The 2 Factors Driving Gold and Silver Prices Higher

the-2-factors-driving-gold-and-silver-prices-higher

Gold and silver have been on a tear so far this year, which probably shouldn’t be all that surprising given the many headwinds facing the economy right now. But why now, you might ask? Why weren’t gold and silver climbing much of last year?

In a way, this may all have come down to the right timing, and the fact that there are two important factors driving gold and silver prices right now. Like every other good out there, gold and silver are impacted by supply and demand. And both supply and demand are working together to push gold and silver higher.

Gold and Silver Demand

The primary demand-side factor behind gold and silver prices today is increasing demand from investors. Demand for gold and silver from investors has been increasing significantly over the past two years. But in recent months that demand seems to have grown astronomically. There are a few reasons for that.

First, the likelihood of an oncoming recession is growing more real and apparent every day. People who may have discounted the likelihood of recession a couple of years ago now realize that the economy is in a bad place. With households growing increasingly indebted, companies starting to lay off workers, and more and more people dropping out of the workforce, it’s becoming clear that the economy is not in great shape.

Then there’s the fact that there’s still time to cash out and protect your investments. Markets still think that the Fed will swoop in to save the day, and so the correction that many of us have been waiting for for months still hasn’t materialized.

As the saying goes, markets can stay irrational longer than you can stay liquid. But that irrationality means that you can still cash out of your investments, or roll over your assets into a gold IRA, or do something else to try to protect them, and still keep many of your post-2016 gains intact. There’s no reason to sit on your hands and watch your assets lose value.

Many Americans understand that, which is why they’ve been buying gold and silver like it’s going out of style. Overall demand for gold and silver coins is up worldwide, and that increased demand is driving up prices.

Of course, it’s important to remember that precious metals coins always sell at a premium to the spot price. The price you pay may be based on the spot price, but it’s going to be some percentage higher than the spot prices. You may report your gold and silver assets’ value at the spot price, but right now buying and selling prices are going to be above spot. In silver’s case, premiums have sometimes been up over 100%, which is because…

Gold and Silver Supply

The combination of increased demand from investors and supply issues at various mints has helped decrease the actual physical supply of gold and silver coins available to purchase. In the case of a gold IRA or silver IRA, only certain newly or recently produced coins are eligible to be held in an IRA, and these coins are in short supply today.

In the case of the US Mint, for instance, the Mint sold only 980,000 ounces of gold coins last year, down from 1.252 million ounces in 2021. Sales of Silver American Eagle coins were down even more, from 28.275 million ounces in 2021 to 15.964 million ounces last year, a decrease of 44%.

That’s a problem, particularly because the Gold American Eagle and Silver American Eagle are among the most popular IRA-eligible precious metals coins on the market today. How does a mint fail to keep up with sales during a period of significantly increased demand?

The US Mint faced numerous supply issues in 2022, including the inability to source enough planchets for many of its silver coins. These supply issues aren’t unique to the US, either, as other mints around the world are having difficulty keeping up with the increase in investor demand for gold and silver coins.

There may be a lot of silver and gold above ground, and many tonnes of each metal produced each year, but the process of extracting metal from ore, purifying it to the standards needed for IRA-eligible coins, producing coin planchets, and then getting those planchets to mints is both time-consuming and intricate. Delays at any step of the way can have major impacts on downstream production.

It’s this supply constriction that is helping to drive up premiums on gold and silver coins right now, catching many would-be precious metals buyers in a pinch.

Which Way Will Gold and Silver Prices Move?

It’s hard to imagine that 2023 won’t be a good year for gold and silver, especially if the long-awaited recession finally becomes reality. Demand for gold and silver remains strong, which bodes well for the gold price.

If the US Mint, and any others facing supply issues, can make 2023 a trouble-free year as far as supplying the market goes, premiums on coins could come down. But if gold and silver continue to rise in price due to increasing investment demand, that could cancel out any premium declines.

The future is as uncertain and unpredictable as always, but we have to make decisions in the present. If you’re looking to protect your retirement savings with a gold IRA or silver IRA, you need to be aware of what’s moving gold and silver prices today. Between high demand and ongoing supply issues, gold and silver market prices can be at hefty premiums to spot today.

That doesn’t mean that prices will come down significantly in the future, however. Waiting for prices to come down before buying gold and silver may not be the best choice, as if prices take off it could be a while before they come back down, as in the last bull market post-2008.

Now is as good a time as any to buy gold and silver coins, especially if you’re looking to buy them for a gold or silver IRA. With our established relationships with mints around the world, Goldco is always working to get you high quality, IRA-eligible gold and silver coins as quickly as possible, helping you overcome any supply issues plaguing the markets.

And with over $1 billion in gold and silver placements and thousands of satisfied customers, Goldco has established itself as a leader in the precious metals industry. Give us a call today to learn more about putting gold and silver to work for you in protecting your hard-earned savings.

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About the Author: Paul-Martin Foss