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U.S. Mint Shutters Production as Retail Gold & Silver Scarcity Rises
Government Planners Move toward Total Takeover of Financial System
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Hello, and welcome to another edition of the Money Metals Weekly Market Wrap Podcast, I’m Mike Gleason.
First, a quick update on product availability, premiums, and shipping times. Money Metals continues to keep popular items in stock better than most of our competitors -- and our shipping delays are either minimal or non-existent. Our expanded fulfillment team here at Money Metals is getting boxes out the door at breakneck speed. Something we are incredibly proud to report on, all thanks to the tireless work of our loyal staff.
Among the key reasons for Money Metals’ high performance in an environment which has caused so many other dealers to stumble is because we also handle our fulfillment inside our own facility -- where we also operate a major U.S. depository for precious metals. These capabilities are pretty rare in an industry where so many dealers, particularly online dealers, rely on third parties to handle core business needs.
Now in terms of premiums, they do remain elevated due to continued extreme levels of demand… coupled with major supply disruptions at mints and refiners that are known to struggle in high demand situations, even without the added challenges of a global pandemic.
Our take is that, until spot prices rise substantially from here, especially in silver, we don’t expect much reduction in the premiums currently seen in the retail bullion market. But higher spot prices could eventually result in more secondary market product coming back into the market.
So bottom line is, even with spot silver between $15 and $16 an ounce, don’t expect to be able to buy and take immediate delivery of any physical retail silver bullion item for much less than $20 for the foreseeable future.
But that’s where Vault Metals comes in. Through Money Metals special, storage-only Vault Metals program, you can obtain direct ownership of gold and silver ounces at much closer to the global spot price. Think of it as your own gold and silver savings account. For more information on this great, cost-efficient option, visit MoneyMetals.com or call 1-800-800-1865.
Well now, let’s get into this week’s market update.
Even as the death count from coronavirus continues to climb, investors are finding reasons to be optimistic. U.S. stock market futures jumped Thursday night after President Donald Trump released formal guidelines for opening the economy back up in phases. Investors were also encouraged by reports that Gilead Sciences has developed a drug that shows real promise in combating COVID-19.
But the state of the economy remains grim, with reports this week showing catastrophic drops in retail sales, industrial production, and homebuilder sentiment. Meanwhile, the ranks of people filing for unemployment has surged to a staggering 22 million.
The mining industry is also getting hit hard. Major copper, gold, silver, and platinum group metal mines have been ordered closed in several countries around the world. An estimated 40% of global silver production is now offline.
A collapse in supply combined with an unprecedented surge in fiscal and monetary stimulus aimed at averting a financial collapse is a potentially explosive setup for precious metals markets. And while jewelry and industrial demand remain depressed, bullion demand has been incredibly strong in recent weeks.
This week, gold and silver prices are flat to modestly down, with gold essentially unchanged at $1,705 an ounce as of this Friday recording. Gold had traded up to an 8-year high Tuesday, just shy of $1,800 an ounce, before succumbing to selling. Some more consolidation may be necessary before the yellow metal makes another run toward the $1,800 level and then ultimately new all-time highs above $1,900.
Silver currently checks in at $15.39 per ounce and is showing a weekly loss of 2.0%.
Turning to the PGMs, platinum is showing relative strength – something we don’t often see. Platinum is up 3.0% this week to trade at $783. And finally, palladium now sports a $2,222 per ounce price tag after falling a slight 0.4% for the week.
As I mentioned earlier, premiums on most bullion products remain elevated as inventories remain scarce. Investors who have been awaiting opportunities to buy coins with lower premiums attached to them were dealt another blow by Wednesday’s news of a U.S. Mint closure. The U.S. Mint announced it would shutter its West Point facility indefinitely due to COVID-19 risks. Rumors are that the closure may be somewhat short, but we’ll have to wait and see if it actually plays out that way.
The shutdown will directly impact supplies of gold, silver and platinum American Eagle coins as well as American Buffalo gold coins. A few other mint shutdowns around the world are forcing buyers to opt for alternatives, which in turn is exerting upward pressure on premiums for all bullion products.
Scarcity-driven premium spikes in the bullion market have occurred before and have quickly been resolved by an increase in supply and/or a softening of demand. We’ve seen that start to occur slowly. Unfortunately, this crisis is quite different from anything that has hit bullion dealers before – and market conditions are likely to remain abnormally tight for weeks and possibly months to come.
The good news is that investors who want to own physical bullion but don’t necessarily need to take delivery of coins, rounds, or bars can own bullion bars near spot prices via our Vault Metals program. Vault Silver and Vault Gold enable investors to obtain allocated fractional interest in exchange-sized bars stored in secure vaults with Money Metals Depository. For now, this is the best way to own precious metals without having to pay abnormally high premiums or wait for inventory to become available.
Perhaps next month America will start getting back to work, and mines and mints will begin reopening. But the economy will never be the same as before the shutdown. Neither will investors’ priorities and risk appetites.
Even assuming the worst is behind us and the virus doesn’t make a second round resurgence this fall and winter, we could be looking at a federal budget deficit of close to $4 trillion and a Federal Reserve that is still engaging in emergency operations to prop up the financial system.
Crisis conditions won’t end anytime soon. Even if a crisis in the stock market or the junk bond market is seemingly solved by a set of interventions, new crisis “hot spots” will continue to emerge – one week it might be mortgages, another it might be student loans, small business bankruptcies, municipal bonds, pensions, insurers, entitlement programs, the U.S. credit rating, and ultimately the currency itself.
What all this means is that as investors adjust their strategies to the new realities we face, precious metals are likely to play a larger role in safe-haven asset allocation. Times that call for more caution and better preparedness, for self-reliance and resilience, are times that call for ownership of gold and silver.
Well that will do it for this week, thanks for listening. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Until then, this have been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.