COVID-19's toll to rattle gold prices next week as U.S. becomes new epicenter

A massive three-day bounce in stocks has proven to be only temporary as equities tumbled Friday, once again dragging gold down with it.

One of the biggest news to drive markets next week will be that the U.S. has become the new epicenter for the COVID-19 outbreak, surpassing China and Italy with the number of people infected.

The number of cases in the U.S. surged to more than 100,000, with at least 1,500 deaths. Worldwide there are now more than 590,000 cases and at least 26,900 deaths.

"The spread of the virus will continue to be very important, especially with the U.S. becoming the epicenter now," said TD Securities commodity strategist Ryan McKay.

The world will be watching Italy to see if there will be a flattening of the curve there, McKay told Kitco News Friday.

"If we start to see a solid trend of slowing growth there, it could be a good sign that social distancing measures do indeed work and would sort of give us the timeline as to what to expect over here in North America potentially," he noted.

What makes the news of the U.S. being the new COVID-19 epicenter worrying is the extent of how the rest of the global economy relies on the U.S. market and the U.S. consumer, said Gainesville Coins precious metals expert Everett Millman.

"The fact that the Fed has to use all of its ammunition sets the stage for everywhere else in the world that easy monetary policy and stimulus measures will be the norm for at least several weeks, possibly next several months," he said.

There is still a lot of hope around the $2 trillion stimulus package, which the House passed by voice vote on Friday afternoon.

Stimulus aside however, what concerns the markets is the enormity of the economic damage to the U.S. economy.

"While the stimulus measures being rolled out around the world can mitigate the initial negative fallout from the coronavirus outbreak and help support the eventual recovery, COVID-19's economic toll could be more severe," said FXTM market analyst Han Tan.

And no matter how massive the fiscal and monetary stimulus packages will be, they are all about damage control, not growth, noted ING's Chief International Economist James Knightley. "The U.S. can only grow once the economy re-opens," he said.

U.S. jobless weekly claims were just a sneak peek of the real "data horror show" that's about to be revealed via all the other U.S. macro datasets scheduled for release starting next week, said Nomura Global Markets Research.

Thursday's jobless claims number saw a spike of more than three million, with many people getting laid off amid widespread shutdowns across the U.S.

Jobless claims remain the critical number to pay attention to next week with Capital Economics projecting a climb to five million

"Given that the jump in claims to more than three million appeared to capture only a fraction of the claims reported by some states, particularly California, we are braced for a surge to nearer five million," said Capital Economics senior U.S. economist Michael Pearce.

Friday's nonfarm payrolls data will be slightly less significant because March's survey was conducted before all major layoffs hit the U.S. "The March payroll survey was conducted in the second week of this month and therefore came too early to capture the full hit to the labor market from the pandemic," Pearce noted

David

Are you late to the gold price party if you didn't buy 6 months ago?

Should you have bought gold six months ago before the world even heard of the coronavirus, which has triggered surging physical demand for gold and could drive prices to new historic highs?

Challenging times like these always draw new people into the gold market, said The Perth Mint global gold market advisor Kevin Rich.

“Gold is attracting more volume from existing gold investors—[But] times like these also always bring new people in,” Rich told Kitco News on Wednesday.

Even though some investors are now disappointed they didn’t buy gold six months ago, the precious metals market is cyclical and experienced investors will tell the newbies that there are still substantial gains to be made.

Some investors might say: ‘I am late to the party and should have bought gold six months ago.’ But experienced investors know that these cycles come and go. It reinforces the safe haven and diversification benefits that savvy gold investors have seen over the years,” Rich said.

To calm the fearful buyers who are scrambling to find some physical gold bars or coins to purchase in what looks to be a very tight market, Rich said not to worry.

“For now, there is enough [gold] to go around,” he said. “Plenty of gold in different formats available.”

It is important to remember that eventually, all global COVID-19 cases will peak and things will begin to normalize.

“For now, any mining or refining closures I think are temporary. This is a historic one-off event that none of us have ever seen … For now, it seems that we are good, but it depends on how long this event goes on,” he noted. “I would anticipate that the curves will start to come down and things will normalize.”

Whether it will take weeks or months, there is still “probably enough gold above ground to make it through that period.”

The massive worldwide demand for physical gold is easily spotted through The Perth Mint’s own business. In March, the mint’s depository business topped $5 billion in value of the precious metals it has sold and is holding for people.

“That’s a record level for them. They are seeing strong demand from investors. A lot of it is coming from Europe, especially Germany. There is demand from U.S. as well,” Rich said.

And even though The Perth Mint is running low on some inventory items, it is adding additional shifts to its refining output to meet some of that increased demand.

“There has been enormous demand for small bars and coins. Some of the inventory has been depleted. They’ll work hard to re-stock,” Rich pointed out. “There is no shortage of the underlying metal behind the refining. It is really just the question of refining capacity right now.”

For now, the gold price action has mostly been about the financial markets than the supply and demand side of things, Rich added.

“Gold prices are really being set with what is happening in the financial markets relative to equities … But over time, as the dust settles, the physical side will have an impact as some refineries around the globe continue to close,” he said.

Both, the financial markets side and the physical side are very constructive for the gold price.

The COVID-19 outbreak has tested gold’s safe-haven status, which proved to investors how valuable it is to have the yellow metal in their portfolios.

“If you look at how gold has performed through the entire pulldown in equities, it performed reasonably well. There was some selling pressure as people were liquidating all assets to meet margin calls and deleveraging. Overall, it proved to be a safe haven,” Rich said. “The reason why people add it to their portfolios was proven once again as it held up through this period.”

Going forward, gold prices could be looking at another historic run higher, especially considering everything the Federal Reserve has been doing as well as the overall low-interest environment globally, Rich noted.

“These monetary packages that the Fed and other central banks are doing are similar to what happened in 2008. Down the road, nine to 12 months from now, there will potentially be an inflationary effect, which is good for gold,” he said.

The patterns of 2008 resemble today’s crisis — first equities sold off in 2008 and gold was selling off, then the Fed stepped in and gold ran up, which started the 2008-2011 historic gold run, Rich explained. “There are similarities to what is happening now,” he added.

 

By Anna Golubova
For Kitco News

David

Some price pullback is healthy for gold

Consider this, gold has had a price range from Friday’s low ($1457) to Tuesday’s high (1698.60) of $241. If you compare Friday’s opening price ($1470) to Tuesday’s close ($1660) Gold had gained a total of $190 over three trading days. Based on the rapid ascent of gold pricing today’s moderate selloff I believe is healthy.

We have all witnessed markets that have entered what is known as a parabolic rise, or more commonly referred to as a J curve, and on the majority of instances the steeper the climb the harder the fall. Gold has experienced a dramatic price increase from Friday’s open up until Tuesday’s close. Which means that today’s decline of approximately $21 in gold futures is a healthy pullback.

As of 4:45 PM EST gold futures basis the most active April contract is currently fixed at $1640.50. That is just $20 off of yesterday’s close. If we create a Fibonacci retracement from the low of Friday to the high of Tuesday or today, the current decline is approximately at the 23% Fibonacci retracement level. While that is considered a mild pull back, current pricing at $1641.30 is well off of today’s intraday low of $1615.70

Our technical studies currently indicate that major support occurs between $1600 and $1607 which is the 38% Fibonacci retracement. The studies also indicate the first level of minor support at $1643.30, the 23% retracement level.

Another noteworthy aspect of the last two trading days has been that on both occasions traders have moved gold futures as high as $1699.02 days in a row. This creates a candlestick pattern simply known as a tweezer top. This pattern requires two consecutive days to have approximately equal highs. It differs from a tower top or bottom in that that pattern requires multiple candles to find support or resistance at approximately the same price point. We can see an example of that on today’s daily chart which shows a tower bottom occurs at approximately $1458.60.

The other interesting observation about gold pricing over the last few weeks has been the large difference between spot prices and futures pricing. Currently spot gold is trading at $1616.40 which is a net decline approximately five dollars on the day. Compared to current futures pricing at $1643 the differential between April futures and spot gold is roughly $27. In my experience as a former commodity broker, former CTA and now a market analyst I have never seen the differential between spot and futures most current month being this large.

What is more perplexing is that spot is currently below futures pricing and according to a report in MarketWatch, Josh Strauss, partner at money manager Perkin Hardy Strauss in Chicago says that “there is no gold. There’s roughly a 10% premium to purchase physical gold for delivery. Usually it’s like 2%. I can buy a one-ounce American Eagle for $1,800. Kitco reported today that it was out of almost all standard 1-ounce gold coins. American eagles and buffaloes, issued by the US Mint are both out of stock.

Which beckons that we ask the following question; if there is such a shortage now why is spot pricing in gold below the most active April contract of gold futures. One plausible explanation would be that the expecta

Wishing you as always good trading,

 

By Gary Wagner

Contributing to kitco.com

David

Get ready for $2,500 gold price this summer – B. Riley FBR

Massive gold price revisions are hitting the market this week as analysts estimate the impact of the COVID-19 crisis, with one investment bank upping its Q3 and Q4 gold price forecasts to an impressive $2,500 an ounce.

Citing unprecedented fiscal and monetary policy stimulus, B. Riley FBR analysts said on Tuesday that they expect gold to surge to $2,500 an ounce in Q3 and continue to trade at those levels in Q4.

“It has not been our practice to forecast gold price,” wrote B. Riley FBR’s analysts. “[But] due to our conviction in rising gold prices, we are meaningfully raising our gold price deck … to $2,500/oz in 3Q20 … and we feel compelled to align our 12-month price targets to this view.”

The main driver will not be a potentially deep recession or another major drop in equity markets, but extremely low rates along with “unprecedented fiscal and monetary stimulus,” the analysts said.

“Regardless of how much longer recession conditions will continue and how much further general equity markets might retreat, extreme monetary and fiscal stimulus policies being enacted on a global basis will have repercussions,” B. Riley FBR’s note stated. “These repercussions will likely parallel 2009-2011, and drive gold price to new highs.”

Gold miners will greatly benefit from this surge in prices once the economy begins to return to normal more or less, the analysts added.

“We believe the current macro environment has been primed to drive gold prices to the $2,500/oz level. During such a gold price ascent, gold will be the best performing asset class, and gold related equities will be the best performing equity sector,” they wrote.

The investment bank advises its clients to “overweight gold and gold-related equities, and hold a market cap weighted portfolio of our favorite names: NEM, RGLD, PVG, SSRM, and CDE.”

“We also recommend our favorite pre-producers (GSV, SA, SILV), which we view as most likely to be caught up in an M&A wave associated with rising gold prices,” the analysts added.

 

By Anna Golubova
For Kitco News

David

Gold, silver prices soar; inflation on horizon?

Gold and silver prices are trading sharply up in midday U.S. futures trading Monday. Prices shot from modestly higher levels overnight to sharp gains following an early-morning announcement from the Federal Reserve that the U.S. central bank is very aggressively buying more securities, including mortgage-backed, and also will open up a “main street” lending facility. The Fed used the term “unlimited” on amounts it will spend. U.S. stock indexes initially shot higher on the news but quickly sold off again. April gold futures were last up $65.30 an ounce at $1,550.30. May Comex silver prices were last up $0.505 at $12.895 an ounce.

Today as I watched the TV business news channels continue to report dire news on the economy, and stock and financial markets–in particular a national movie theater official who said there is not one single member of his association that is making one single dime at present—I pondered the following as my wife and I have been holed up for two weeks in my rural Midwest home on a dead-end road: When this coronavirus panic has run its course and the severely impacted people worldwide return to a normal way of life, it seems that all of the world that has been pent up for what will likely have been so many weeks will want to get out in the public and do some things, and be some places and enjoy life again! That means a surge in retail demand, especially at entertainment-related businesses. That potential massive surge in consumer demand is likely to be temporary but there are a few stock market forecasters saying the stock indexes will be back at record highs by next year. Importantly, after the U.S. and other major central banks of the world have flooded their economies with massive sums of cash, it seems that pent-up consumer demand could be even stronger. My college economics classes taught me that when you combine higher consumer demand with money that has flooded the banking system it is a sure signal for price inflation—and maybe problematic price inflation at that. Ironically, after so many years of low inflation, it may have taken a crash in the world economies into near depression levels to restart price inflation trends that up until a dozen years ago had been rising at significantly higher annual rates. When I got into the commodity markets industry full-time over 35 years ago, I also learned that price inflation is bullish for raw commodities, and especially for gold. And after over three decades in the business I do know that price history in markets repeats itself. I could be off the mark on this rising inflation theory, but one cannot argue that the elements for such occurring are or will be in place. Let me know your thoughts. I enjoy hearing from my valued Kitco readers all over the world. jwyckoff@kitco.com

Global stock markets were lower in overnight trading. U.S. stock indexes were locked limit down in overnight trading as the U.S. Congress over the weekend failed to agree on a financial aid package for U.S. businesses and citizens, which was being blamed for the even more dour marketplace mood to start the trading week. There are midday reports that the U.S. Congress is close to agreement on a bailout package.

The Covid-19 outbreak continues to spread worldwide, with the U.S. economy shutting down even further as many states, including New York and California, have been locked down by their governors. Focus in the U.S. is on a shortage of medical supplies. Local health officials are now asking for the public to donate any supplies such as masks and gloves that they have at home. U.S. Senator Rand Paul has been diagnosed with Covid-19. Over the weekend much of the American public came to the stark realization the U.S. is not going to remain on lockdown for just a couple weeks, but instead for a period likely at least twice that long and probably even longer. China-U.S. relations are becoming more strained as President Trump now refers to Covid-19 as the “China virus,” which has angered the Chinese people.

The important outside markets today see Nymex crude oil prices weaker and trading around $22.00 a barrel. The U.S. dollar index is weaker after hitting a three-year high overnight. The 10-year U.S. Treasury note yield has dropped to around 0.78% Monday after trading above 1.0% last week.

Technically, April gold futures bulls and bears are back on a level overall near-term technical playing field as a steep price downtrend on the daily bar chart has been negated. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,600.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at today’s low of $1,484.60. First resistance is seen at $1,575.00 and then at $1,600.00. First support is seen at $1,525.00 and then at $1,500.00. Wyckoff's Market Rating: 5.0

May silver futures bears have the solid overall near-term technical advantage as a steep price downtrend is in place on the daily bar chart. A bearish pennant pattern may also be forming. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $14.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $11.00. First resistance is seen at $13.23 and then at $13.50. Next support is seen at today’s low of $12.29 and then at $12.00. Wyckoff's Market Rating: 2.5.

May N.Y. copper closed down 870 points at 208.40 cents today. Prices closed near mid-range today and closed at a three-year low close. The copper bears have the solid overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 234.15 cents. The next downside price objective for the bears is closing prices below solid technical support at last week’s low of 197.25 cents. First resistance is seen at today’s high of 214.65 cents and then at 217.50 cents. First support is seen at 205.00 cents and then at today’s low of 202.05 cents. Wyckoff's Market Rating: 1.0.

 

By Jim Wyckoff
For Kitco News

David

Gold price dips below $1,490 ounce, Asian markets trounced

Worry is still gripping world markets in the face of the COVID-19 scare.

Markets are looking for cash and precious metals are getting dumped. On Sunday evening gold dipped below $1,490 ounce, a four-month low. Silver dropped below $12.30 ounce before recovering.

Platinum bucked the trend and traded up, reaching a high of $625 ounce. Palladium was up, too, breaking through $1,580 ounce.

Pacific-Asian stocks are down. Hang Seng opened 5% lower at 21.659. The S&P/ASX 200 is off nearly 6% as of midnight ET.

Dow futures tumbled 900 points on Sunday, tripping the 5% allowable limit and halting further trading, reported CNN.

Reuters reported that oil prices are off more than $1 a barrel at the start of the trading session on Sunday.

Markets are waiting for some monetary action. The U.S. Congress is wrangling over a $1-trillion economic stimulus bill. The bill was held up on Sunday, but negotiation is resuming. A week ago the Federal Reserve acted, slashing the federal fund rate between 0 and 1/4 percent.

 

By Kitco News
Sunday March 22, 2020 22:12

David

Gold settles higher, but logs a second weekly decline

Gold futures rose Friday, finding support after indiscriminate selling across financial markets weighed even on some traditional havens, sending prices for the precious metal lower for the week.

For now, gold has gotten a boost from Senate Majority Leader Mitch McConnell’s proposal to get “needed relief cash in hands of middle and low income households, and other stimulus measures moving forward,” said Jeff Wright, executive vice president of GoldMining Inc.

“This has at least temporarily stemmed the tide of liquidation selling of all assets, gold no exception,” he told MarketWatch. “All signs point to gold moving higher in near term, unless panic selling wave returns.”

The ICE U.S. Dollar index DXY, -0.78% pull back is also supportive for gold, Wright said. “All signs point to gold moving higher in near term, unless [the] panic selling wave returns.”

Gold for April delivery GCJ20, +1.47% on Comex rose $5.30, or 0.4%, to settle at $1,484.60 an ounce. For this week, prices for the most-active contract lost 2.1%, according to FactSet data. The previous week’s loss of more than 9% was the largest since September 2011.

May silver SIK20, +4.12% rose 25.1 cents, or 2.1%, to $12.385 an ounce, for a weekly decline of 14.6%. Prices on Wednesday settled at the lowest since January 2009.

Gold has “rebounded alongside the improvement in risk appetite, while falling for much of the week as central banks around the world threw the kitchen sink at the coronavirus,” said Craig Erlam, senior market analyst at Oanda, in a note.

“Their efforts are not in vain but we’re not seeing the surge in demand for gold that we’ve seen in the past when the market is flooded with liquidity. I feel there may be a lag effect, with investors still liquidating gold positions to fill holes elsewhere but only time will tell,” he said.

Meanwhile, benchmark U.S. stock indexes moved lower in Friday dealings as gold futures settled. Still, the global equity rout slowed this week as central banks rolled out additional stimulus measures and governments weighed fiscal responses.

Against that backdrop, May copper HGK20, -1.48% ended at $2.1715 a pound, down 0.6% Friday and nearly 12% lower for the week. April platinum PLJ20, +2.44% tacked on 4.3% to $622.50 an ounce, with prices down over 16% for the week, but June palladium PAM20, -0.74% added 0.7% to $1,540.20 an ounce, for a weekly rise of around 2%.

“Fundamentally, gold should be in $1,500-1,600 range, and moving higher based on FOMC balance sheet expansion, stimulus measures and traditional retention of safe haven status,” said Wright. A “weekend of calm and quiet will be welcome for everyone in the market—long and shorts and public in general.”

Published: March 20, 2020 at 1:54 p.m. ET<br>
by Myra P. Saefong and William Watts

David

Dollar strength continues to plague precious metals

Gold continues to fall in the presence of extreme dollar strength which is dictating most of the net change within the precious metals complex. As of 6:15 PM EST the dollar is currently up almost 2%, with the index currently fixed at 103.56.

The last time we saw the U.S. dollar have this kind of strength was in January 2017 when it hit a high precisely where the dollar index is trading currently just above 103.

During this last week alone the dollar index traded from a low of 97.70, and is currently at its highest value this week at 103.56. That is a net change of almost 6% (+5.86%) in a single week. Today’s strong rally in gold accounted for roughly one third of the gains realized this week.

U.S. equities had a mild recovery today but it is not convincing enough to say with any conviction that the selling pressure and carnage is over. This could simply be a. Where equities are consolidating and moving up slightly, or a dead cat bounce. In either case the key is caution and patience as we wait to see how the current coronavirus crisis and pandemic play out.

Still many analysts question why we have seen the stock market lose such a vast amount of market capital, along with gold down dramatically at the same time. The common belief is that market participants are simply liquidating all assets including the safe haven group. However, many believe including myself that at some point if equities continue to drop it will not be just the U.S. dollar gaining strength as a safe place to park your investment capital, and gold will once again return to a safe haven asset.

As reported in MarketWatch analysts at Zaner metals wrote, “We do think that gold has seen consistent cushioning from those unwilling to give up on the idea of gold and silver ‘eventually’ getting safe haven buying. However, for the time being, the primary safe haven instrument (at times the only safe haven instrument) has been the dollar and, therefore, we are highly suspicious of further gains in precious metals particularly and silver.”

Although many analysts expect the U.S. equities to remain under pressure over the next months, which should result in more dollar strength and gold prices remaining week.

It is also hard to explain why with all of the proposed extra stimulus from the government and central banks and emergency rate cuts that the dollar continues to be the favored place to put investment capital as a safe haven.

While we acknowledge that the typical reaction to recent Fed decision to infuse capital and liquidity into the markets, and cut rates to near zero in two emergency moves that gold should have reacted in a bullish manner. The facts remain investment dollars are on the move from equities into bonds, the U.S. dollar and the Yen.

On a technical basis we see major support for gold at $1440 to $1446. This is based on a previous support level in gold that occurred between November and December of last year. This was also the price point that we saw gold spring up to higher prices as it challenged $1700 per ounce for the first time in seven years.

The gold – silver ratio hit an all-time record high yesterday just above 124. Today it backed off a little bit moving down to 121.96. Since this ratio is in uncharted territory it is difficult to predict whether this price point will act as ultimate resistance or a level of consolidation before moving to yet a new record high.

Wishing you as always good trading,

 

By Gary Wagner
Contributing to kitco.com

David

The only silver lining is the gold-silver ratio

When we look at the precious metals complex the only thing we see moving higher is not a specific precious metal, rather it is a ratio between two precious metals. This ratio is the only investment that is competing with recent dollar strength which hit a new high today of 101.26, after factoring in today’s gain of approximately 1 ½%.

The only silver lining to this cloud of coronavirus confusion and fear is the gold-silver ratio. The historical I use only goes back to 1998. That being said, the current gold -silver ratio is the highest on record.

Historically speaking from 1687 up until 1885 the gold-silver ratio was fixed at just under 20 to 1, meaning it took 20 ounces of silver to equal the value of 1 ounce of gold. Between 1885 and 1934 the ratio remained range bound between 20 to 1, and 40 to 1.

Figure 1 is a long- term chart of the gold- silver ratio, it goes back to 1687. The arrow just under 1934 shows the dramatic change in the ratio following legislation by President Roosevelt.

President Franklin Roosevelt enacted legislation and passed the Gold Reserve Act of 1934. This act made it illegal for American citizens AND the Federal Reserve to own gold. This act required that all Americans and the Federal Reserve to surrender all of their gold coins as well as gold certificates to the United States Department of the Treasury and exchange them for new American dollars which no longer were redeemable in gold. This in essence converted the gold standard-based dollar to a partially backed currency.

Citizens as well as the Federal Reserve Bank transferred all of their gold reserves to the U.S. treasury at a discount. The net result was that the United States had established an exchange stabilization fund under the control of the treasury which would control the value of the dollar.

After World War II many major countries all met in Bretton Woods and created a monetary management system to maintain the external exchange rate which effectively allowed countries to convert their U.S. dollars to gold.

From 1934 to 1947 the gold-silver ratio rose to 100 for a brief period before settling back to its former level of 20 to 1 in 1971. The red arrow on figure 1 represents the year, 1971 that President Nixon passed legislation that in essence abolished the gold standard as we know it. This became known as the Nixon shock which effectively ended the Bretton Woods agreement and abolished the ability for countries to convert their U.S. dollars into gold.

This caused the gold silver ratio to rise once again to approximately 80 to 1.

Figure 2 is the gold silver ratio from 1975 to 2015. It shows that between 1990 and 2015 the gold silver ratio traded from 90 to 1, to as low as 35 to 1.

 

However, that all changed at the beginning of 2020, when the ratio had been trading at roughly 85 to 1. Figure 3 is the gold silver ratio including the most current data up until March 18, 2020. During the first 18 days of March the gold silver ratio jumped from approximately 95 to the current value today of 124, the highest level on record.

What is clear is that the precious metals as a group have been under pressure and trading dramatically lower ever since the coronavirus crisis began. However never in history has it taken 124 ounces of silver to equal the value of a single ounce of gold, until today.

 

Wishing you as always good trading,

 

By Gary Wagner

Contributing to kitco.com

David

Silver price beaten down but investors can‘t find any, so what’s going on? Peter Hug Responds

Silver’s future is bleak as a recession could wipe out any industrial demand left for the metal, this according to Peter Hug, global trading director of Kitco Metals.

Monetary policy was not enough to calm investors, Hug noted, as markets reacted negatively to the last Federal Reserve rate cut made last Sunday.

“That episode really scared the market. It indicated that the Fed pushing on a string here is not going to solve the issue. It’s going to require some significant fiscal policy,” he said.

Hug said that a recession may now be underway.

“Ignoring the economics of a significant recession – it may be short lived, if we’re not already in it – if we ignore the economics of it, silver [is] an industrial metal and there would be virtually no demand for it,” he said.

Hug said that the recent price decline in metals is due to traders and investors liquidating their metals to meet margin calls, putting even more pressure on the physical market.

“Because there is no physical metal in the market right now, both the U.S. Mint and the Canadian Mint are on allocation with some products anywhere from four to six weeks out, at a minimu, we’re looking at a situation where there isn’t enough physical offtake to offset the selling of the ETFs and the futures, because there’s no physical product left to buy,” he said.

Spot silver traded 20 cents higher on the day Tuesday.

David