What a week. If you feel anything like I do right now, you're probably ready for a cold drink or glass of red wine, so allow me to get straight to the point.
What's going on with precious metals?
There is A LOT going on with precious metals at the moment. In fifteen years, I've never experienced a week quite like this one. I'm going to focus my comments today on the most critical points for investors; product availability, product premiums and the price outlook going forward.
Don't let a falling gold or silver price fool you; demand for physical gold and silver is at record levels right now. Based on our own trading figures, and those of our industry colleagues, I estimate demand for physical products is up 400% these past two weeks. As a result, the precious metal supply chain is experiencing severe product shortages at the moment. Most best selling products are either temporarily sold out or on a 6-8 week delivery schedule. Many suppliers are not taking orders for best selling products at this point, and won't be, until supply catches up.
The problem isn't a shortage of physical gold or silver in the world, the problem is that the mints and refineries are temporarily sold out of their products due to extreme retail demand. It will take these organizations time to increase their output, adjust their production schedules, bring more equipment online, etc., to meet current demand. This creates a gap in the supply chain, which is now blatantly obvious. Some products do remain available, but they may not be the best sellers investors are used to, or available at premiums they wish to be paying.
Premiums are determined by supply and demand in a free market. Due to extreme demand the past few weeks, premiums have doubled, and in some cases, tripled or more. Gold Maple Leafs went from $35/over spot to $55/over spot, to $75 over before being sold out completely. Silver product premiums are up 300%++, to the point where it's almost uncomfortable to recommend certain products to clients out of good faith, even thought they want to buy them badly. I've seen Silver Eagles at spot +$8 and heard of dealers in Mexico charging $35 USD for a coin.
The expectation is that premiums will stay high until supply catches up to demand. At this point in time, there is no end in sight. Speak to us about availability and premiums and we'll guide you as best we can. Our talented traders have identified some opportunities that still exist, at least for the moment.
Gold ended the session today up $27.40/oz and silver was up $0.49/oz, both very positive signs as the prices stabilized and were more reflective of what we've been seeing in the retail market. Although more rocky trading sessions are expected going forward, the mid-term outlook for metals, based on similar historical periods, remains positive. As I stated in last week's update, I believe we have entered the next phase of the precious metals bull market, one where metal prices suffer their expected set back along side the rest of the markets, before catapulting towards new record highs.
This historical trend is demonstrated perfectly by my industry colleague Jeff Clark, senior analyst for Goldsilver.com, in his latest article which I've included a link to below. Jeff's article studies three major recessionary periods and highlights gold and silver's comebacks once the initial dust had settled. I expect the same will happen here in 2020.
Read Jeff's article here: https://swpcayman.info/crash_recoveries
On that note, I wish you a wonderful, healthy and relaxing weekend. More action to come next week, I'm sure.