May 1, 2023 – Gold and silver prices traded essentially flat last week, but are up sharply this morning on the FDIC bailout and sale of First Republic Bank, the second largest bank failure in history.
However, yields on the 10-year treasury moved a bit lower, and the U.S. dollar as measured by the DXY index ended last week almost unchanged.
Last week’s report on first quarter GDP was lower than expected. The consensus expectation was for 2% growth, but the actual number was 1.1%. It looks increasingly certain the U.S. economy is headed for recession later this year.
Investors at large, and metals investors in particular, continue to wonder when the Fed will pivot on rates in response to weakening economic data.
Fed officials are expected to once again boost interest rates on Wednesday. The consensus estimate is for a quarter point rise.
Demand for retail bullion products has eased. The best run dealers have caught up with the backlog of orders to ship. Premiums are likely to move lower if demand remains moderate.
Friday’s Close (Weekly Gain/Loss)
Monday Morning (Gain/Loss from Friday’s Close)
Gold
$2,001 (+0.3%)
$2,011 (+0.5%)
Silver
$25.32 (unch)
$25.94 (+2.4%)
Platinum
$1,097 (-4.4%)
$1,090 (-0.6%)
Palladium
$1,564 (-6.1%)
$1,543 (-0.7%)
Gold : Silver Ratio (as of Friday’s closing prices) – 79.0 to 1
Ongoing U.S. Mint Failures Bring Discredit to America, Raise Costs
Share this Article:
We are one third of the way through 2023, and it has certainly been interesting in the bullion markets thus far.
The year opened with supply and demand for coins, rounds, and barspretty well balanced. Demand surged when the failure of Silicon Valley Bank awakened investors to the possibility of systemic problems among smaller and regional banks.
For the moment, retail bullion demand has eased, and the markets seem to be taking a breather.
Things can change quickly, however. For example, FDIC regulators just arranged a distressed sale of First Republic Bank to Jp Morgan, and more banks could run into trouble.
Rising interest rates are destroying bank balance sheets, and the problem figures to get worse with the Fed expected to hike rates again this week.
Add plenty of geopolitical uncertainty to the economic uncertainty, and all this points to continued demand for physical bullion.
Here are some factors to consider on the supply side, starting with the U.S. Mint. There are, unfortunately, no signs that our nation’s sovereign mint is going to start living up to its charter and produce coins in quantities “sufficient to meet public demand.”
Despite the massive spike in demand for bullion coins three years ago, the dysfunctional U.S. Mint has somehow managed to produce fewer coins.
Officials are blaming COVID pandemic and difficulties securing enough blanks, but those excuses ring hollow after so much time. The Mint produced roughly half as many silver American Eagles in 2022 than it did in 2021.
Based on 2023 sales year to date, the Mint is on track to produce roughly 20 million silver Eagles this year. That is just over 4 million more coins than 2022.
For sake of comparison, the U.S. Mint produced 47 million coins in 2015, and overall coin demand in that year was well below the current level.
Premiums for gold and silver Eagles are at all-time highs because of shortages caused by the Mint’s embarrassing production failures. This also contributed to demand for alternative products and put pressure under those premiums as well.
The good news is that other producers – both private firms and foreign governments – have been rising to the occasion. Most mints and refiners around the world have added significant capacity.
When demand for bullion first surged in March of 2020, dealer inventories evaporated within days.
Lead times for delivery extended to several weeks.
The recent surge in demand was significantly larger anything we have seen in the past, but lead times at Money Metals Exchange moved out briefly by just a few days.
Putting aside the inexcusable problems at the U.S. Mint, the industry’s increase in capacity bodes well for investors. Premiums on physical metal probably aren’t going back to pre-pandemic levels, but they are moderating.
This week’s Market Update was authored by Money Metals Director Clint Siegner.
This copyrighted material may not be republished without express permission. Offer only available through email promotion. Offer does not apply to previous orders and may not be combined with any other offer or program. Special shipping rates or other restrictions may apply to international orders. The information presented here is for general educational purposes only. Money Metals Exchange and its staff do not act as personal investment advisors. Nor do we advocate the purchase or sale of any regulated security listed on any exchange for any specific individual. While our track record is excellent, investment markets have inherent risks and there can be no assurance of future profits. You are responsible for your investment decisions, and they should be made in consultation with your own advisors. By purchasing from Money Metals, you understand our company is not responsible for any losses caused by your investment decisions, nor do we have any claim to any market gains you may enjoy. Money Metals Exchange is not a regulated trading “exchange” as defined by the CFTC and the SEC.
Money Metals Exchange • PO Box 2599 • Eagle, ID 83616
