Metals, a Hedge or Investment Depending on Your Views... or a Sucker's Bet?

[Don Alaska]

I think the gold push is because many national banks are still fearing a collapse of the dollar and are buying huge quantities of gold to hedge there bets. Plus, the Trump Administration appears to be inflating the dollar to increase exports and generate jobs domestically. That would be reflected in the price of stable commodities.

 

[Jacob Petersheim]

Indications suggest that the rise in gold and silver prices has little to do with the tiny retail market in metals.

Trump has to be a little frustrated, because as much as the USD is devaluing, every other currency seems to be falling faster. For example, things in Japan are getting nuts because of how high prices for anything in Yen are rising. I just checked, and at the moment 1 Yen = 0.0066 USD.

Japanese retail metals buyers can't get hold of more gold or platinum, and recently have been driven toward silver (which has not been as popular as an investment there).

 

[Jacob Petersheim]

Some are approaching panic with the lowering of interest rates and nor promises for an additional series of cuts.

Fear of a stock bubble collapse has driven many into cash, including even Warren Buffett. But cash in the bank is rotting away and this accelerates as interest paid on savings drops.

Many suggest real estate as the safe haven, but that's not exactly practical for smaller players. It also has expenses of its own even if just bare land. Property taxes for one, but often requirements to deal with things like controlling brush and overgrowth, seasonal flooding and drainage, and even insurance against accidents that befall trespassers!

Ad the word of the day seems to be "fungible" in a lot of stuff I'm reading:

A fungible asset is a good or asset that is mutually interchangeable with another identical asset because each unit has the same value and properties. This means one unit can be substituted for another without any loss in value or utility.

Distinction from non-fungible assets: This concept is the opposite of non-fungible assets, which are unique and cannot be swapped for another without a change in value, like a house, a diamond, or a work of art.

 

[Jacob Petersheim]

The end of an era. The 1964 Kennedy half dollar coin was produced in honor of John F. Kennedy and was the last 90% silver half dollar minted.

 

[Jacob Petersheim]

It may not be too late even now to get in on the gold rush.

It sounds like the central bankers are taking control and will be ramping up the money printing very soon now. Gold is well above $4300/ounce today, and it is hard to find anyone who thinks this bull run is near over.

I don't see how this ends well. Every discussion on the topic seems to be taking for granted that the rich are going to get richer as the poor get even poorer.

The Fed Can’t Stop Now — Massive Money Printing Is Next

 

[Don Alaska]

Indications suggest that the rise in gold and silver prices has little to do with the tiny retail market in metals.

Trump has to be a little frustrated, because as much as the USD is devaluing, every other currency seems to be falling faster. For example, things in Japan are getting nuts because of how high prices for anything in Yen are rising. I just checked, and at the moment 1 Yen = 0.0066 USD.

Japanese retail metals buyers can't get hold of more gold or platinum, and recently have been driven toward silver (which has not been as popular as an investment there).

That is still 151 yen to the dollar, which is far below what it was when I lived there--360 yen/USD

 

[Jacob Petersheim]

The global silver market is very weird.

China seems to have a lot of very wealthy individuals who are buying up silver in (literally) metric ton lots. This comes on top of very high demand from the CCP government itself. Industry isn't loading up, but then again production levels are down in Chinese manufacturers since the tariffs began to be imposed and US consumers got tapped out and stopped buying as much stuff.

The UK's LBMA still struggles with low reserves. US refiners are all backed up trying to produce the fine silver "banking bars" of silver to meet the LBMA's orders.

How much of this is about financial system shenanigans and how much might be political/industrial warfare is hard to say. It sounds like the US and Australia are being drained of silver though. Even more so than the gold drain that is also going on.

Along the way, the "paper silver" futures market keeps running into issues where they cannot meet the demands for delivery of the physical silver that is supposed to be on deposit to back the paper. Some silver EFTs have even collapsed.

There is a story that silver is being moved out of the US to the LBMA via cargo flights instead of by ship to meet deadlines. But industry insiders say the number of flights required are impossible.

It sounds like trust in the bullion reserve institutions is at an all time low within the silver industry.

 

[Jacob Petersheim]

A precious metals analyst Eric Yeung in Hongkong is reminding people now that Donald Trump and his son both advised the US public to buy gold and silver back in January 2025. He finds it very odd that people went along with so much of what Trump has said, but disregarded his advice on this particular point.

 

[Jacob Petersheim]

There is a lot of weird lore around precious metal bullion. Much of it seems to stem from attempts to make the pieces "numismatic" or collectible in the classic sense of coin collecting or to appeal to the "magpie" (stacker) who likes to pile stuff up to look at his "stack" and fondle and stare at various pieces.

One of these is the ill-fated "Star Privy" American Silver Eagle:


Just on the face of it, it's a 2024 Silver Eagle. But at the lower-right a "W" and 5-pointed star have been struck. Coin collectors call these "privy marks."

If you are using ASEs as a liquid 1 ounce unit of silver you can readily sell back this shouldn't matter. But there are minor issues. These were struck at the Philadelphia Mint, unlike most ASEs. Philadelphia is a production mint that makes the common coins for circulation.

Dies aren't changed as often there, so later runs may suffer loss of engraving relief. Coins are handled more roughly because Philadelphia is set up for harder alloy coins than the fine silver ASE. So dinged edges, scuffs, etc. are far more likely. Perhaps worst, minting lubricants aren't cleaned as thoroughly, which can create a form of chemical discoloration collectors call "milkspotting." This isn't tarnish, but some other chemical discoloration that appears whitish in streaks, blobs, or speckles. It may not even show when the coin is new, only "developing" on the surface a year or more later.

A lot of Canadian Silver Maple Leaf coins also have the milkspotting issue, as do other silver products.


Because of this, with silver around $50/ounce you might pay a couple of bucks less on premium than for the standard ASE.

However dings, scratches, and milkspotting may mean on resale a local coin shop might only buy back your 2024-P Star Privy as a "cull condition" coin, paying you a couple of bucks less.

 

[Jacob Petersheim]

One of the most "investible" of gold coins in the US is the American Gold Eagle, which comes in 1, 1/2, 1/4, and 1/10 Troy ounce mintings. It is 22 karat ("crown gold") with enough gold in it to fill out its fine weight.

The other is the American Gold Buffalo, which only comes in 1 ounce size (aside from an anomalous year around 1998 I think). This 24 karat ("fine gold").

For a number of reasons a Buffalo usually costs more than a 1 ounce Eagle. Some reasons are arbitrary and some are practical and related to its smaller mintings. But numismatic issues can also rear their head here.

The premiums can be higher for the current year of minting as well as for low-mintage years.

One way to buy a cheaper Buffalo is to look for a 2022, a high-mintage year.

On buyback typically all years fetch the same price, barring individual coin condition issues. So unless you are collecting the year doesn't matter. And a Buffalo will normally get you a higher buyback than a gold Eagle. Enough to overcome the higher Buffalo premium? Maybe, maybe not.

 

[Jacob Petersheim]

The dynamics have certainly changed around investments.

For all of the yip-yapping about silver, and its recent price run it may still be "sucker's money" as an investment for us little guys. The news around silver may all boil down to shenanigans in the financial markets being exposed along with industrial need projections for the commodity.

Everyone from central banks to high level investing gurus seem to be interested exclusively in gold.

But that aside, bonds, especially sovereign bonds like US Savings Bonds on up, appear to be losing too much luster. The interest they pay isn't keeping up with inflation.

Even if you flee to cash what kind of interest rates can your savings get today, or worse yet by January 2026?

These are issues that impact all of us, but as a retired old fart worried about ending up penniless when pensions, Social Security, etc. fail or cut back in a few years and even 401Ks have crashed with stocks...

Well, I'm listening. Maybe I should get serious about acting.

 

[Jacob Petersheim]

Ok, this video encapsulates my reasons for starting this thread in July. Everything else I've been writing was more or less "gingerbread" - hoping to draw out a discussion of the real issue.

While nominally about what China is doing, it is really about global financial system changes that will impact us all. The last 10 minutes might mean the most to those of us in the Western nations.

China Is Using Gold To Replace the U.S. Dollar

 

[Jacob Petersheim]

So does what goes up come down? Yes. But how far?

And what the heck is going on this year and last?

 

[Jacob Petersheim]

Of course, today there is a big selloff as profit-taking makes a move. Yesterday rose $100, so far today the price has dropped $200.

I don't really have the stomach for that. Never been a stock trader, or much of a gambler in general.

 

[Jacob Petersheim]

Something weird seems to be going on in the precious metals market.

There was a selloff or price smashdown just the other day, then a rise back to new highs. Now there is an even larger smashdown.

At the same time, a lot of sources of statistics about the market are reporting weird numbers or in some cases not reporting at all. This makes it almost impossible to know where flows of the physical are moving between or even their directions of flow.

In the US there are 3 top-tier distributors of retail market precious metals. They report that they cannot get any stock of the most desired and easily traded sovereign coins (US gold and silver Eagles, Canadian Maple Leaf gold and silver). At the same time they're having no trouble getting "generic" gold and silver products such as rounds and small bars (100 ounces and smaller).

This suggests that the run on gold and silver has begun in the US, at the same time that the paper derivatives market has smacked down prices. This is causing premiums (markups) to rise.

One suggestion is that the AWS outage on the East Coast yesterday has interfered with the market data on flows. This occurring for the first time ever exactly when the price smashdown occurred is pure coincidence, of course.

 

[Don Alaska]

Of course, today there is a big selloff as profit-taking makes a move. Yesterday rose $100, so far today the price has dropped $200.

I don't really have the stomach for that. Never been a stock trader, or much of a gambler in general.

There certainly is some profit-taking going on, but banks and others are trying to cover their losses by cashing in gold reserves. That always causes the price of gold to drop temporarily until the losses are covered and the banks involved have stabilized.

 

[Jacob Petersheim]

Interesting history:

 

[Jacob Petersheim]

This video gives you a look at how the rich are different. Clive & Clive, Jr. here are recording from their last day in China.

I can imagine that this kid is growing up a bit as Donald Trump did. I sure never got the sort of education this kid is getting.

 

[Jacob Petersheim]

I'm not sure how many remember this old TV show, much less this particular episode.

 

[Jacob Petersheim]

One might think that an ounce of gold or silver is an ounce of gold or silver. But several things enter into the picture to make the situation a lot murkier.

One is numismatics, the "coin collector" mentality that gushes over appearance, rarity, unusual features, historical significance, etc. Very much like regular coin and stamp collecting, but leaking over into the bullion market to distort things. Yet you can find a price on a given coin that has been numismatically "graded" highly and even packaged into a plastic "slab" with incorporated certification documents... that is cheaper than a raw commercial coin even from the same dealer. In theory though graded coins carry higher premiums.

Another is liquidity. In the US it is easier to sell or trade a US Minted coin (Eagle, Buffalo) than other forms of gold or silver. Next comes Canadian coins (Maple Leaf), and then UK (Britannia). Below that comes other coins from those 3 countries, then coins from Australia and South Africa, then "medallions" from the US Mint and others, and down and down in a loose hierarchy.

Another factor is premiums. Different forms of gold and silver have different markups, usually higher for the most liquid coinage. These can also fetch a bit more on buyback too of course. Premiums are not constant. There have been times when American Silver Eagle coins have had 100% premiums.