February 2021 - Week 2 Edition
Gold rallied $30 from $1,808 to $1,838 on Monday morning, February 8, as investors focused on the chances for rapid passage of the $1.9 trillion stimulus package. Such a huge infusion of fiat money would weaken the dollar and boost gold while raising prospects for higher inflation down the road. Commodity price inflation is already nearing the “runaway” stage with double-digit increases in over a dozen widely followed commodities in the first five weeks of 2021, with silver and gold almost certain to follow.
Silver and Gold Coin Shortages Cause Delays and Premiums to Rise
The late-January run on silver has led to a shortage of available supply of bullion coins at major mints, causing a delay in delivery and a rise in premiums to dealers and hence to customers. The Royal Canadian Mint has had its production disrupted by COVID-19 shutdowns. The U.S. Mint stated last week that it is still rationing its sales of bullion coins because of “continued exceptional market demand,” as well as limited supplies and manufacturing capacity. Delayed delivery from the U.S. Mint has stretched up to 30 days and premiums over spot have risen dramatically. While we were once able to sell Silver American Eagles for just $3 over spot, we, and other dealers must now charge $8, or more, over spot price for Silver American Eagles. The Austrian and Australian mints’ silver product premiums we offer are currently much less than what we have to pay for Silver American Eagles.
If you buy silver or gold bullion, check out our pricing first. Typically, we charge less. We also offer better service and we often have products in inventory to avoid the delay. Additionally, we have more and better information on both bullion and numismatic coins. Go with the dealer that offers better price, service and award-winning information.
Commodity Price Inflation Nears Double Digits in Just 5 Weeks of 2021
The two most widely watched commodity price inflation indexes are up nearly 10% in the first five weeks of 2021. The Commodity Research Bureau (CRB) Index is up 8.11% through February 5, and the S&P GSCI Index is up 9.71% in the same timeframe. The CRB is a basket of 19 commodities, with 39% allocated to energy, 41% to agriculture, 13% to industrial metals and 7% to precious metals, while the S&P GSCI is a larger index of commodities with a broader array of commodities. In that sense, the CRB is like the Dow is to stocks (narrower), and the S&P index is broader, like the S&P 500 index is to stocks.
Looking at the core commodities that make up the CRB and S&P GSCI indexes, the largest five-week gains are in the commodities that are vital to manufacture batteries for electric vehicles – cobalt (+42%) and lithium (+41%). All of the energy-related prices are also up in double digits in the past five weeks:
The precious metals are trailing so far, but the Platinum Group Metals are catching up, led by the rarest member of the group, Rhodium (+28.2%), then Platinum (+5.5%), while Silver (+2.1%) and Gold (-4.3%) fall behind. Last year was the opposite, of course, with commodities down and silver and gold up.
With fiat money flooding the system, commodities should continue to rise, including gold and silver next. In their “Commodities Corner” column, Barron’s has made the case for both Silver and Gold in their two most recent consecutive weeks: “Look for a Turnaround in Gold’s Lackluster Price” (February 1) and “Silver Prices Will Climb Even After Squeeze Play” (February 8). Here are some of their key points:
Gold’s main bullish factor will be Biden’s spending plans and Treasury Secretary Janet Yellen’s advice to “act big” to help struggling Americans. Barron’s quotes a gold expert who predicts a gold rally back to $2,000, saying, “we believe the markets are more dependent on government stimulus and money printing than they have ever been historically,” adding that Biden and Yellen will “stand by their rhetoric.”
Silver’s driving force is its narrow market, combined with rising investment demand and rising industrial demand for solar panels and 5G technology. Frank Holmes, CEO of U.S. Global Investors, told Barron’s, “Solar panels have been a massive industrial demand” source, as well as the global rollout of “5G.” Add in the new problems of rising inflation, debt and spending and some see another rise to $50 silver.
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