What Is Going On With Gold & Silver Spot Prices?

Discussion in 'Bullion Investing' started by Good Cents, Mar 18, 2020.

  1. Good Cents

    Good Cents Active Member

    Hi all. I'm relatively new at this (~3 years) and these Spot prices are crazy. Why do they keep falling like this? What is going on?

    I've read some of the posts for the past few weeks but I'm still confused.

    For the past few years spot on Gold and Silver would go up when the stock markets went down. But now everything is tanking. I understand why the stock markets are tanking, but why are Gold and Silver dropping like crazy?
     
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  3. Randy Abercrombie

    Randy Abercrombie Supporter! Supporter

    I am sure there are "think-tank" detailed answers to this question. I wonder myself. I chalk it up to confusion. We have never before been where we are now. None of the old rules seem to apply..... However I do suspect that once this passes most everything will get back to a sense of normalcy.
     
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  4. Good Cents

    Good Cents Active Member

    Normalcy is now projected to first begin in 18 months or more when they get a vaccine up and running. They are doing all kinds of "models" to figure this out but there is no "normal" on the horizon.

    https://www.washingtonpost.com/worl...a84116-6851-11ea-b199-3a9799c54512_story.html

    I'm trying to figure out whether to sell my PM before it becomes worthless, or buy more now if I can find some (seems to be sold out everywhere).

    I understand that Silver is tied to industry, so maybe projections are low for the next year or more. But Gold is not tied to industry, so why the huge drops?

    And on top of all this, if the market is expected to tank, then you would think the Dollar will drop as well. If the dollar is projected to drop then Gold would be worth MORE dollars per ounce, not less.

    In the news they are talking about the gov't sending money out to everyone in the country to stimulate the economy. If the gov't is worried enough to be sending us checks, you would think people would be trying to hoard Gold the world over and that would send the prices higher.

    And I was under the impression that Silver is often seen as the poor man's Gold when it comes to stacking. You need a lot of money to stack Gold but only a fraction to stack silver.

    I realize that dealers are inflating premiums, and that it may not be possible to actually take advantage of the low prices now of Gold and Silver (etc) in terms of physical metal. But why is there so little paper investing in something that is a go-to item to trade for a way out of a country in turmoil (Venezuela), or a war-torn country?

    Investors are fleeing to "Cash" - but why? "Cash" is the US Dollar which, if the stock market will continue to drop and unemployment increase (which is sure to happen if businesses will have to close for a few weeks straight), then the Dollar will also drop and Gold should then be worth MORE than Dollars. Wouldn't you think?

    Is there something I'm missing here?

    (Please everyone - no conspiracy theories, Q-prophecies or politics.)
     
  5. medoraman

    medoraman Supporter! Supporter

    I view pm as going down from two fronts:

    1. PM that is more industrial like platinum and palladium are reacting to the economy and anticipated lower demand going forward.
    2. "Investment" pm is getting sold to make up for losses elsewhere. When you have a margin call to cover, better to sell a stable value asset and not a stock that has lost 40% of its value and may be near a bottom.

    So, really, gold has served its purpose. It maintained value in troubling times, enabling you to get cash when you need it the most. Once the margin calls stop, stocks start rebounding, and we take in all of the trillions more spent, I think gold could spike again like in 2011 after the 2008-09 crash.

    Am I right? No way of knowing at all. Since I do not need cash, and most bullion is sold out, I have decided to just sit on the bullion I own right now and see if it does play out this way.
     
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  6. Randy Abercrombie

    Randy Abercrombie Supporter! Supporter

    No conspiracy stuff from me. I am as grounded of a fellow as you will ever meet...... But again, I chalk every bit of it up to confusion and uncertainty. My wife is home right now. She is a university employee. She was just told moments ago to expect to not come back to work until May. Started out on Monday as being out of work one week. Nobody knows where things are headed.... I have always kept a stash of cash in my safe, but all my monies as well as my businesses monies will remain in the bank. I don't understand why folks are fleeing to cash anymore than I understand why they hoarded all the toilet paper. People are confused. That's all best I can tell.

    I been stacking PM's since the 1990's. It started as a haven sort of investment for me. Later it became something fun that I have willed to my grandkids. So in reality, I don't much care if the stuff continues to tank. I just enjoy looking at it. I don't think PM's will become valueless simply because there have been thousands of years of value associated with silver & gold. We have a bump in the road. Sort of a big bump. But we will get through it.
     
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  7. Good Cents

    Good Cents Active Member

    I wasn't addressing you, I was rather preempting some of the other posters that I read in other threads.

    Re the rest of your post, I hear you and appreciate your response.
     
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  8. Good Cents

    Good Cents Active Member

    What you say about how gold acted as a stable value and now is being sold to cover margin calls makes sense. It's the extreme degree that looks strange to me.

    What actually happened in 2011? Was there a huge drop in Gold in 2008 and then a spike and then it came back down? What happened on the ground in real life (as opposed to on the charts).
     
  9. Clawcoins

    Clawcoins Well-Known Member

    FYI,
    If I buy silver from you for $16
    then SPOT drops to $15

    Do you think I'm going to willingly sell it back to you for $15 ?
    Nope, premium is going to go up, and I'll sell it for $16.10.


    Right now a half ounce of platinum american eagle is more than the 1 ounce spot price.
     
  10. Good Cents

    Good Cents Active Member

    I think the rise in premiums is only because the drop happened extremely fast. Normally, dealers do not change their premiums as gold and silver rises and drops gradually. I understand the rise in premiums and I think those will be temporary.

    (And there ARE dealers who are selling PM for reasonable premiums and not price gouging right now. They are few and far between, but they exist.)

    My concerns and questions right now are about the Spot Prices, not the dealers raising the premiums.
     
  11. spirityoda

    spirityoda Coin Junky Supporter

    Because people are worried about buying food, water, and TP. NOT PM's. Shoot even gas prices in my town have gone way down.
     
  12. spirityoda

    spirityoda Coin Junky Supporter

    TP is money here. True story. :jawdrop::nailbiting::rolleyes::eek::sorry:
     
  13. medoraman

    medoraman Supporter! Supporter

    In 2008 gold weakened, (basically for same reason as now I suspect), but in response to fiscal stimulus it spiked in 2011. As prices came down from the highs of around $1900, dealers kept premiums high the entire way down. Not until a few years ago did low premiums dominate the market. When prices drop, premiums spike. When prices spike upwards premiums increase. During the subsequent drop premiums spike. Many market conditions cause physical premiums to spike. The only time to get cheap premiums is during boring times when no one wants it.

    Like I said in an earlier post, use paper pm to lock in cheap prices. Then when premiums decline to normal levels sell the paper and buy the physical. If the "evil banksters" are manipulating the prices down, take advantage and lock in cheap pm prices. Prices will recover in the future, and you can then swap out paper for physical.
     
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  14. Clawcoins

    Clawcoins Well-Known Member

    okay.
    I reread your first post.
    First of all I do not agree that when the market goes up PMs go down and vice versa. It is far more complex than that if that was the case then the market has been going up for a long time, then gold should be free by now.

    Many large investors use PMs as a safe haven. In times of emergencies they reach for the cash which means selling the PMs (and everything else).
    https://www.marketwatch.com/story/w...a-safe-haven-asset-2020-03-12?mod=commodities

    But, contradicting it, in times of panic people also buy into PMs. It's just the large sellers are larger than the buyers.

    I used to buy ASEs all the time and I tracked Spot, versus the selling price. I would track when drops occurred and when finally the ASE price minimized premiums again. If you bought cheap rounds it was closer to spot, but it varies all dependent upon what type of silver you were after, which would also affect backside sales.

    The answer is ... there is NO Singular reason, it's a much more complex equation and there are multiple equations depending upon the impact factors.

    You know that people using metals such as Silver for various things. For instance, if you shut down a Solar Panel manufacturer, that then reduces their need of Silver. Silver is reliant more than gold in manufacturing and there's a larger continuous supply of it.
    Then you have people who hedge PMs against currencies, and various other buyers/sellers of it.

    Normally spot price in converse of the US Dollar Index, not of the stock market. Hasn't the stock market, on average grown forever ? ... then Gold should be Free by now.

    There are many reasons for spot price to vary for many reasons.
    So there is no one answer. It's just right now, the majority driver is cash is king for investors and hedgers.
     
  15. Mr. Flute

    Mr. Flute Well-Known Member

    $11.79/troy oz for silver right now. Interesting...
     
  16. Rono

    Rono Senior Member

    Howdy folks,

    Yeppers, the spread between paper gold and real gold is getting larger as I type. This is what is know as an artificially priced market and by this I too am not talking any sort of conspiracy, just the nature of the beast.

    As mentioned, a lot of folks had some of their assets in the paper version of precious metals such as the bullion ETFs like GLD and SLV, etc. Right now because the market is puking, many are getting margin calls and they must raise cash. Couple in the fact that there are a lot of 'liquid' assets - ETFs and mutual funds that are actually a bit illiquid right now. You see everyone has been looking for yield and a lot of money managers have put as many junk bonds (pay higher yield) as they legally can in their funds - many of which are U.S. shale/oil paper. They have a break even price of oil between $40 and $100 and right now it's in the 20's. Their debt is trash and that's one of the reasons why the Fed has been pumping cash into the system but it has also put more sales pressure on the POG. So, all this paper bullion has been sold and driven the price down.

    Er, the 'street' disagrees with the spot price which results in either a reduction in the supply or an increase in premiums or both. We're seeing both.

    It's the same thing as when the interest rates (price of money) get so low, the bankers decide they don't have any available money at that rate. 30 year fixed at 2.5%? Sorry, I don't have any money to lend. 5.5%? Well, maybe I can find some.

    Please note for the record, that as I type, physical silver bullion for sale is unavailable.

    peace and Flatten the Curve,

    rono
     
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  17. FryDaddyJr

    FryDaddyJr Junior Member


    low gas prices have nothing to do with "yer town"
     
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