Transcription
Good morning. It's Jeffrey Kushin of CPM Group. It's about 11:30 in the morning here in New York on Monday the 2nd of February. I will be out of the office on the 3rd of February. So, we're doing this video today. There's a lot to cover with.
I want to talk about what's next with gold, silver, platinum, and palladium. We saw a very sharp decline in prices on Friday. There were people who were somehow or other surprised by that. I'm not quite sure why, but we'll go through what's next for gold, silver, platinum, palladium.
I also want to talk about the differences between the prices of silver and other metals in Shanghai and Mumbai and London and New York. There's been a lot of commentary about it and I'll explain why there was a difference, uh, why there has been a a large difference on Friday and over the weekend and uh, I'll discuss a little bit of the hypocrisy behind that discussion, uh, people who say they don't understand it and complain about things, but we'll get into that.
I want to start with the US dollar and I want to start with the US dollar because it's really important and it's really important for investors and others to understand where it is. The dollar is off about 8.4% from its cyclical high on the 13th of January 2025. So a year ago it hit a peak and it's come down and you can see here most of the decline was during 2025. It's been moving sideways actually for a couple months but it's off 8.4% from that peak. That notwithstanding, it's up 39.6%, 40% since its low in July of 2011, a few days before the Treasury credit rating was reduced. And the dollar had fallen because people were expecting the credit rating to be reduced. And it's risen 40% since then. And then, you know, we got into a cyclical low in 2021. And the dollar's risen. It's 7.6% higher than it was in 2021 coming out of the pandemic lockdown recession. So when people keep talking about how the dollar is collapsing, they're simply not telling talking the truth. And that's very important. It's very important for investors to understand the dollar's not collapsing. It may decline in the long run, but it also may do well.
There are central bankers and macroeconomists who have talked for decades about what comes after the de facto dollar gold uh, the dollar standard that has been in place since 1971. And the view was that the dollar ultimately would pass away as the de facto um currency reserve currency and that's true. Someday it will. The only monetary system that hasn't failed is the current one. And over the last five, six thousand years, there's been numerous currency systems, all of which or almost all of which have been based on either the dollar or silver or the dollar and silver. And all of them have collapsed except the current one. Being based on the dollar gold has done nothing to protect currency from being long-term debasement and collapse. That's what's important to understand.
I used this chart last week and I want to use it again because another thing that's very important to understand is that time matters. You know, there's we have this the comment that we've said the long-term prices are unsustainably high or unsustainably low, but the short term can last three to five years. In 1997, we predicted that the gold price would drop and it did in the second quarter of 2000, 1997. And we said prices below $300 are unsustainably low on a long-term basis, but the short term could last for five years. And it did. The price did not get above two $300 on a sustained basis until 2002. And similarly at the end of 2011, the beginning of 2012, we said that we could see a cyclical decline of three to five years within a secular long-term bull market for gold and silver. And the gold price and silver prices fell from 2012 into 2016. I did this, I talked about this last week and I think I'm going to talk about it. I'm talking about it again because it's very important for people to be able to distinguish between the short term and the long-term and long-term thinking and short-term thinking. That's very important.
We can be very bullish, as we are, about silver prices in the long run, rising above last year's $40 average price, while at the same time saying we don't think prices will rise sharply from the intraday high of $121.79 last Thursday, the 29th of January. That was 35% higher than it had been at the end of November when it was $50. Actually, it doesn't make sense. That's even that's more than 35. It's 135% higher than it was two months earlier. And anybody who sees something rise 135% in two months ought not to be surprised to see it fall back and give up half of that, only half of that increase when the speculative fervor dissipates. And that's what it was, speculative fervor. A lot of short-term people seeing the gold and silver prices rising, worried about a wide uh variety of economic and political factors coming aware of what was really going on not only in the United States but around the world pouring into gold and silver and platinum and palladium and copper and aluminum and nickel and zinc. And then when the prices reached such high levels and various economic and political events occurred, they dumped and because they were involved in the ETFs and other things, they were able to dump very quickly.
Similarly, we can be bullish that the gold price will rise significantly from the $3,459 average price last year, but we probably reducing, you know, the price could rise uh above the $5,586 that we saw on an intraday basis last Thursday. But we're much more bullish on the long-term annual average prices than we are on those those spikes and and speculative uh peaks. It's very important to understand that not so that you understand us, so that you don't lose continue to lose money on your investments.
So let's talk gold prices. Gold prices spiked sharply higher. I talked about it since the end of November, but you can look at this and you can just say, "Well, actually, the gold price went from $4,400 to 5,000 whatever it was last Thursday within the month of January." Clearly a speculative spike. We feel sorry for people who did not see that as a speculative spike. And it came back off and it got almost down to where it had started last month. And as we had talked about last week, part of that was the role of the February Comex futures contracts into April and part of it was economic conditions and part of it was political issues. The price of gold is still in an upward trend, but some of that speculative fervor has been burnt out.
I want to go through the markets a little bit quickly because I really want to talk about the ETFs and explain the differences between Shanghai, Mumbai, London, and New York prices. Silver prices. Again, you know, we talk about how it rose so sharply, 135% from $50 at the end of November, but if you look at it, it rose from $70 at the beginning of this year to $121 last Thursday, $50 in within one month. Yeah. Anybody who's surprised that the price could decompress on a wave of speculative selling ought not to be surprised. And again, the price of silver is still in a bull market. The price averaged $40 last year. Yeah. Is it going to average more than $40 this year? We think it's going to. Is it going to average a lot more than $40 this year? We think it's going to. Do we think it's going to 200 on a sustained basis or even 121 on a sustained basis? We don't think so. And we have a variety of economic and political and fundamental. The fundamentals are very important here. Fabrication demand, investment demand, backed up investor investors selling so much stuff, they've backed it up in the refineries and a refinery turnaround times have gone from one to two weeks to four to six weeks. That's a fundamental problem. That's a fundamental issue. And when I get to the ETFs, you'll see a really big issue on on on silver as well as market conditions.
Now, as I said, February is an active gold futures month. March is an active silver futures month. And we have about 499 million ounces of March open interest in the March Comex silver futures contract, most of which will be rolled over into May and to a lesser extent July. And that's going to have an upward pressure on silver prices. Not because Comex doesn't have the silver and not because we're running out of silver in New York or on a global basis. That's all wrong. It will apply an upward pressure on the price because people are going to be buying back 499 million ounces of silver futures and that will have an upward pressure on the price. That has nothing to do with the world or Comex running out of silver or any kind of default as I was talking about last week.
Last week, you know, when we were going into the February gold delivery, at the beginning of the week, we had a 14 million ounces of open interest in the February contract. By Friday, when the price came off, it had gotten down to 4 million ounces. Investors and others who were short the February contract bought back 10 million ounces of gold last week. I'll show you the ETF figures on gold in a minute. But the reality is that nobody else and no other sector of the gold market around the world was buying 10 million ounces of gold last week. And that's why the price went from $90 to or 121 in silver and and whatever it went like 4,000 to to 5,500 in gold. And then that phenomenon was over and the price came off. The price came off at the same time that there were various pronouncements economically and politically. That said, we think those longer-term fundamentals still and economic and political factors are still there and will continue to exert upward pressure on precious metals as investors look at the world and say, "Hey, we're worried."
Platinum prices also came off. They had reached a record level earlier in the month. They've come off sharply. They've gotten back to where they were at the beginning of the year, one month ago, and they're still more than double what they were a year ago. So, it's there. And then palladium prices. Similarly.
I want to talk now about ETFs. This is a chart. It shows monthly changes in gold, silver, platinum, palladium ETFs that we track. We track dozens of these things from around the world. And this is you can see the monthly changes in each one. And then I've added, I used this table a few weeks ago through December. Then I added today, January. Just looking at gold. There was one month where investors were net sellers of ETFs and that was back in May during the the initial terror of tariffs, the tariff terror. Last month. Over the course of the entire month, investors bought 3 million ounces. I'll show you the daily data in a second.
If you look at silver, you had three months where they were net sellers and they were off at the end of the year 29 million ounces. I mean, I'm sorry, they were they were off, they were up for the year 203 million ounces, but they came off some at the very end. In January, they sold 30 million ounces of ETFs. And I'll show you the daily data on all of these in a minute. Platinum, again, you had increases. Again, most of it was in the second half of the year, basically after the Kansas City Fed's Jackson Hole, Wyoming conference where the the Fed said, "Yeah, the economy is getting worse and we may have to lower interest rates more often in 2026 than we had thought we would have to." And people seem to have forgotten they said that.
Now, this table you can't see. We'll be producing a market alert for our clients uh and we'll include this table, but I'll show you the con the the results. But you can see here just graphically, the gold, you can see one, two, three, four days where in January, over the course of January, there were four days where ETF buyer uh investors were net sellers and they were net buyers over the course of the month. And then you look at silver and you can see a much bigger decline much more often. And if you look at last week as the price was rising from Monday through Thursday of last week from $90 to $121, ETF sell investors were selling into the rise. When the price fell Friday, they bought. They bought like 5 million ounces last week, last Friday. Platinum mixed, about half the time uh investors were net sellers. Half the time they're buyers and palladium slowly but steadily they're buying. And they were more consistent buyers of palladium and gold than they were of platinum and silver.
Here is the summary of that daily data on January. And again, you can see gold, 18 days out of the 22 business uh trading days in January, net ETF investors were net buyers and they bought three mill more than three million ounces over the course of that month. Investors in silver ETFs were net sellers 15% 15 days out of the 22. So roughly uh two-thirds of the time, two-thirds of the days last month, they were sellers and they sold 30 million ounces over the course of the month. Platinum investors pretty flat, 12 days of buying, 10 days of net selling, about 54,000 ounces. And then palladium, 17 days, only 5 days of net selling, about 40 uh 63,000 ounces.
So ETF investors are very important in seeing where the price is going because ETF investors are a combination of long-term traditional precious metals investors and short-term speculative people. People who don't get involved in the precious metals every day of their lives, seven days a week for some of us, but see the price rising, see the state of the world, see the risks inherent in the inflated stock US stock market and say, "Well, how can I quickly buy exposure to gold and silver, platinum, palladium?" And the answer is the quickest way for an investor that doesn't have a bullion trading account or accounts or futures and options accounts. The quickest way is ETF shares because these are shares and they're traded on the stock exchange. So if you have a brokerage account with a a broker that will trade shares and options uh or and bonds for you, you can buy into the ETFs. So there's a lot of speculative activity in the ETFs that doesn't necessarily exist in the physical markets. Something to pay attention to.
Now, as I said, there was some discussion about the differences in silver prices geographically. Shanghai prices at the end of trading in New York Friday were still around $120, $122 an ounce and silver in Comex had dropped to $71 at one point and settled a few bucks above that and people were saying, "Wow, why what's going on that's causing this gigantic discrepancy?" And similar conditions were occurring in Mumbai. And the thing difference is that in Shanghai and in Mumbai, the markets have circuit breakers. They have regulations that say if the price falls a certain percentage in a given day or a given period of time, the pre-halting trading has to stop in some cases for five minutes, in some cases for a day. So what you were seeing last Friday and over the weekend and in Monday trading in Shanghai and Mumbai today was that these markets had had limits placed on how far they could rise or fall in a given day. They'll have to play catchup with markets where markets were prices were allowed to find their own price levels.
That's the funny thing about it, you know, and well, the funny thing about it is that there were all these people who were complaining what's going on in Comex that it's not it's it's it's been allowed to fall so sharply. Where are the where are the circuit breakers? Why hasn't the Comex halted trading? And most of the people who are making those complaints are the people who keep saying for years, "Oh, I, you know, the silver market or the gold market is not free on the Comex. It's a managed price and you know if the price ever gets away from people, the the Comex steps in." Well, the Comex steps in to assure stability through the issuance of variation margins and it can do more as it did in January of 1980 to assure the stability of the contract and to assure that everybody who was long and short silver could live up to their commitments to the clearing house to either sell or buy silver, right? But the Comex, there's no evidence that the Comex comes in and jerks the market around or stops trading because the price is moving too far, too fast, up or down. These are free and unmanaged markets and people complain about it when the price doesn't rise to unrealistic levels. And then when the prices are allowed to fall after a speculative double like we've seen, they complain, "Why isn't the Comex coming in and interfering with the market?"
The difference between Shanghai prices and Comex prices on Friday was that in Shanghai, which is part of a communist controlled managed economy, they have circuit breakers and they said, "Wait a second, the price is falling too far, too fast. You have to stop." The same way they say the price is rising too far, too fast, you have to stop. But the Comex doesn't do that. Kind of hypo, you know, um, hypocritical.
Years ago, there were these people who were really disreputable. The the one guy had been banned from being a futures or options broker by the CFTC because he was trading his clients accounts in taking positions against the positions that he was taking for his clients and stuff like that. And so they became gold vigilante watchdogs and they kept saying, you know, the banks should be required to disclose their gold holdings. And it's funny because Republic Bank used to disclose that in their quarterly financial statements. Republic was bought by HSBC, I think, 1999 or so. Um, but I was at a meeting and these people were saying, you know, they should do it. I said, you know, I'm all for disclosure. It would make my job a lot easier because as with the central banks that have passed rules that they they will abide by and do abide by in terms of disclosing changes in their monetary reserves. They've made my job a lot easier. I don't have to fly around the world and have dinner with people at various central banks and talk to them about what they're doing that they're not reporting. It makes my job a little bit less lucrative because we used to help central banks mask their transactions and that would give us insights as to what was really going on, but it's nice to have that. So I was at some meeting and these people were saying that and I said, "Okay, you know, let's start this with this room. How much gold do you have?" And no one would answer. I certainly would not answer because I don't want anybody to know how much gold I have, much less where I store it. Same with silver. I had one guy who estimated how much silver I had and pre and suggested that I was like in the top quartile of silver investors worldwide. Yeah, I I I just don't care to know, you know. I guess I do want to know that I'm not too large to have issues in the market, but that's beside the point.
There's this hypocrisy that will claim conspiracies to manage the prices where the conspiracies have no evidence that they exist. And there's this enormous body of evidence that they do not exist. And at the same time say, "Oh, well, here's a guy who was spoofing the market for five minutes. Clearly, the banks are conspiring to manipulate and suppress the market." You know, A does not equal B in this case. And then when the market moves against them, it's like, "Where where where are the where are the police? Where are the where where are the regulators who are going to protect me from thinking that just because a bunch of speculators poured into the market and drove the price of silver from $50 to $90 to $121 in two months' time that I am free to believe that it's now going to $200 or something more and then when the speculators leave because the markets have changed and the prices re-reason 135% in one month, they're upset that the regulators didn't come in and and and block it." Doesn't make sense. It's hypocritical. It's ironic.
We have this special report, "The Gold Silver Renaissance, 25 Years On." We did it in December with the support of Silvercorp. It's available from CPM Group. It talks about why 25 years ago we said there would be this long-term bull market in gold and silver, which is a quarter of a century on, but looks like it's going to continue. You can get that at cpmgroup.com. You can send us a note at info@cpmgroup.com. You can pre-order our 2026 yearbooks, uh, which will be coming out over the next several months, uh, starting with the gold yearbook in March. You can see free reads. You can send us an email about ways we can help you. In the meantime, take care of yourself. Take care of those around you. Try to do something good for the world. And we'll be talking to you later this week.