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Money Metals News Alert
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January 20, 2025
– The gold price rose about $10/oz last week, while silver finished near
flat.
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The excitement in the
metals markets isn???t showing up in the spot price itself.
It is in the institutional
markets, though.
Specifically, those who
have Comex deliverable bars located inside the U.S. have the ability to sell for
hefty premiums versus the price of acquiring bars in London and the rest of the
world.
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Traders who need physical bars to
cover short positions in silver and gold are paying up. Those who have the bars in
the U.S. are reluctant to let them go as the incoming Trump administration is
expected to move quickly to impose tariffs on a variety of imports, possibly
including precious metals.
The markets seem to be making a
genuine distinction between those holding paper promises and those holding the
metal itself.
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Gold : Silver Ratio (as of
Friday's closing prices) – 88.8 to
1
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It???s a Buyer???s Market for Bullion
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Most of the past five years in the
retail bullion markets were a sellers??? market. Buyers faced hefty premiums and
demand outstripped supply.
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Over the past few months,
that dynamic turned 180 degrees in the U.S. retail market.
A whole lot more people
are inclined either to sell the metal that they have – or simply hold.
Ask premiums -- the amount
buyers pay in addition to the metal value for coins, rounds, and smaller bars
– are at the lowest levels in years.
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That is good news for buyers, but
lower premiums aren???t the only reason that now could be a good time to buy.
The market is showing some tightness
where it really matters in terms of metal prices. There aren???t enough COMEX
deliverable bars at the moment, at least not inside the U.S. The potential for a
short squeeze exists, driving spot prices higher.
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Over the past week, the
premium for ???registered??? bars in a COMEX vault has ranged from 50 cents to a
dollar per ounce for silver. At the same time, premiums for deliverable gold bars
made a big move higher, topping $40 per ounce..
So far, these premiums
haven???t shown up in the retail physical market. They are primarily being paid by
shorts who have to deliver actual metal in Comex deliverable bar form.
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The difference between COMEX futures
prices and the price of physical metal will eventually either push spot prices
higher or futures prices lower as arbitrageurs play the spread.
Readers may remember the ???Silver
Squeeze??? in 2021. It was a grassroots effort by retail investors to create a short
squeeze in the futures markets and force prices higher.
While the effort was certainly
successful in driving demand for retail bullion products, it did not drive futures
higher. Thousand ounce silver bars and kilo gold bars remained plentiful and the
market price never really took off.
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The current situation is
different. The shortage in COMEX bar inventory available for delivery is having an
impact behind the scenes and may soon burst into the public markets.
The trigger for the recent
events is tariffs. President Trump is expected to levy tariffs on a variety of
imports, including potentially precious metals. This threat has caused a global
scramble to get gold and silver inside the United States before any tariffs take
effect.
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Vault inventories in London and
elsewhere are not exactly plentiful. They???ve actually been declining for years.
A lot of the reported London inventory
is allocated to gold and silver exchange traded fund (ETF) holdings. Some of what
remains is held in ???strong hands??? -- owned by investors who aren???t willing to sell
at all, or who are holding out for much higher prices. It isn???t clear how much of
a ???free float??? of bars is available for export.
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There is also a supply
deficit in silver. While mine output for gold has risen recently, silver
production is expected to decline and remains 200 million ounces short of annual
demand.
Producers have yet to
respond to somewhat higher prices with more production. That means traders who
need physical silver to cover a short position won???t be the only ones bidding for
the available above-ground supply.
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For anyone planning to buy physical
gold or silver, now could be the best opportunity in years. Considering premiums
by themselves, it definitely is.
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This week's Market Update was
authored by Money Metals Director Clint Siegner.
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This copyrighted material may not
be republished without express permission. Offer only available through email
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to international orders. The information presented here is for general educational
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