Gold needs gains to maintain investor interest, silver price strength is hurting coin sales – Heraeus
NEW YORK (January 27) Investors appear interested in gold only if the price is rising, while consistently high silver prices are actually depressing physical demand, according to precious metals analysts at Heraeus.
In their latest precious metals update, the analysts noted that investors’ interest in gold appears to be contingent on the yellow metal’s price gains.
“Following a record high gold price of $2,790/oz on 30 October 2024, total gold ETF holdings saw two months of net outflows that reduced holdings to just below 83 moz as investors took profits,” they wrote. “In Q4’24, ETF holdings mirrored movements in the gold price; this strong link continued into the new year as the gold price has risen steadily. Since the start of January, total gold ETF holdings have seen net inflows exceeding 450 koz. However, a drop in holdings of 250 koz last week coincided with the gold price testing resistance at $2,720/oz, before the breakout.”
“On Tuesday last week, gold broke through this key resistance level of $2,720/oz, established in Q4’24,” the analysts said. “Having breached the previous resistance, the next target for gold is the previous all-time high of $2,790/oz, which lies just 1% above the recent peak. If the gold price continues to rise, ETF holdings could continue to see inflows.”
The disruption of physical gold stocks under threat of U.S. tariffs is also ongoing, with COMEX gold inventories Gold continuing to swell. “Gold and silver exchange for physical (EFP) premia remain high, fuelling the ongoing surge in gold shipments into COMEX inventories from other jurisdictions at an unprecedented pace,” Heraeus analysts wrote.
“Since the beginning of last week, COMEX gold inventories have grown by nearly 2.5 million ounces, with over 1 million ounces added in a single day on two separate occasions,” they added. “Additionally, implied lease rates for -short-term gold lending are still elevated, signalling a significant liquidity squeeze for deliveries of less than one month.”
The analysts don’t foresee this week’s expected rate hold from the FOMC to boost gold prices, so the yellow metal “may struggle to reach a new all-time high in the short term.”
After posting one of the strongest weekly performances in months, gold prices are in decline to start the week. Spot gold last traded at $2,740.70 per ounce for a loss of 1.09% on the session.
Turning to silver, Heraeus said that high prices are impacting coin demand at the Perth Mint.
“Despite the Mint’s December bullion sales rising 55% year-on-year to just over 1,000 koz, full-year cumulative bullion sales fell for the second consecutive year, dropping by over 30% to just below 10,000 koz,” the analysts wrote. “Historically, sales see an uplift in months when the silver price falls to a low. Therefore, sales in 2024 may have been a victim of strong silver price performance.”
“In contrast, US Mint sales of the Silver American Eagle coin, which often exhibit sales patterns consistent with collector interest, managed slight 0.4% year-on-year growth,” they added. “This was driven by a 150% year-on-year surge in December purchases. Nonetheless, silver sales at the Perth Mint performed better than gold bullion in 2024, which saw a decline of 41% year-on-year.”
Heraeus said that while January is usually a strong month for bar and coin sales from both mints due to new releases, “persistently high prices may curb demand.”
“Without a significant pull-back in the silver price forming a buying opportunity this year, bar and coin sales may continue to struggle,” they cautioned.
After testing the $30 per ounce support level late last week, silver prices continue to bounce off key support on Monday. At the time of writing, spot silver last traded at $30.343 per ounce and is down 0.83% on the daily chart.
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