Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy

Commodities / Gold & Silver 2020 Mar 25, 2020 - 02:31 PM GMT

By: MoneyMetals

Commodities

Last week was another week of wild market volatility for all asset classes, and precious metals were no exception. 

Gold continues to be the least volatile metal.  And it continues to hold up better than the chaotic stock market during most trading days. But it has experienced some downside in recent days. 

Money Metals Exchange and other bullion dealers have experienced an unprecedented surge in demand for silver and gold coins, bars, and rounds.  Many dealers have essentially sold out and/or refused to accept smaller orders because of fulfillment challenges.

The month of March could set an all-time record for sales of Silver Eagles.  That will depend on whether the U.S. Mint is willing and able to supply coins to dealers in volumes that the market demands.


So far, it unsurprisingly failing to keep up with demand – resulting in dealer inventory shortages, rising premiums, and abnormally long delivery windows for most orders.

Money Metals’ premiums have certainly risen sharply, but not as much as our competitors.  But this is not price gouging, because wholesale costs have risen dramatically also due to shortages. 

Prices in the retail market are reflecting the fundamentals of the bullion market – which include massive demand, production bottlenecks, and shortages.  At the same time, dealer bid prices have risen sharply, meaning – if folks are willing – they will be paid a very high premium over spot if they sell their items to dealers.

A growing number of Americans are facing tremendous financial strain and may have no choice but to liquidate assets and raise cash.
The advantage of holding physical silver during times like these instead of futures or exchange-traded instruments is clear.  During the market mayhem over the past couple weeks, some exchange-traded funds began diverging in price from their own underlying assets in cascades of selling. 

One exchange-traded silver product, which trades as PSLV, began trading at a discount of over 10% to net asset value.  That means if you owned shares of this vehicle and had to sell, you would be getting significantly less for your shares than they are supposed to be worth. 

Part of the explanation for anomalies such as these is that markets become less efficient when they are being driven by panic selling and extreme swings in the value of underlying assets.  But a deeper and more troubling potential reason for the large price discrepancies is that investors may have grown increasingly concerned about the layers of credit risk and counterparty risk associated with exchange-traded products. 

A rising perceived risk of default or failure could certainly cause the market to attach a discounted value to any financial instrument.  That’s certainly been the case for a lot of corporate bonds and shares now that many companies are in a cash crunch.

Precious metals in physical form carry no counterparty risk, cannot default, and will never go to zero – although as we’ve seen that their spot prices can still succumb to waves of selling that grip capital markets.

Silver has gone from incredibly cheap to insanely cheap during this coronavirus crisis.  One measure of just how depressed prices have gotten is that on Wednesday the gold:silver ratio closed at a record 125:1. It took 125 ounces of silver to buy a single ounce of gold!

Also this past week, the VIX volatility index for the stock market spiked to an historic high, slightly above the level registered during the peak fear period of the 2008 financial crisis. 
While there is certainly much more damage yet to be inflicted in the economy and quite possibly much lower stock market levels ahead, it’s also likely that many assets that were unfairly put on the chopping block this week have put in their final lows.

Even as the U.S. economy remains on virtual lockdown, demand for commodities is likely to start picking up from China. The COVID-19 new infection rate there has slowed dramatically and nearly flat lined, if you believe government reports.  As, Chinese factories return to production and motorists return to the roads, demand for raw materials will increase.

It may be a many months or longer, before the United States economy returns to something akin to normal.  But when it does, a massive amount of pent up demand will hit the energy sector and commodities more broadly.  Consumers and corporations will also be armed with trillions of new coronavirus dollars that are set to be distributed to them by the federal government.  

We have never seen a bailout attempt like this before.  Certainly not on this large a scale or this wide a scope. 

Hard to believe just a few weeks ago, Americans were feeling grateful to not be living under an authoritarian country like China that can arbitrarily decide to quarantine populations and shut down entire cities.

Americans are now effectively living under a command economy.  Political decisions will now determine which businesses are allowed to operate and which will ultimately survive. Will we ever get back the freedoms we used to take for granted? Or are we in a long emergency that will never see a return to normalcy?

The ultimate consequences of this economic lockdown and the coming helicopter drops of cash are difficult to predict.  This crisis could render government deficits unmanageable, destroy Uncle Sam’s low interest rate borrowing capacity, and force officials to adopt Modern Monetary Theory – essentially bypassing the bond market and having the Federal Reserve print whatever cash the government needs.

As severe as this recent deflation scare has been, the inflationary snapback to come could catch a lot of investors completely unprepared.  And as disappointing as silver’s spot price performance has been of late, it has the potential to deliver truly explosive gains when the pressures now building in the physical bullion market blow the lid off the paper market. 

In the meantime though, please be careful out there.

By Mike Gleason

MoneyMetals.com

Mike Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2020 Mike Gleason - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules