Gold & Silver Surge – Is This REAL Investment Demand?

Sean Brazney: Hello, my name is Sean Brazney, Sales Director for Monex Deposit Company. I have the great pleasure of having with us today, Jeffrey Christian, who is Managing Partner and Founder of CPM Group, one of the many analysts over there at CPM Group. Always great to have you with us, Jeffrey.

Jeffrey Christian: Pleasure to be with you.

Sean Brazney: You know, our report this year is Precious Metals in a Rising Storm. When I think of a rising storm, for some reason I think of storm surge. I’m on the coast, so coastal storm surge. Here we are watching gold and silver surge to the upside. I’d kind of like to get your take on whether or not this is real investment demand that we’re finally seeing coming into the gold and silver sector right now.

Jeffrey Christian: Yeah and to be honest, I’m here in New York. We’re having a Nor’easter today, as we speak. So, the storm surge is physical, as well as, precious metals.

Yeah, I think this is real and what we’ve seen, so far this year, is a lot of strong investment demand, and it’s real investment demand, including physical metal. We’ve seen increased demand earlier in India, in China, in the United States, North America, and Europe. You saw demand for physical metal and what we’ve seen over the last two and a half weeks now, is that as the price rose, a lot of physical investors, at least in the United States, have kind of pulled back a little bit, because the price is reaching record levels. We set three new intraday record gold prices in March, and we’ve set three more in the first three trading days of April, the prices at record levels, and I think a lot of physical investors tend to be more value-oriented. So, we did see a lot of demand in the first part of the year, up until the middle of March, for physical metal, but as the price started making these new records highs. We’ve seen a little bit of caution on the part of physical investors, but you saw a surge of investment into futures and options and ETFs, and those are shorter-term, momentum-type investors who say, “Oh, wait, the gold price is rising. It’s reaching record levels. Let me jump in.” And the fastest way you jump in is with an ETF.

So, if you look at what we’ve seen over the last really three and a quarter years now is that you’ve seen stronger demand overall for physical demand, but ETF investors were actually reducing their holdings over that three and a half period. Then in the last two or three weeks, you’ve seen the physical investors pull back a little bit, but the ETF guys came in, because that’s a quick way to get that exposure to rising gold price.