Month: January 2023

Neils Christensen – Thursday January 26, 2023

In her latest report, Nicky Shiels, head of metals strategy at MKS PAMP, described the sentiment in the precious metals market as primarily gold-focused.

The comments come as gold prices have verged on a technical bull market with prices recently up nearly 20% from their November two-year lows. Shiels noted that the pullback in gold has been shallow.

Meanwhile, silver, which outperformed in November and December, has stalled, with prices treading water around $24 an ounce.

February gold futures last traded at $1,926.30 an ounce, down 0.84% on the day. At the same time, March silver futures last traded at $27.060 an ounce, up 0.50% on the day.

Gold’s strong start to 2023 has pushed the gold/silver ratio off its recent one-year lows and is currently trading back above 80 points. It now takes more than eighty ounces of silver to equal one ounce of gold. The historical average for the ratio is around 60.

“If one told any generalist gold was up $300+ in 3 months, most would expect silver at $30 ($25 minimum). However, perhaps it isn’t what’s wrong with silver but more what’s ‘right’ with gold,” she wrote in her note.

Shiels noted that the persistent inflation threat, ongoing volatility in the crypto market, geopolitical uncertainty, including the new debate in U.S. Congress over the debt ceiling and potential default, are all specific supportive factors for gold.

As to where gold goes from here, Shiels said the precious metal still has room to move higher. She added that this is the quietest bull market rally the market has seen in a long time. She said that the market is even close to being “frothy.”

“There are plenty calling out golds overextension and it’s clearly overbought on the short-term technical; however, 1) that view is consensus, urggh and 2) it may be the case that, like in steady bull markets, it doesn’t have to correct lower to work off overbought conditions, but just consolidate before relaunching,” she wrote.

Although next week’s Federal Reserve monetary policy decision poses a risk for gold, Shiels said that she expects the market to overcome the wall of worry. Currently, markets have all but priced in a 25 basis point hike next week, which is a significantly slower pace compared to the Federal Reserve’s last four 75 basis point moves.

“Although it really should be non-event with 25bp priced in for Feb and really, who cares about whether there is another 25bp in March or not when gold’s overcome 4x 75bp super-sized hikes in 2022,” she said. “Context is everything, but its still in Golds DNA to worry about most FOMCs.”

Looking ahead, Shiels said that she expects gold prices to grind higher as she believes this is more than just a momentum trade.

“The opportunity is not in a gold correction, but in silver & platinum playing catchup (in what could get messy given liquidity constraints), which is only more likely after the FOMC and Chinas return,” she said.

By Neils Christensen

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Neils Christensen
Friday January 13, 2023

The U.S. Mint’s disappointing sales numbers in 2022 are raising some questions among bullion professionals and retail investors; however, according to some analysts, these issues are also a part of a more significant trend in the global precious metals marketplace.

Last year the U.S. Mint sold slightly less than 16 million one-ounce American Eagle silver coins, a drop of 43.5% from sales of more than 28.2 million coins sold in 2021. Sales of American Eagle coins dropped to their lowest level since 2019.

However, analysts note that the reduced sales weren’t due to a lack of investor interest. Analysts have reported solid global demand for silver bullion throughout 2022. An indication of investor interest has been record-high premiums for American Eagle coins, pushing above 70%.

While the U.S. Mint reported disappointing sales numbers for 2022, Perth Mint saw record sales of more than 23 million ounces.

Michael Fuljenz, president of Universal Coin & Bullion and chair of the National Coin and Bullion Association American Silver Eagle sales committee, said that there are systemic issues impacting the production and supply of American silver bullion coins. He added that these issues could continue to persist in 2023, which means consumers will continue to face persistently high premiums.

Fuljenz said the biggest problem is that the mint buys silver blanks from private mints. Blanks are silver disks that are then transformed into coins.

Analysts have noted that the U.S. Mint has had difficulty maintaining its supply of blanks as it competes with growing overseas demand.

“The U.S. Mint either needs to start making their own blanks or be more competitive and pay more or loosen their conditions when it comes to buying them,” said Fuljenz. “If the Mint had more blanks, they would probably have had sales matching 2020 and 2021, and premiums would not have risen from about $3 over the spot silver price to $14 over the spot silver price in two years.”

Tom Power, president, and CEO of Sunshine Mining, which supplies the majority of the U.S. Mint’s silver blanks, said his company is running at full capacity trying to keep up with growing global and domestic demand.

He added that the silver market continues to deal with supply chain and production issues, particularly a shortage of skilled labor.

“There is no shortage of silver or the raw metal out there, but there are still ongoing production issues as we all continue to suffer from a labor shortage,” he said. “This has been going on for two years now and we could see it last another year or two.”

Power added that even if he could increase capacity at Sunshine, it would take 12 to 16 months to get the equipment he would need. “We are giving the U.S. Mint everything we can afford to give them,” he said.

Along with ongoing supply issues, the U.S. Mint also has to compete with unprecedented global demand.

Everett Millman, a precious metals expert at Gainesville Coins, said that the supply issues the U.S. Mint faces are part of a much bigger trend as a wealth of precious metals flow from Western nations to Eastern countries. Many analysts have noted that India has seen an insatiable appetite for silver bullion, with record imports in 2022.

Millman explained that this is a trend the precious metal sector sees every time there is a significant drop in gold and silver prices.

“Investors in the East seem to always take advantage of these price dips to stock up on precious metal,” he said. “When prices start to rise, we see the reverse and the metal flow back to the West.”

Millman added that in this environment, it’s not surprising that the U.S. Mint would have difficulty finding enough silver blanks to meet domestic demand.

“If there is more demand in the East and that is driving prices, then that is where the gold and silver are going to go,” he said.

Millman also pointed out that the Perth Mint’s record performance in 2022 indicates robust global demand.

Although consumers could continue to face higher premiums through 2023, Millman said that healthy demand in the East is a strong indicator that prices will eventually rise.

“Traditionally, investors in the East are not looking to buy gold to make a quick profit but are concerned about preserving their wealth and hedge against ongoing currency debasement,” he said. “Those dynamics are good reasons why we see gold flowing to the East.”

Millman said that he expects the tide in the precious metals market to shift when gold prices rise to $2,000 an ounce.

By Neils Christensen

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