The monetary metals pulled back sharply yesterday but have entered Tuesday on stable footing. Silver is trading at $29.90 –and gold is $2,674.
The ongoing volatility is a reflection of uncertainty in the gold and silver markets globally, including fears of import tariffs from the incoming Trump administration.
If Trump slaps a tariff of, say, 10% on precious metals coming into the U.S., that would have a huge impact. 10% on silver would amount to $3 per ounce!
As a result of this worry, the price of gold and silver – as traded on the New York futures market – has risen sharply above the prices for the same metals seen simultaneously in other markets across the globe.
In silver, for example, the spread between London spot and New York futures has recently reached as high as $1 per ounce!
This spread has also created a big incentive for parties all over the world to get their gold and silver into the U.S. before any tariffs are imposed.
Traders are buying metal in London, simultaneously selling in the NY futures market (and pocketing a tidy profit), withdrawing the metal from London vaults, and transporting the metal to the U.S. to deliver onto the exchange to close out the futures position.
This dynamic is having the effect of draining London vaults of gold and silver at an unusually fast rate –and at some point, these lower levels of vaulted metal in London could create price dislocations in that major market too.
Those who have short positions in the New York market are in the process of getting squeezed, especially if they are having trouble getting their hands on physical metal to deliver into their short positions. Or get it into the right form.
This situation could lead to big price swings and even a major short squeeze event in gold and/or silver, so you can be confident we'll keep our customers updated at MoneyMetals.com.
Originally Published on Money Metals Exchange.