Silver and Gold production supply has steadily been decreasing throughout the year, leading to a continued supply squeeze on many products. Inventories of warehouses and retailers have been lower than ever before, leading to unprecedented times in the precious metals industry. A part of the bullion squeeze can be attributed to the Queen’s passing, which will lead to the changing design of many of the most popular bullion coins, such as the Britannia, Maple Leaf, and Kangaroo, to feature King Charles III. This has led to higher demand and many sites, such as the British Mint, having to form queues to slow the site traffic.
This supply squeeze cannot be attributed to Queen’s death alone. In March 2022, the US Mint announced they would stop production of morgan and peace dollars for the rest of the year. Other mints took similar steps to lower production with fears of continuing supply shortages.
The high demand and low supply have led premiums over spot to surge. The 2022 1 oz American Silver Eagle has increased to a premium of $18 over spot. The premiums are continuing to increase, but the spot price of precious metals has not seen the same increase.
Although there is a correlation to a lower supply of bullion after the Queen’s death, many experts believe the supply shortage has more to do with the US Dollar and the manipulation of the paper market. COMEX is one of the world’s largest futures and options trading markets for metals. In order to provide options and futures for traders, COMEX must hold physical bullion in depositories to account for the bullion traded in the paper market, however, many experts believe COMEX does not have enough physical bullion to cover the paper market. This can cause a lot of future problems if the COMEX bullion is requested for delivery.
Along with the paper vs physical market difference, the COMEX supply of gold and silver bullion has been decreasing dramatically over the past year. On January 27, 2021, the COMEX warehouse had 149,509,868 registered (ready for COMEX delivery) troy ounces of silver. On October 19, 2022, that number had decreased to 38,134,405.959 troy ounces. That is over a 73% drop in registered silver supply, and it is continuing to decrease. A similar decrease is happening in gold, when in May of 2021, registered gold was around 20 million ounces, and in October of 2022, that number had decreased to 12 million ounces. This forecasts the growing demand for physical bullion, and how the supply is not able to keep up. In 2022 alone, demand for gold has jumped an estimated 12% year over year.
Experts believe the largest players in the industry are pressuring the markets to keep prices low to cover their contracts. As long as these prices stay low, there will continue to be a squeeze on the supply, and it will continue to be hard for companies to stock their warehouses and for customers to buy the bullion products they want.
Distrust in the financial system also has increased demand for bullion products. Due to turmoil throughout the world and ongoing economic problems, distrust in the financial industry has reached unprecedented levels. Since precious metals are seen as a hedge against economic downturns, customers around the world have continued to buy gold and silver. With the squeeze on the bullion market and prices continuing to stay low, investors will continue to buy precious metals, putting more pressure on the market.
It is not only individual investors and corporations investing heavily in the precious metals market, as governments, such as India, have imported massive amounts of gold and silver to increase their stockpiles. It is estimated India will have imported over 8,200 tons by the end of the year.
This supply shortage can be seen most clearly when buying bullion products on precious metal websites. Some of the most popular products for investors have been out of stock, and companies have taken a long time to restock their inventory. GoldClub Direct continues to be able to offer some of the most popular bullion products on the market. If you are thinking of following the strategies of governments, institutions, and individual investors worldwide, discover a renowned selection of bullion products on GoldClub Direct.
All Updates and Market info are provided as a third party analysis and do not necessarily reflect the explicit views of GoldClub Direct LLC.. and should not be construed as financial advice.
