Welcome to SurvivalBlog’s Precious Metals Month in Review, where we take a look at “the month that was” in precious metals. Each month, we cover gold’s performance, and the factors that affected gold prices.
What Did Gold Do in November
Gold started the month around $1,640 an ounce. After dipping slightly to $1,630, prices powered $145 higher to the $1,775 area, leaving the $1,685 support level in the dust. Prices leaked lower in the third week of November, but held above the $1735 support line that signifies the floor gold must respect to signal a new short-term bull run. Prices regained lost ground to end the month above $1,770 an ounce.
Factors Affecting Gold This Month
THE FED
The Fed continued to call the shots in November. Markets took solace in an apparent change in trajectory for future rate hikes. Fed officials have signaled that next month’s rate hike with be 50 basis points instead of 75 bp, with markets presuming that the same will hold true in February.
The Fed tempered the good news by telegraphing that the top interest rate will be near 5% instead of the 4.5% – 4.75% previously targeted. St. Louis Fed president James Bullard had a more hawkish prognostication, of course. He stated that interest rates would have to be higher than 5%, perhaps up to 7%, in order to stop stubbornly high inflation.
DOLLAR
The dollar lost some of its power in November, as easing inflation numbers softened Fed rate hike rhetoric. The greenback had its worst day since 2009 on November 10th, after US CPI was reported to have only risen 7.7%, down from 8.2% and lower than projections of 7.9%. Gold shot $40 higher, and the Dow closed an amazing 1,200 points higher.
The greenback failed to reassurt its dominance for the rest of the month, allowing the euro to return to above parity, and helping gold prices in other currencies.
INFLATION / RECESSION
Europe is also starting to see the first tiny signs that inflation may be topping out. Composite EU CPI showed a larger than expected drop to 10.0%, down from 10.6%. This fueled hopes that the ECB might hike rates less than previously expected at their next meeting. Energy and food shortages will keep prices high and economies faltering, however, miring the region in stagflation.
Central Bank Gold Purchases
The World Gold Council reports that central bank gold purchases for the third quarter of 2022 totaled 399 tons – a new record, and almost twice the old record. The most shocking part of the report is that 280 tons of that gold were purchased by unidentified central banks.
The supposition is that most of it was purchased by China, but were there others? The obvious suspects are Russia and Saudi Arabia, two other countries where de-dollarization has emerged as monetary policy.
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Central Bank gold purchases in September were a net 30.3 tons. Czechia (0.5t) joined usual suspects Turkey (10.7t), Uzbekistan (8.7t), and Kazakhstan (6.7t) in the buyers column. India extended its buying streak in September, purchasing 4.1 tons.
The only seller of note was Mongolia, which sold 0.4 tons.
Gold ETFs
ETF investors responded to a challenging combination of markedly higher interest rates and a strong US dollar with significant outflows of 227t.
Gold ETFs experienced outflows in all regions during October. North America saw a drawdown of 40.2 tons,
Europe had 14 tons of outflows, and holdings in Asian gold ETFs fell by 4.8 tons.
GLOBAL SILVER SHORTAGE WORSE THAN EVER
While speculative bets in COMEX futures continue to set the spot price for silver, the supply of available physical silver has dropped to critical levels. LBMA silver stockpiles ave dropped to 26,502 tons, down 2.2% from the previous month. The value of holdings stood at $16.3 billion, which is about 883,417 silver bars. This is the lowest amount of silver held in LBMA vaults since reporting started in July 2016.
An incredible 1,404 tons of silver was withdrawn from COMEX in September, leaving only 1,186 tons. It’s running out, folks. When the paper silver traders realize that the actual silver is almost gone, they will all stand for delivery and cause a “bank run” on the COMEX silver vaults.
Andy Schectman, CEO of Miles Franklin Precious Metals, claims that there are 1,802% more COMEX silver futures contracts trading than the amount of physical silver in the vaults. Bullion banks and other market makers will be forced to buy silver on the spot market at far higher prices in order to honor the contracts of those standing for delivery.
On The Retail Front
The US Mint finally lifted the quotas on 2022 American Silver Eagles at the end of October, and distributors were quick to pounce. ASE sales numbers in October went from the 850,000 quota limit to 1,258,000. November ASE sales were 1,407,000. That will be the last 2022 ASEs released by the Mint, as production shifts to making sure there is enough 2023 ASEs to meet the heavy demand in January.
2022 American Gold Eagle production ended in November, as planned. Only 6,000 1 oz AGEs were sold for the month. October’s totals were updated to 62,500 oz of AGEs in all sizes. American Gold Buffalo coin sales hit 4,500 in November before starting the transition to 2023 production. October sales figures were adjusted upward to 39,500.
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The Perth Mint sold a record 183,102 ounces of gold coins and minted bars in October. Silver coin and minted bar sales for the month were just shy of 2 million ounces, at 1,995.350 oz. This is down by 23% from September, but up 48% from last year.
Market Buzz
Silver demand in India is expected to spike by 80% this year to a new record.
Also in India, airport security in Mumbai set a single-day record for gold smuggling busts, nabbing 61 kg (135 lb) of gold worth more than $3 million from a total of seven passengers.
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The World Gold Council (WGC) reports that global gold demand totaled 1,181 tons in the third quarter of 2022, 28% higher than the third quarter last year. Retail gold coin and small bar demand hit 351 tons in the quarter, 36% higher than last year. Year to date, gold demand has been 18% higher than last year.
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Gold demand in China for the third quarter was 163 tons, up 58% from the second quarter, when COVID lockdowns suppressed the economy.
– Steven Cochran of Gainesville Coins