Transcription
Good afternoon. It's Jeffrey Christian of CPM Group. It's about 22 minutes after 12 noon here in New York on Friday the 26th of June. I want to talk about things that you should focus on, uh, as a precious metals investor and some things that you can probably ignore. I'll go through some of the details in terms of gold and silver and platinum, palladium investment demand. Uh, before I start and before I get into GDP and the, the, the PCE price index and other factors, um, I want to thank Monetary Metals for making this paid CPM Group, uh, research video available to you, uh, our viewers. Um, they support it. Monetary Metals has really opened up the yield-bearing gold market to a swath of investors, uh, paying yields on gold in gold. And if you're interested in learning more, you should go to monetarymetals.com/cpmgroup.
Also, at the end of this video, I will talk about the nonsensical comments that you're hearing about the Treasury revaluing its gold and silver as of the 4th of July. It just is garbage. It's the kind of thing that you could ignore. And I'll explain it at why that is the case at the end of this presentation.
Now, gold at noon time was trading at $4,15, uh, on the COMEX. We saw a sharp decline a couple days ago that reflected a ratcheting down by investors of expectations for precious metals prices. There was a view that interest rates are going to stay high or longer, that you could see a ceasefire, if not an agreement, in the US invasion attack on Iran. Uh, the tide was turning in favor of Ukraine, uh, in Russia, and, and there were a variety of other factors that all were sort of indicating to the investment market that the need to have more gold and silver in your portfolio to protect against risks were, were, were reduced. And this is something that we've been seeing over several months. You can see here on this price chart a very clear downward trend since we reached that record peak around $5,500 at the end of January. And that downward trend continues. We are testing the $4,100 level. We broke below it last week and got down to 4,64, five. We broke down below it again this week, uh, two days ago. The price is back over 4,100, but we are really testing that level. A lot of technically oriented investors and traders are looking for $3,800 as a downside, and we may well see that. We could also see much lower prices. The upward trend that you've seen really here since, uh, the beginning of 2024 is also being tested right now. And the fact that the price has moved below that trend line, depending on how some people draw it, um, suggests that that further $300 move downward, uh, during the next few months is, is, is possible. CPM Group still expects prices to rise later in the year. Uh, we expect a more hostile economic and political environment after the summer months could come at any given time, but it's possible that for the next two months, the next nine weeks, we will see prices consolidate, uh, can, uh, above $3,800, um, and, and below $4,800. Um, so that's the possibility for gold in our view.
Silver, very similar trend, but we're seeing much lower and much weaker, uh, prices. You had seen $616, $62 as a support level in early February, in the middle of March, and then again in the middle of June. We broke below that. The price right now, uh, or as at noon time was $59.33. We have gotten down below that. We are looking, we've seen the price spike down to about $556. A move to 50 or even 45 or 40 is possible. 50 seems, uh, 55 seems to be the next point. Again, it's the same dynamics that we're seeing with gold. Summertime consolidation, sideways move, profit taking following the the sharp increase from last September into January, and it, uh, coming off. I'll show you some data on investment demand, uh, for gold and silver and platinum, equinium, in a few, in, in a, uh, after the charts.
Platinum has also shown greater weakness, uh, and it has come down. It is right now, well, at noon time, it was $1,529. Um, we're testing that $1,500, uh, range. Uh, a break below that could see the price go to 1450 or 1400. We're not quite sure that you see the price go back to the that that, you know, it traded between 900, $800, $900 and $1,100, $1,150 from 2014 into, uh, May of last year. We're not quite sure that you're going to see the platinum price go back to that, but a lot of investors are concerned about longer-term demand for platinum, palladium, and rhodium in the auto industry. Uh, and in fact, you know, you've heard a lot of commentary for years from South African platinum producers about all these new uses, and a lot of them are spurious. They probably won't occur. Fuel cell vehicles, for example, the technology and, and the reliability and the safety issues related to hydrogen are not there. We might see hydrogen safely and cheaply produced, shipped, stored, and distributed at some point in the future using liquid organic hydrogen carriers. But that technology is decades away. And the auto industry has made it clear that if you can cheaply and safely ship, store, and distribute hydrogen, they would use it in hydrogen engines and not fuel cells. They would save tremendous amount of money using proven technology, hydrogen engines, uh, as opposed to highly, uh, technical and sometimes less reliable fuel cells. The first internal combustion engine used hydrogen as a fuel around 1806. So the South African producers have been hyping all these new technologies for platinum for years. And now this week, one of the major producers has come out and said, "Hey, we need to find new uses for platinum group metals, platinum and palladium specifically, and rhodium to some extent too," suggesting that they are fully aware that a lot of the technologies they've been claiming, uh, would be, uh, using a lot of platinum in the future probably aren't going to be there. And we actually have a chart that we use in our platinum group yearbook and in our long-term platinum group studies showing how really when I started in the business in 1979, 1979, the South African producers were saying that by 1985, 1988, fuel cell vehicles would be using hundreds of thousands of ounces of platinum. And they've continued to say that since the 1970s, and it's still not the case, and it probably won't be the case going forward. Fuel cells have good applications, remote locations, stationary applications of, uh, secondary power supply, but on-road fuel cell vehicles probably do not make economic or technical sense. And the South African industry has known that all along, but they continue to hype it. And that's what you see that kind of hype go with the po driving the platinum price over the last 12 months from $1,000 to to $3,000. And now it's coming back off. So the platinum market and the palladium market, which I'll show you in a second, are less bullish than gold and silver. Gold and silver prices are likely to stay stronger because their financial assets and their risk assets, their portfolio diversifiers, their financial assets, they're quasi monetary assets. Gold is a monetary asset. Silver is not, uh, in the eyes of central banks. Uh, but they have the role of offering people protection from financial and economic and political and social problems, as well as personal problems. Um, platinum, palladium don't have that. Platinum and palladium are industrial metals, and the major industrial use is autos.
Palladium prices even weaker than gold relative to where they've been, and they are now back down almost to the upper level of the range that they traded in between late 2023 and May, uh, June of of last year. The palladium price was $1,216 at noon time today here in New York, which is pretty much the upper end of the level that we've seen over the that that 19-month period from late 2023 into the middle of last year. So, palladium price has pretty much given up most of that advance.
Now let's talk a little bit about the economy. I said I would talk about things that you should be focusing on. One of the things you should be focusing on is the state of the economy, and we are seeing greater economic strength than a lot of people had expected. That can dissipate over the next 12, 6 to 12 months. There are many economists who are concerned about that. The United States, the Treasury, uh, uh, Bureau of Economic Analysis, rather, um, came out with its third G, uh, uh, estimates of real gross domestic product, real economic output in the United States in the first quarter. They came out with that yesterday or the day before. And you can see here these the three bars of in each section, the, the B, the BEA comes out with an advanced estimate, and then they come out with a second estimate as the they get more data, and then they come out with their third and final projection, which is what they came out with this week. And you can see, for example, the orange bars on the right, that's the total real GDP, and they had estimated it was around 2% initially, and then we thought, well, maybe it's going to be closer to about 1.8%. And in the final estimate that they came out with this week, it's 2.1%. Then you can look at where that's coming from. Consumer spending, you can see was much weaker than they had expected it to be in their initial two estimates in their final data. Now that the first quarter is three months, two and a half months behind us. In their final data, consumer spending was much weaker in the first quarter than they had estimated it would be. Where you did see strength was in business investment and in overall investment. Now, that's can be a precursor of increased consumer spending in later quarters. When businesses invest and they build new factories, and they buy new equipment, and they buy office furniture and computers, that usually indicates that they're going to be hiring more people. Once people have jobs or better jobs or new jobs, they tend to buy more things. Sometimes they buy a house, and then they have to fill up the house with white goods and, and electronics and other things, and lawnmowers and all that stuff. Um, but this time, what we're seeing is a lot of the investments are in low-employment data centers. So that's a little bit worrisome. We have seen some good jobs data, uh, growth, 170 some odd, uh, thousand new jobs, uh, in a, in a month. That's pretty good. And it suggests that the economic environment is stronger than a lot of people had thought. The other place where you saw strength was in exports. Government spending, pretty much what the government thought it would be, and then imports, which are a negative in the calculation of GDP, were half of as much as they thought it would be. So that means that people were relying more on domestic goods. So, kind of a mixed picture, but basically a strong picture. Now, if you look at GDP at 2.1% in the first quarter, you can see it's down a little bit from 4% in, uh, the fourth quarter of last year, but it's pretty much in line with the kind of GDP we've seen since the Great Recession, uh, ended in 2009. It's not sterling. It's not booming, but it's also not slipping into a recession. And that's where we are with GDP.
Government also, the Bureau of Economic Analysis also came out with its disposable, uh, personal income data and its, uh, personal consumption price indices on the personal disposable personal income data. You can see the blue bars are the, uh, personal income, and it was negative. It contracted in April. It sprung back very sharply, uh, in May to the highest level since January, and consumer spending also has increased. Now, in April, you saw consumer spending relatively strong, around 2% growth, and that was all being paid for with credit, be, basically, be that increase because incomes were, were contracting overall. Now, in May, you saw the expenditures pretty much in line with the income, which is a healthier sign. If you look at the price index based off of the personal consumption expenditures table, you can see persistent inflation pressures in oil and beyond oil. So the orange line is the headline personal consumption expenditure price index. And you can see it's risen very sharply over the last three months, reflecting oil and, and natural gas, uh, supply disruptions due to the United States and Israel attacking Iran and everything related to that. But if you look at the blue line, you also see non-energy, the headline, take out the headline food and energy, which are more volatile, and look at core expenditures. You can also see that that inflation has continued to be, uh, upward pressure. Now, part of that is spillover of oil because, you know, if you're going to be buying something, it's going to be trucked to you or taken by train, and that's trains and trucks use diesel fuel. So, you'll be using energy there. But you basically are seeing much more persistent inflationary pressures, which will probably keep interest rates higher than a lot of people thought 8 months ago, 12 months ago.
Now, turning to precious metals, I used some of this data earlier in June. I've updated it through, uh, yesterday. I didn't update it actually. Carlos Sanchez, uh, my, my partner, uh, one of my partners here, updated it. Gold ETFs, uh, held 132 million ounces as of the 25th of June. There's a little bit, uh, you have to be aware that most ETFs report on a daily basis, but some report on a weekly or monthly basis. So, there's a little bit of a slippage there, but 132 million ounces of gold holdings, that was off only 30,000 ounces since December 31st, but it was off 2.77 million ounces from the 13th of May. That's when the price of gold started falling at a sharper level. So, that was like an interim peak on the 13th of May. And we've seen 2.7 million ounces of ETF sales of gold since that time, slightly more than a month. Silver holdings were 1.1 million ounces yesterday. That was off 79 million ounces from the beginning of the year. You had really heavy sales of silver in January and early February, and it was off 15, uh, 13.5 million ounces since the silver holdings peaked on May 14th. Platinum, 2.9 million ounces, off 480 million ounces since December 31st, and off 155 million ounces, thousand ounces, since May 5th, the platinum ETF holdings peak. Again, as I was saying, investors have grown much more pessimistic about platinum and palladium to some extent. Palladium ETF holdings, 1.2 million ounces, off 160 million, a, thousand ounces, since December, the end of last year, and off 50,000 ounces since May 15th. So, you're seeing ETF holdings, which come from both short-term non-traditional precious metals investors and as well as some traditional precious metals investors. You're seeing ETF holdings being liquidated over the last month and a half, and that's one of the reasons why the price has been falling.
And it's not just ETF investors that have been selling. A lot of investors have been selling their gold coins and medallions and smaller investment bars or one-ounce bars, both gold and silver. And you can see that in the premium, the premiums that are being paid for US Mint coins, which have fallen significantly, uh, since last year and are now lower than they were in that period. This chart only goes back 2012, but between 2012 and 2008, 17, you saw this slow decline in the value as investors were kind of inching away from precious metals. Then there was a bigger fall in in 2017, 18, and 19 before investors rediscovered precious metals, uh, in the middle of 2019 and started buying again. And we saw these spikes in the premium, which reflected greater investment demand, and the funds, um, the, the wholesale and retail dealer coin dealers had to buy new coins from the mints. These are the US Mint, but also the Royal Canadian Mint and other mints, uh, to meet that demand. What we're seeing now is a reflow, secondary sales from investors back to the dealers, which is backing up. Now, if you have scrap, if you have medallions or or many other bars, the dealers, if they can't find ready buyers, will have them melted down and cast into 100 ounce or 400 ounce bars, but they'll keep the Eagles and the Maple Leafs and other coins that still have a positive premium as opposed to a discount to the wholesale spot gold price. And that's what we're seeing now. So, you're seeing a lot of backed-up coins in the dealer market. The dealers don't need to buy new coins from the mints because they've got a lot of secondary coins. So, when a new buyer comes in and says, "Oh, I want to buy a gold eagle." Say, "Okay, well, if you want a current one, I'm going to have to charge you, you know, a higher price because, uh, I'm buying them from the US Mint distributors." Uh, but I have these other ones from previous years. I can sell them to you at a better price. So, you're seeing the secondary market supply current investment demand for gold coins. And you're seeing that in the silver market. And we've heard stories, and CPM Group has passed them on over the last year and a half, about the refineries and, and the dealers being backed up. And you can see again on the right-hand side, a silver 100 ounce bar premium, and the lighter blue line, and the American Eagle, uh, silver eagle, and how those premiums have come down sharply since 2023, and even more sharply for the eagle just over the last few months. On the right-hand side is the dealer premium for thousand ounce good delivery bars, and it also has come down sharply and is close to zero, has gone into negative territory because there's so much silver that's backed up in the market. So when people tell you, hey, the world's running out of silver, that's a different world than I live in.
Now, the COMEX July contract is an actively traded contract. It becomes deliverable the middle of next week, and people who are short the July contract have been buying back the contract and selling forward into the September contract. They're just a roll. And sometimes those rolls, uh, of the futures contracts have a positive effect on the prices, and you'll see the price spike higher, and then once the roll is completed, it comes back off. You can see, for example, with the active March contract at the end of January, you had 460 million ounces of March open interest. By the end of February, when that March contract had become deliverable, you were down to 8 million ounces. And the May contract had gone from 125 million to 395, 396 million because people were buying back their March contracts and selling in May. And yes, the price did show some strength during that period of time. In the May contract, then at the end of March was 368 million ounces, and by the end of April, as it was becoming deliverable, it was down to 7 million ounces. And again, a lot of that stuff rolled into July. So at the end of April, you had 356 million ounces of July open interest. As of Tuesday the 23rd, you were down to 166 million ounces. And as of yesterday, it was down to 119 million ounces. So the July roll is occurring. It will continue to occur over the next few days. It's probably not going to be a significant factor price pushing prices up sharply. It will support the silver price at least for the next few days, but when that rolls over, any short-term price support from it will be dissipating.
And oil's not running out of silver. I keep hearing people on the internet talk about how silver reported, uh, reported inventories on the COMEX are down to 40, 42, 47 million ounces. They're not. As of two days ago, they were 87 million ounces of reported registered inventories. And that was up from 84 million ounces in at the end of May, and 80 million ounces at the end of April, and 76 million ounces at the end of March. It was down from 104 million ounces at the end of January, but by February, it was down to 87 million, 88 million ounces already. So registered inventories have not dramatically changed since February, and they're not 40 million ounces or 42 million ounces. They're not falling sharply. They're not disappearing like some less reputable coin dealers have been saying on the internet. And eligible but unregistered has also been very stable. It's, uh, over the last four months, total inventories there too. So COMEX inventories have not been falling sharply. You don't have to worry about that. You don't have to salivate and say, "Oh my God, the world's COMEX is being drained of silver." Because it's not. It's just not.
Okay. The last thing I want to talk about is Treasury gold revaluation rumors. There are all these rumors that on July 4th, the Treasury is going to revalue gold with $20,000 or $30,000. All kinds of numbers flying around. And that this somehow or other will help the budget. It won't. $42 is what the US Treasury uses in its accounting of its gold. It has 261 million ounces of gold, and it accounts for that at 42 million ounces, which was an agreement, the price that was agreed to 1973, 1974, after we went off the dollar gold standard. The price was $35, and central banks around the world said, let's make the official price $42. But there's a free market price, and as I said, the free market price is $4,15 at noon. It was $4,097 a little bit earlier in the day. That's the market price. The $42 is an accounting figure. It has nothing to do with the price of gold. It has nothing to do with what the Treasury knows the value, the market value of its gold is. If it were to say, "Oh, let's make the price $20,000." It does nothing to the gold market, and it does nothing for the deficits and debt problems that they're facing. No one would buy gold from the Treasury at $20,000 an ounce. And the Treasury has not would not be in a position where it says, "Let's sell this. This is our last monetary reserve. This is where most of our monetary reserves are in gold, right? No one's going to buy. Why would I buy $20,000 gold even if the Treasury were offering to sell it? Why would I pay $20,000 when I get an ounce of gold for $4,100 at the coin shop? They would buy in the market. And the Treasury would not buy gold at $20,000 either. Might sell gold if it could find a bigger fool and then buy back replacements at $4,000 and make $16,000 an ounce. And you could see one of these oligarchs that's like kissing up to the Trump administration say, "Yeah, I'll do that just to be nice to you, Don, because I am earning billions of dollars in government contracts." But the Treasury wouldn't be buying gold at $20,000. They'd be buying it at the market, and the market price would fall. Treasury's got 261 million ounces of gold. The Treasury would look really foolish, even more foolish than it looks now, if it were repricing its gold on an accounting basis, because as I said, it doesn't help the deficit. It doesn't help the debt. It doesn't help the creditworthiness of the US Treasury. And people would see them as laughing stocks, even more so than they do now. The price of gold would fall because people say, "Wait a second. If the Treasury is paying attention to its gold and is revaluing it, is this a precursor of some Treasury sales? And if the Treasury starts selling 261, some portion of its 261 million ounces, the largest stock of gold in the world, what's that going to do in terms of flooding the gold market with bullion and driving the price down?" So the bottom line is that any such thing would not work. It wouldn't work for the gold market. It wouldn't have a major effect on the gold market, although it could drive the price down. And it wouldn't help with the deficits and debt, and there are probably some people left in the Treasury who understand that. So, it's just a lot of hot air from people who don't understand stuff. Just babbling. It's nonsense. It's real pure, unmitigated, all-American nonsense kind of stuff that you hear in comedies.
Now, as I said, they're 261 million ounces of gold held by the US Treasury. They're audited annually by KPMG, and there was a bar-by-bar audit and a sample assay of several hundred bars or several hundred thousand bars done in the 2000s. So, anyone who speaks about the Treasury gold not being there or not being audited, I guess they just don't read the newspaper. You know, Ron Paul used to talk about it, and then he held a hearing as he was leaving the House, and the Treasury came with a big stack of papers and said, "Here's the audit bar by bar. We have a copy of it here. It used to be available from the General Accounting Office. I think they took it down as part of a rotation of older documents off of it. But we have the bar-by-bar audit from the audience."
Now, another point to bear in mind, ostensibly, Congress decides whether to buy, sell, or hold gold. Congress allocates and apportions and finances activities in the government. Now, it has abrogated that responsibility and has given over some of that to the government, uh, to the administration right now. But it's actually constitutionally assigned, the, the power to buy and sell and spend is assigned in the Constitution to Congress. However, there are three people in the administration who are authorized to buy or sell gold or other financial assets without congressional authorization if they deem there's a financial emergency that warrants it. So, bear that in mind. The dialogue we had this morning is, you would have to be stupid to sell the Treasury's gold. And then some smart person said, "Yeah, governments do stupid things all the time, especially this one." It wasn't me. Um, so the Treasury revaluing its gold is nonsense. You don't have to pay attention to that. You should be paying attention to interest rates, the stock market, the political environment, both within the United States and globally.
It's all I have for now. We are working on our platinum group metals yearbook, which will come out in July 21st. Uh, you may pre-order that at our website. You can order the gold yearbook that came out in March or the silver yearbook that came out in May. You can subscribe to the precious metals advisory, the base metals advisory. You can send us an email at info@cponegroup.com and say, "I want to talk to you." You can also go to our website and read about our retail investment program, which is a program that we built several years ago, taking a lot of the work that we do that we sell to companies and governments that have major financial exposure to commodities and precious metals. And we repackaged it into a lower-cost package of annual and monthly information, and, and shorter-term information for retail investors and other people who have a lower budget target. And you can go to our website and you can check on the retail investor product program and you can see what you get for that, and then you can contact us if you want to become a client of ours in the retail investment program. It's all I have in the meantime. Take care. We'll talk to you next week. Uh, in the meantime, take care of yourself, take care of those around you, try to do something good for the world, and have a good weekend.