Gold, silver turn to the upside; bullion coin premiums once again on the rise as supply tightens

(USAGOLD – 1/29/2021) – Gold looked to be tracking toward breaking even on the month in early trading. It is up $25 at $1870. Silver is up a robust 90¢ at $27.48 – a level that if sustained would put it up around 4.5% for January. Though gold has struggled to regain the momentum in terms of pricing in international markets to start the year, demand for physical metal at retail dealers is firmly on the rise. On the other hand, silver has posted a strong January both in terms of physical demand and pricing in international markets.

“The lesson here,” writes Brien Lundin in this month’s Gold Newsletter, “is that we’ll see times when gold is buffeted by rogue waves in the flow of economic data. And when those days come, we need to remember that the tide is actually flowing powerfully in gold’s favor. In truth, it’s the interplay between the bond market’s reaction to potential inflation and the actual inflation data that will create the wiggles in gold’s uptrend. Rather than get shaken out by these market fluctuations, we need to hold steady…or even look at these as buying opportunities. Because if anything, the fundamentals for gold have only turned more positive in recent days.”

Important client note: Gold and silver bullion coin premiums are once again on the rise. Increased demand throughout January is being exacerbated by tightening supplies and delayed releases of new coinage from sovereign mints. The Royal Canadian Mint is still reporting a several week delay on shipping any of its 2021 product – with no concrete availability date yet announced – and the U.S. Mint has returned to allocation, reducing and limiting the number of coins being released to the dealer network on a weekly basis. The imbalance between supply and demand has already pushed wholesale premiums roughly .75% higher on gold bullion coins and approximately +2.5% on silver bullion coins since the start of the year. At this juncture, the consensus in the industry is if gold prices remain at the lower end of their range against a backdrop of continued fiscal and monetary support from both the government and Federal Reserve, demand is likely to continue at high levels, and premium pressure unlikely to abate anytime soon.

Chart of the Day

Euro Area Central Bank Balance Sheetbar chart showing the euro areas central bank balance sheet

Japan Central Bank Balance Sheetbar chart showing Japan's central bank balance sheet growth 2000-2020

United States Central Bank Balance Sheetbar chart showing growth in the United States central bank balance sheet 2000 to 2020

China Central Bank Balance Sheetbar chart showing growth in China's central bank balance sheet 2000 to 2020


Chart note:  For the record, the charts on quantitative easing in various economies from 2000 to 2020. The most notable feature for Europe, Japan, and the United States is the pandemic-related surge in 2020. China is lagging on a relative basis, which might be one reason why the Chinese yuan has been in an upswing over the past several months.

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