Mints are running out of gold; not enough physical silver to cover paper – former U.S. Mint Director

global shortage of physical gold and silver products has created a premium on coins and bars, and this premium is causing a disconnect between the spot price and the "true" price that retail investors need to pay, said Ed Moy, former director of the U.S. Mint.

Moy, who was the director of the U.S. Mint between 2006 and 2011, cites the inability of the mints around the world to keep up with physical coin and bar demand as a reason for this shortage.

"Not only the U.S. Mint, but other Mints around the world, Australia's Perth Mint, the Mexican Mint, have all run out of gold, they can't keep it in spot and there's so many shortages retailers are having problems accessing that gold," Moy told Michelle Makori, Kitco's editor-in-chief.

Premiums on these physical gold and silver products can run as high as 20% in some places, Moy said.

"If you go to any of the top retailers for gold bullion and take a look at what they're charging for an ounce American Eagle gold bullion coin, even though the spot price right now is $1,775 give or take, you're hard pressed to find a ounce gold coin for anything less than $2,000, and I've seen it as high as $2,100," he said.

One of the main reasons for why the spot prices have not caught up to gold and silver's premium-adjusted price is that the overall markets are flooded with bullion derivatives, Moy said, but it's only a matter of time before the short contracts keeping the price down expire.

"What's artificially depressing the price of gold now is that there's a lot of institutional investors that don't hold gold. What they hold is they buy gold derivatives, like futures…and a lot of them are betting that the economy's going to recover and that everything's going to be fine and gold's going to go down," he said. "As those short contracts come up, what you're seeing is a popping in price."

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The gold market went back to basics in the first quarter of 2021 as demand for jewelry and physical bars and coins supported a sharp drop in investment demand, according to the latest research from the World Gold Council (WGC).

In its quarterly Global Demand Trends report, the WGC said that physical demand for the precious metal totaled 815.7 tonnes, virtually unchanged compared to the fourth quarter of 2020. However demand was down 23% compared to the fourth quarter of last year.

In an interview with Kitco News, Juan Carlos Artigas, head of research at the World Gold Council, said that shifting demand in the gold market continues to demonstrate the precious duality as an important strategic asset.

“Investment demand can have a significant influence on price, but also you shouldn't completely, disregard what is happening in other parts of the market because that can create support for the price. That is what we are seeing right now in practice,” he said.

Meanwhile, the average gold prices in the first three months of 2021 was 13% higher compared to the first quarter of last year; however, it was down 4% compared to the previous quarter.

Artigas, said that the research shows global gold investment is shifting away from tactical positioning as investment flows out of gold-backed exchange traded funds. At the same time consumers are developing more strategic purchases, taking advantage of lower prices to buy the physical metal in forms of jewelry and bars and coins.

“The support from renewed consumer demand has provided important support for gold, otherwise the price may have fallen further. Yes we have seen outflows in investment demand but we also see positive growth in demand in other areas,” Artigas said.

Looking at investment demand for physical bullion, the WGC said that consumers bought a total of 339.5 tonnes in the first three months of the year, up 36% compared to the first quarter of 2020. The report said this was the highest level of coin and bar demand since the fourth quarter of 2016.

“Bargain-hunting in key markets, notably China, was a major driver of growth in this sector of demand as the gold price fell back from the 2020 peak,” the analysts said in the report. “Fear over rising inflationary pressures was an added driver, as economies around the world responded to the massive fiscal and monetary stimulus introduced to combat the worst impacts of the pandemic.”

Physical bar and coin demand help to offset significant declines in investment demand. The report said that investment into gold-backed ETF saw outflows of 177.9 tonnes, down dramatically compared to 299.1 tonnes of inflows seen in the first quarter of 2020.

“Outflows quickly mounted through the quarter as inflationary expectations – and, by extension, expectations of higher interest rates – were unleashed. Outflows of this magnitude were last witnessed in Q4 2016, a time when there was a similar re-appraisal of the expected course of US growth and interest rates,” the analysts said.

Although gold investment demand and in turn prices struggled in the first quarter of 2021, Artigas said that the market can still bounce back fairly quickly. He added that rising interest rates at the start of the year had a significant impact on the gold market, but those headwinds should continue to ease through the rest of the year.

“I think investors will return to gold as the Federal Reserve continues to maintain low interest rates,” Artigas said. “Bond yields can’t increase indefinitely. At some point if yields rise too much we would expect the Fed to step in to keep interest rates anchored.”

Artigas added that even if bond yields continue to move higher, rising inflation pressures will mean that real interest rates will remain at historical low level.

The WGC also reported a recovery in gold jewelry demand. According to the data consumers bought 477.4 tonnes in the first quarter, up 52% from the first quarter of 2020. However, the WGC said that while jewelry demand has improved it still has a long way to go to get back to pre-pandemic levels.

“Longer-term comparisons show that [jewelry demand] remains relatively subdued, falling short of the quarterly average over the previous five years of 505.9 tonnes. And it remains well below average first quarter levels too,” the analysts said.

The third important pillar of support in the gold market remains central bank demand. The World Gold Council said that

central banks bought a net total of 95 tonnes of gold in Q1, down 23% compared to the first quarter of 2020.

Although central bank demand saw a slow start to the year, Artigas said that they still expect central banks to be net gold buyers.

“Sizeable purchases and sales from a small group of emerging market banks continued to drive overall central bank demand,” the analysts said in the report.

One interesting feature the WGC highlighted in central bank demand in the first quarter is that the Bank of Japan increased its gold reserves by 80 tonnes as a result of a government transfer between departments.

“Japan’s foreign reserves are held between the central bank and the Ministry of Finance, and this gold purchase has been transferred to the latter’s foreign reserves account. Because this was an intergovernmental transfer of gold, rather than a new purchase, it has not been included in our reported central bank net demand number for Q1,” the analysts said.

Artigas added that if the Bank of Japan didn’t think the gold would be useful the government wouldn’t have made the transfer.

“We can see that central banks think gold has a purpose as a reserve asset and can be a useful tool,” he said.

Looking at the gold supply, the WGC said that the global supply of gold totaled 1,092 tonnes, up 4% compared to the first quarter of 2020. However, total mine supply actually increased 4% to 851 tonnes as producers continued to work through last year’s COVID-19 induced disruptions.

“The overall fall in supply in the first quarter illustrates the importance of recycling and producer hedging to the gold market,” the analysts said.

 

By Neils Christensen

For Kitco

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'We are sitting on economic cliff' – Gold price will be 'well north of $2,000 this year' – ex-JP Morgan MD

nvestors could see a big move higher in gold soon, according to ex-JP Morgan managing director and now CEO of Trovio, Jon Deane, who sees prices trading well north of $2,000 an ounce this year.

Inflation is already here, and the world is sitting on an economic cliff, which makes assets like gold, silver, and bitcoin very popular with investors, Deane told Kitco News.

"We are already seeing inflation. If you look around the world, you see real estate prices, building supplies, and services skyrocket," he said. "What we created since the early 1990s is an entire financial infrastructure that is relying on debt, and we have accelerated that dramatically in our response to managing the COVID-19 crisis. In that regard, we will continue to increase the money supply globally, and we will continue to have a quite aggressive fiscal policy. We are sitting on an economic cliff."

After shedding weak long positions in gold, the precious metal's technical picture is looking much better.

"We'll see a real big move in gold. We've taken a lot of the length out. We are in a real position to move higher. We'll go well north of $2,000 this year. Realistically, $2,200 is probable. It may have some headwinds as we go through $2,000 again. Gold is in a much better position than where it was a few months ago," Deane said.

The outlook for silver and bitcoin is also bullish. "[Silver] can be somewhere between $35-$40 by Q1 next year. Bitcoin could be north of $100,000 or even $150,000 before the end of the year," he said.

What gold and bitcoin are likely to see is a wave of new investors joining the inflation hedge club. And for bitcoin, this theme is even more prevalent since it is a very new asset compared to gold.

"Bitcoin story is similar to gold but on a much bigger scale. You are introducing entirely new market participants to an asset class that has never seen that before. Every day, there is a new announcement of another major asset manager that is going to get involved in bitcoin. All those dollars add up," Deane said. "Whereas in gold, most of the people interested already have an allocation. And it is about increasing that allocation, not just getting exposure for the first time."

Either way, the interest will be there as investors are likely to want to own some sort of mix between gold and bitcoin.

"Asset managers will have a higher allocation to precious metals to protect their portfolios. New market participants will be coming into the space, and that will push prices higher," Deane noted. "We've seen a number of new generations' activity in the markets, whether it is the Reddit's Wall Street Bets community or other platforms. They will also start to look at these alternative assets."
 

Is our monetary policy system broken?

The response to COVID-19 around the world has been to lower rates to near zero and to print massive amounts of new money. But his action has consequences, especially considering that the world was already sitting on a large amount of debt prior to the coronavirus crisis.

"Monetary policy is broken because of the debt situation everyone is and it is impossible to get rates back up to a meaningful level without some form of significantly higher inflation," Deane explained. "Money printing creates stimulus in the economy. You are pushing those dollars out the door. And people are building houses, renovating their properties, starting new businesses, spending cash. That naturally creates inflation."

With all the debt out there, monetary policy cannot be as effective, Deane added. "If you are now at 50 basis points and you raise rates by 25 basis points. That is a 50% increase in your borrowing costs at a time when the world has the greatest amount of debt we ever had. It would be a huge economic shock to put it through the system," he stated.

The only way the governments have to get rid of some of that debt would be to inflate it away. "By inflating away the debt, that means getting inflation to uptick to get negative real rates," he said. "We backed ourselves into a corner. As a result, we actually need inflation to get us out of it. We need to inflate away the debt. We need modest secular inflation."

However, the problem with inflation is that once it starts to run hot, it is very hard to control, and that could be the problem the Federal Reserve encounters soon. "We don't want inflation to run too hot. And this is the risk of Fed's approach to inflation right now," Deane explained. "People are losing confidence in economic management. People are less likely to hold U.S. dollars. The return on them is zero."

 

By Anna Golubova

For Kitco News

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Gold and silver are marginally higher heading into the European open

It has been another indecisive session for gold and silver overnight as they trade within their ranges. The yellow metal trades 0.04% higher at $1781/oz and silver is back above the psychological $26/oz handle but flat. It is once again copper stealing the show as the red metal trades 1.35% in the black and the base metal is very close to hitting $4.50/lb.

Risk sentiment was mixed overnight. The Nikkei 225 (-0.42%) and ASX (-0.17%) fell while the Shanghai Composite bucked the trend to trade just above flat.

There was no real movement in FX markets as the dollar index moved 0.07% higher and the biggest moving FX pair was USD/CHF which pushed 0.17% higher.

Looking at some of the headlines overnight, Brazillian Iron ore producer Vale said they expect supply to increase with demand moving in the other direction.

Chinese Industrial Profits hit +92.3% y/yvs prior +20.1% y/y March.

US Senator Manchin wants Biden's infrastructure bill split in 2 to increase the chance of passing

UK to propose COVID-19 vaccination 'passports' for international travel at the G7 meeting

The BoJ kept rates unchanged at -0.10% and QQE and YCC maintained to target a 0.00% rate for the 10-year JGB. The BoJ also lowered its core CPI forecast to 0.10% from 0.50% for the current year. It also raised next years forecast to 0.80% from 0.70%

As Tesla had an earnings call yesterday boss Elon Musk said he is still holding all of his Bitcoin. BTC/USD has moved 1.23% higher overnight to trade at $54,702.

The FT have reported that Chilean miners are worried they will not be able to keep up with the current copper demand.

Looking ahead to the rest of the session highlights include the Riksbank rate decision, U.S. CB consumer confidence, weekly API's and comments from BoC Gov Macklem.
 

By Rajan Dhall

For Kitco News

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Gold is trading marginally lower heading into the European open

Gold and silver are started the European session slightly lower this morning following any major lack of direction in the Asia Pac session. The yellow metal trades at $1776/oz just under flat while silver has dropped nearly half a percent to trade at the 25.87/oz area. Copper has broken a big resistance at the previous wave high to trade at its highest level since August 2011

Risk sentiment in the Asia Pac area was mixed. The Nikkei 225 (0.36%) closed higher while the ASX (-0.21%) and Shanghai Composite (-0.77%) both fell. Having said that markets in Taiwan, South Korea and India all performed well.

In the FX markets, the dollar index moved 0.06% lower and the biggest mover was AUD/USD which recorded a gain of 0.20%. This was closely followed by GBP/USD which is currently trading 0.19% in the black. Spot WTI has moved 1% lower and BTC/USD jumped over 7% to hit $52932.

Look at some of the news stories, the EU is leaning on the UK to align UK food standards to EU food and safety rules. There is also a bargain on offer if the UK take a deal. Apparently, in return the EU is offering easing import and exports checks between Britain and Northern Ireland.

Over in the U.S., swing Democratic Senator Manchin backs Republican smaller infrastructure proposals. Manchin spoke over the weekend and said he would support a more targeted version of Biden's $2 trillion infrastructure package. Adding to this story U.S. Senator Graham republican support could exist if the was $800-900 bln.

Bank of England (BoE) Dep Gov Broadbent sees "very rapid" economic growth at least over the next couple of quarters. There was also a note of caution as he said "it's going to be quite noisy and bumpy this year".

Looking ahead to the rest of the session highlights include German Ifo, U.S. durable goods data, commest from ECB's Panetta and Lane.

By Rajan Dhall

For Kitco News

 

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Can massive bitcoin selloff push gold price above $1,800 next week?

Gold attempted to tackle the $1,800 an ounce this week — a level, which once breached, could help get the precious metal above $1,900 an ounce, according to analysts.

Even though the attack on $1,800 was unsuccessful for now, analysts remain optimistic on gold's near-term price direction. The positive outlook is largely due to two drivers — the recent bitcoin selloff and U.S. President Joe Biden's plan to nearly double the capital gains tax rate for wealthy Americans.

At the time of writing, June Comex gold futures were trading at $1,776.90, flat on the week.

"We can get a move in gold after seeing the double-bottom. And next week might be the catalyst to push the precious metal higher due to bitcoin's drop and Biden tax announcement," RJO Futures senior commodities broker Daniel Pavilonis told Kitco News.
 

Bitcoin selloff

The popular cryptocurrency was down more than 9% on Friday, heading for the worst week in almost two months. At the time of writing, bitcoin was trading at $50,045, down 5.62% on the day.

This renewed negative volatility in bitcoin could prove beneficial to gold, which has been losing the popularity battle against bitcoin.

"Bitcoin chart looks a bit negative. Bitcoin has been one of the reasons that held gold back. Some natural buyers of gold have been buyers of bitcoin. And if bitcoin stays down, next push higher in gold could see more sponsorship, and the precious metal could take some people back from bitcoin," said LaSalle Futures Group senior market strategist Charlie Nedoss.

Bitcoin's $48,000 level is important to keep an eye on. "This is where I saw chart support," said Nedoss. "Bitcoin could trade down to $43,000 — that is where the 200-day moving average is. The cryptocurrency hasn't traded below $45,000 since breaching it back in February."

Nedoss added that if $54,000 can hold, it would be positive for bitcoin.

Biden's capital-gains tax increase

Biden's proposal means that the federal tax rates for some investors could be as high as 43.4%, Bloomberg reported citing people familiar with the matter.

"Some of the highest capital-gains taxes around the world are in the 30% mark. Most are around 20%. This is an overreach. And with Biden's infrastructure spending plans, we could be looking at stagflation," Pavilonis said. Stagflation is a period of inflation combined with a decline in GDP.

Biden's plan is impacting equities, cryptocurrencies, and most importantly, the U.S. dollar, which has an inverse relationship to gold.

"The dollar does not seem to be liking a lot of the policies coming out of Washington, including the Biden administration's proposed new capital-gains tax increase. Also, one of the next big initiatives is infrastructure spending. Both of those factors are hurting the dollar, and that is positive for gold," said Gainesville Coins precious metals expert Everett Millman.

If the tax structure becomes less favorable for those investors holding a lot of capital priced in U.S. dollars, they are going to find other places to put their money, Millman explained. "If the capital gains tax makes the U.S. a less favorable destination, there will be less incentive for people to hold money in U.S. dollars. That is going to hurt the purchasing power of the dollar generally," Millman said.

Also, markets are not forgetting about inflation, which is said to be a major driver for gold later this year. "Inflation expectations are the highest they have been in years. We have not seen a lot of measured inflation yet because the velocity of money is pretty low. But with infrastructure spending coming up, markets think that at some point, this will boost inflation," Millman added.

Getting through $1,800

Pavilonis noted that once we get above $1,800, gold's moves higher could become bigger due to fewer resistance levels.

"Gold and silver would do very well. We are set up for a longer run higher here in gold. If we close above $1,800, we can move up quickly towards $1,900," he said.

For gold to get past the $1,800 level, the U.S. dollar index would have to drop below 90, noted Nedoss. "On the week, gold hasn't done too bad. As long as we close above $1,765, it will be a positive week," he said. "We would need to see the U.S. dollar put in new lows to take out $1,800. Might need the 89 handle in the dollar index."

The reason why $1,800 is proving to be a strong resistance level is that the $1,806 level is the 100-day moving average for gold. "It's possible to hit $1,800. With all this inflation talk, I am surprised gold is not doing better," Nedoss said.

Millman noted that if $1,800 is breached, there is "a ton of room for gold to rally towards its highs in the $1,900 range."

However, for next week, one thing to be aware of is potentially downward pressure coming from positive macroeconomic data, Millman warned.

"We have seen some green shoots in manufacturing. A lot of short-term reactions to economic data will be bad for gold and good for the broader economy. The $1,800 is pretty strong resistance level that bulls would have to fight to push gold above it."
 

Data to watch

There is a slate of macroeconomic data to keep an eye on next week. The most-watched event will be the Federal Reserve's monetary policy meeting, which concludes on Wednesday and will be followed by the central bank Chair Jerome Powell's press conference.

"The Fed is set to leave monetary policy unchanged – rates remaining in the 0-0.25% range and QE monthly asset purchases at $120 billion – with policymakers set to re-affirm there will be no shift in stance until 'substantial further progress' on the recovery," said ING chief international economist James Knightley.

Also, the Bank of Japan will be making its interest rate announcement on Tuesday.

Thursday will be an important day to monitor on the data front, with the U.S. GDP Q1 preliminary numbers, jobless claims, and pending home sales on the docket.

"Q1 GDP report is likely to show another fantastic growth figure, led by stimulus fuelled consumer spending. We are expecting annualized growth of 7.4%," Knightley added.

Analysts will also be monitoring the U.S. durable goods orders on Monday, house price index and CB consumer confidence on Tuesday, as well as the PCE price index on Friday.
 

On top of all the data releases, Biden is scheduled to make his first speech to a joint session of Congress on Wednesday. Markets will be looking for more details about his tax hike plans.

 

By Anna Golubova

For Kitco News

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

 

David

Gold moves slightly lower heading into the European open

After another move higher during Wednesday's session gold is heading into today's European session 0.14% lower. Silver (-0.28%) is also slightly down but this pales in comparison to the 2.81% gain yesterday.

After a strong close on Wall Street yesterday the ASX (0.83%) and Nikkei 225 (2.38%) bounced back from some recent weakness. The Shanghai Composite did not move in the same vein as it closed -0.38% lower overnight.

FX markets were pretty dull, the biggest mover was NZD/USD which only moved 0.15% lower. The dollar index starts the session just under flat. In the rest of the commodities complex, copper is 0.39% down and spot WTI has moved 0.13% higher. Lastly, BTC/USD has bounced slightly to trade 1.32% in the black.

In terms of news, China's Global Times says Australia is to face serious consequences for unreasonable provocation against China.

The Canadian court is to adjourn Huawei's Meng Wanzhou extradition hearing to August.

Australian Q1 business confidence moved higher to hit 17 this is compared to the previous number of 14 as the nation moved slowly out of the pandemic.

Swiss watch exports (Y/Y) for March hit 37.2% (prev -0.3%) as the sector recovers from the pandemic.

Tokyo's Governor has asked the Japanese government to declare a state of emergency in the city. This comes after another rise in COVID 19 infections. Elsewhere in the Asian region, India's Coronavirus daily new cases surpassed 300k. India is really struggling to get to grips with the pandemic at the moment.

Joe Biden says 80% of Americans over the age of 65 will have had 1 shot of the vaccine by Thursday.

Italian PM Draghi is to unveil a €221bln programme to rebuild the Italian economy.

There was a magnitude 5.7 earthquake offshore Chile. It is not clear if any mining operations have been affected yet.

Looking ahead to the rest of the session highlight include the US Presidents Earth Day summit, ECB rate decision, U.S. initial jobless claims, existing home sales and comments from German Buba Vice President Buch and ECB's Lagarde.
 

By Rajan Dhall

For Kitco News

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

David

Gold pushes higher ahead of the European market open

Gold and silver are once again trading higher leading into the European open. Gold is 0.40% higher at $1785/oz while silver has moved up 1% to reach $26oz again.

After inheriting a negative close from the U.S., bourses in the Asia Pac area have struggled overnight. The Nikkei 225 fell -2.03%, ASX -0.29% and the Shanghai Composite traded flat.

In the FX markets, the majors traded within their ranges. The dollar index is 0.02% in the black and the biggest mover was AUD/USD which dropped 0.11%. In the rest of the commodities complex, copper is up another 0.50% and spot WTI fell 0.23%.

In regards to news, UK CPI for March came in at +0.7% vs +0.8% y/y expected and PPI Input month on month for the same month rose to 1.3% vs 0.6% expected.

Sticking with data, Australia Retail Sales for March beat expectations to hit +1.4% m/m (expected +1.0%).

The Japanese government are set to declare a state of emergency in Tokyo, Osaka, Hyogo due to another rise in COVID-19 cases.

Johnson & Johnson will restart shipments of its vaccine to the European Union after some production issues where resolved.

Chinese President Xi will attend the climate summit on 22nd April after Joe Biden extended an invitation to the Chinese leader.

In Germany, support for the Green party surged according to a recent poll by Forsa. Greens 28% vs Merkel's CDU 21%.

Ukrainian President Zelenskiy is said to be willing to meet Russian President Putin to ease tensions. Putin is also set to give his annual address to the nation today.

Saudi Arabia have reiterated calls for Iran to engage once again in negotiations and avoid any more escalation to not expose the region to more conflict.

Looking ahead to the rest of the session highlights include Canadian CPI, Canadian rate decision, weekly DoE's and comments from the BOC and BoE's Bailey.
 

By Rajan Dhall

For Kitco News

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

 

David