's guide, discover the benefits of adding physical gold and physical silver to your RRSP up in Canada, and follow a step-by-step blueprint to get started. You want some personalized advice? You don't want to just do this online? You can book a consultation with a Sprott Money expert today. There is a link in the description. You can call them up at 888-861-0775. All kinds of helpful stuff always at SprottMoney.com. All right, so Chris, what a month we've had. A really good start to the year for both gold and silver, but January is historically one of the strongest months from a seasonal standpoint. So, you can usually expect to have a good one. We had a really good one, but man, there's a lot going on underneath the surface that is continuing here to the end of the month. So, I'm just going to open it up to you because you've done a lot of great work on your channel this month, getting to the bottom of how these potential tariffs are impacting the physical gold and silver markets. What's on your mind as this month comes to an end?
Chris Marcus (02:55) Yeah, well, obviously what we're seeing around the tariffs and seeing that actually play out in the EFP market, which I think most people have heard about by now, but basically the difference between the London spot market and the futures in New York, which has widened out as there's concern about how these tariffs will impact the metals. Yet, if you take a little bit of a step back, even before that started, Craig, go back to election night. Just like in 2016, we were starting to see gold and silver sell off. People are getting concerned about the tariffs. I think that was right around when you and I talked, and I think we agreed that if we actually do have tariffs, we may well have a higher deficit by the time it's all said and done. So, it wasn't the easiest couple of weeks for the metals. Yet, here we are.
I guess as of today's pricing, we're back. I think we're in the positive on both, with gold touching 2800. This is even with the tariff policy and the dollar index still up 8% since the Fed started cutting. Now, you have stress in the gold and silver markets as a lot of metal has been coming from London into New York. We're seeing multiple reports of concerns over available metal in London. We saw that, obviously, evidenced through the EFP, and we've seen the metal go into the COMEX. Before we started recording today, you mentioned that this morning there was a note from Financial Times saying the Bank of England normally took days to withdraw your gold; now, we're up to 4-8 weeks. Where does that leave us? Are we about to see the gold and silver markets break and explode to extraordinary new highs?
I don't know that I would say that's the case just yet, but what is interesting is that this is happening in the context of an already existing silver deficit. Many people may have seen in some Bloomberg articles that they've quoted Daniel Golly from TD Securities quite a bit, who has talked about the pressures that are building here and the challenges that are rising. This is also the same guy that last year wrote a report saying he was expecting the next silver squeeze and talked about the declining inventories. So, it was already a little bit of a fragile situation.
Craig Hemke (06:39) Chris, we've discussed this for years about how if we get enough physical demand—it's obviously coming at the central bank level too for gold—that would really stress this kind of just-in-time supply chain issue. The Financial Times of London, the pink newspaper, has written about how there are now four to eight-week delivery delays for gold. Now, again, that can get resolved, but this is the kind of thing we've talked about. If you have an unallocated account or you're waiting on a purchase and they’re telling you four to eight weeks, they are signaling a serious problem on the supply side.
Chris Marcus (07:46) Craig, you mentioned that the Bank of England issue could get resolved. It’s also possible that it doesn’t. What if the Reserve Bank of India wants to repatriate more of its gold or continue adding to its holdings? We've seen central banks set records for gold purchases over the past three years. What if they buy even more this year? When you look at what's happening, Trump told countries that if they de-dollarize, they’ll be penalized. India is on the fence, but what are they doing? Buying gold.
Trump told countries, if you de-dollarize, we're going to kick you out. India, a little bit on the fence of how they feel, they don't want to lose access to the West. What do they do? Well, they don't call it de-dollarizing, but they're buying gold.
You know, I try to be careful to phrase things. I don't want to give people the idea like, hey, this is going to explode tomorrow, but you're certainly in an environment where there's a lot of volatility, and you know, one or two things go the wrong direction, you could have a problem. Do we know that that's going to be the case yet? Well, we're seeing a little bit of a problem now, but like you pointed out, things can come back in or there's a lot of things that could happen to create a bigger issue.
Craig Hemke (08:36) Right, right.
Chris Marcus (09:00) And Craig, you also mentioned in there the supply chains, and something I know you saw and I'm guessing many people who are watching right now may have seen is that Josh Fair of the Scottsdale Mint had a tweet last week and also did a video where he talked about how the refineries for silver are now backed up by three months. And he talks about how the dealers just keep buying back so much silver on the retail level, which is then being melted down.
And this is the part that I find interesting. We're already running a deficit. You've had a lot of retail silver selling over the last year and a half, but it seems like that's all going to feed industry, which makes me wonder, well, if we ever get to the end of this wave of selling, if we're still running a deficit even with that metal being used, now you're not gonna see the COMEX or the LBMA or Shanghai inventories come down, but what often gets left out is that the other big chunk of the inventory is all this silver that has been purchased by retail investors, especially since 2008, obviously before that. Fortunately, I have not yet found anyone who even can venture a guess yet of how you would get any indication of how much has actually been sold, but some amount, the supply is coming down, which if you get to the point where the selling stops, let alone if you have buying come in, where does that leave the deficit? Which I might add, Silver Institute had a report out just about an hour ago where they're expecting another large deficit in 2025 and...
Craig Hemke (10:29) Reverses.
Chris Marcus (10:46) We're on track for an issue. There's time left on the clock, but as you and I and others have talked about, there's not money going into the mining sector, especially the junior side. So it's not like we have all hands on deck rushing to get all the silver out of the ground and...
Craig Hemke (10:48) Yeah.
Chris Marcus (11:06) It'll be fascinating to see how it all unravels. You see where it's heading. Things can change. We had that running deficit from 1990 to 2005 in silver, bringing the inventories down. Then we got a little better at getting silver out of the ground. I don't know that that's on track to happen again to that scale, but certainly to see all this happening in that background, it'll be an interesting year for sure.
Craig Hemke (11:08) Yes.
You see that the fuse is lit. We just don't know if the explosion comes this year. But like you said, if we run another couple hundred million ounce supply deficit here in 2025, we'll be pushing a billion ounces over the last five years. And like you said, that's been mediated to some extent by or mitigated to some extent by people selling grandma's candlesticks and her tea set.
And some investment silver, obviously, too, people that bought it at 26, 10 years ago, finally getting their money, that kind of thing. Eventually, that runs out. And if the supply for industry continues to fall and the supply from retail begins to cut off at the same time, maybe the retail demand does a U-turn. That moment's coming. I want to just shift back the focus to gold and what's currently. Go ahead. Yeah, please.
Chris Marcus (12:25) Actually, I just had one comment on what you said there. That makes a lot of sense. And I've been surprised. The dealers I talked to, it has not ended yet in terms of that wave of selling. Initially, I thought a lot of those sellers were probably people who bought at 15, bought at 20, been sitting there for the last 10 and 15 years or late saying, all right, 30 bucks, I can finally get out ahead. Although most of the dealers I've talked to say it's people that need cash. So we'll keep an eye on it. It has not happened yet, but certainly whenever that does happen, I don't know how that factors in, and we will see.
Craig Hemke (12:56) Yeah, yeah. Yeah.
And to speak to Josh, I mean, I've known Josh Fair for a decade. He helped me on my TF Metals report side. I used to have the silver rounds, and his mint was the one that produced them. He's a legitimate guy. Scottsdale Silver is a legitimate company. So it's not like he can just be written off as like, oh yeah, he's just some blogger who doesn't know what he's talking about. So if he's seeing these kind of refinery delays, take him at his word.
I want to shift back to gold in our final minutes because I just find this so fascinating. Even Goldman Sachs came out, remember, right before Christmas and said that they thought the true level of official or unofficial or combined Chinese demand in November was actually 50 tons, not five. And then their official report was 10 tons for December. Now we're almost going into January. Just saw something from Kuz Jansen posted on Goldseek that said he thinks their buying is through the roof. So if already we're looking at a four to eight-week delivery delay out of London, and as you mentioned, India, China, and the rest keep pressing for more metal, what would that mean? Would a physical dislocation from price kind of start out with these huge spreads between Spot and COMEX that persist and widen? As we continue from here, what will you be looking for to think, boy, the whole system is starting to get a little shaky?
Chris Marcus (14:52) I mean, you could say that we've been seeing the signs of that for the past year. Last year, interest rate cuts get delayed and the metals keep rallying in the face of that. Short position builds up, metals keep rallying. A lot of things we have not seen, the relationship between yields and the gold price has changed.
Craig Hemke (14:56) Right?
Chris Marcus (15:19) Perhaps a bit early, but if you look at the London gold pool, what did you see before it happened? A lot of the metal leaving, heading to the East. With everything happening now, we are in a fragile situation, and the next weeks and months will be telling. I expect a good year for the metals this year.
Craig Hemke (17:27) With all these things taking place, you might want to think about adding to your stack whenever you can. You should definitely follow Chris Marcus. Chris, tell everybody where they can find your work not only on YouTube but on X and everywhere else.
Chris Marcus (19:58) You can find us at Arcadia Economics on YouTube. I’m ArcadiaEconomic on Twitter. We also do a Substack at goldandsilverdaily.substack.com. For gold and silver investors, I don’t think the big day is far off anymore. If you want to stay up to date, we're covering it. Craig, it's always fun to catch up.
Craig Hemke (22:12) Thanks, Chris. From all of us here at Sprott Money, SprottMoney.com, thanks for watching. Keep an eye on this channel for a very busy month of February.
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