Silver, and especially gold, are having a relatively strong week — boosted by a government report on Wednesday that suggested consumer price inflation is moderating.
That news reduced worries on Wall Street that the Federal Reserve will halt its interest rate cutting plans… and we know how important cheap money is to this crowd! The stock market rallied on the news as well.
As of this Friday midday recording gold checks in at $2,725 an ounce, good for a weekly advance of 0.8%. Meanwhile, silver is essentially unchanged for the week to come in at $30.60 an ounce. Platinum is down 2.5% commands $957. And finally, palladium is up a slight 0.3% to come in at $987.
The reality, though, inflation is still very much a problem — at least if you ask the average American who is seeing his cost of living shoot up month after month, and year after year.
Meanwhile, even though many feel strongly that Trump should get highly aggressive in trade negotiations, including imposing sweeping tariffs, such an approach does seem likely to fuel the inflation fire.
It’s unknown whether Trump’s tariffs will only target finished goods… or certain countries… but a fear of tariffs on raw materials, including gold and silver, has certainly been creating a lot of drama behind the scenes in the gold and silver market over the past few weeks.
We have reported on this before, but it remains the most likely catalyst for swings and even a short squeeze event in gold and/or silver.
If Trump slaps a tariff of, say, 10% on precious metals coming into the U.S., that would have a dramatic impact. 10% on silver would amount to $3 per ounce!
As a result of this worry, the price of gold and silver – as traded on the New York futures market – has risen sharply above the prices for the same metals seen simultaneously in other markets across the globe.
In silver, for example, the spread between London spot and New York futures has recently reached as high as $1 per ounce!
This spread has also created a big incentive for parties all over the world to get their gold and silver into the U.S. before any tariffs are imposed.
Traders are buying metal in London, simultaneously selling in the NY futures market (and pocketing a tidy profit), withdrawing the metal from London vaults, and transporting the metal to the U.S. to deliver onto the exchange to close out the futures position.
This dynamic is having the effect of draining London vaults of gold and silver at an unusually fast rate – and at some point, these lower levels of vaulted metal in London could create price dislocations in that major market too.
Those who have short positions in the New York market are in the process of getting squeezed, especially if they are having trouble getting their hands on physical metal to deliver into their short positions. Or get it into the right form.
You can be sure we’ll continue to watch this situation closely and report on any big developments.
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