Why Could the Future be Better With Precious Metals?
Sean Brazney: Hello, my name is Sean Brazney, Sales Director for Monex Deposit Company. I am here today with Jeffrey Christian, Managing Director and Founder of CPM Group and one of the many analysts within the CPM Group of analysts and always great to have Jeffrey with us, incredible insight into the commodities market, and we’re very thankful for your time. Thank you for being with us Jeffrey.
Jeffrey Christian: It’s good to be with you and I wish I were with you physically in Southern California, instead of New York, a little cold up here.
Sean Brazney: Yeah, we got to get you out here to a little bit better climate weather. Starting off, we of course have CPM Group that does quite a few reports for us and one of the key reports that we rely on is our yearly themed report. This year we have, A Better Future With Precious Metals. Last year was, A New Decade For Precious Metals Investing. Let’s remember, that that is a new decade, which going off to the next ten years, we hope to have a long healthy relationship with CPM Group over this next decade as well, but we’re coming out of that first year and now into this year’s theme. Jeffrey can you give us a little bit of insight into why that’s our theme for this year?
Jeffrey Christian: Yeah, well it ties in with the decade long theme too. I mean, last year, we were saying look… the economic, political, and social issues that drive investors to want to own gold and silver are not flashes in the pan, they’re going to be around with us probably for at least the next decade. In that environment, you want to have gold and silver to protect yourself from these political and economic problems. This year’s theme, A Better Future With Precious Metals, builds on that and builds on all of the bad things that we saw in 2020. Toward the end of 2020, a lot of people were talking about how welln2021 will be better and our view was, look, it’s a calendar year that changes, all of the problems that we’re facing in late 2020 will continue in 2021. Yes, some things may get better in a cyclical basis and maybe even in a permanent basis, but we still have a tremendous number of problems and facing those problems and looking at those problems we had at CPM Group two themes, or two thoughts, or a corollary to it. One was that precious metals will give you, will help you build a better future for yourself and your family, by giving you protections against some of the negative economic and financial consequences of the stresses that we expect the world and us as individuals to face. The other corollary was that you got to do it yourself. You know, precious metals are part of something that you do for… we can use the…the… meme of the broader world. You know, this is personal wellness. You shouldn’t be expecting the government or some other societal force to protect you and take care of you. To some extent, we’re going back to an earlier period of time where each person is individually responsible for making sure that he and her and their family are provided with protections against undue economic, and financial, and political strains.
Sean Brazney: I love that you just said that you’ve got to do it yourself. You don’t rely on others to do it for you. If you’ve got some capital, it’s your job to think about protecting that capital. Thank you for saying that.
One of the things that’s going on and we want to make mention of course, the pandemic and what is going on around the world has been very serious and impacted people in great ways and we don’t take that lightly. I know we’re here to talk about the precious metals market and to protect yourself with precious metals, but one of the real issues that’s happening out there and impacting the precious metals market, because of this pandemic, it’s really been supply chain disruptions. It’s been really hard getting our hands on some bullion from mints and refiners and just the whole network and how that gets bullion to the market place. We’re seeing some real shortages in gold and platinum bullion coins. Can you give us some insight into maybe how long this might last and moving forward if we can maybe have some hope on some better supply coming into the market?
Jeffrey Christian: Yeah, I can speak about the U.S. mint. I’m not quite sure what the situation is with the other mints, but I know at the U.S. mint a lot of the coins are struck at West Point. The U.S. mint has a facility at West Point, New York. They have, because of the pandemic, they have gone to one-third shifts. So, at any given time they have one-third of their staff in there stamping coins and that means that you’re producing one-third as many coins—simple arithmetic there. So, what you’re seeing with gold and platinum coins and other dealers are reporting tightness in silver coins, is you’re seeing a reduction in the supply. Now, the platinum and palladium coins that the U.S. mint make, they have discretion as to how many to mint every year and they’ve done a relatively good job, I think, of producing enough coins to meet current demand. Although, that’s shifting, because investors are buying more there, but with gold and silver it’s a much tougher thing. The laws that created the silver eagle and the gold eagle and the gold buffalo say that the mint has to produce to demand. Now, in 2018 and 2019, you had investors buying a third as much of gold and silver as they were buying in 2020, and the mint has to sort of guess what future demands are going to be, and they base their guesses on what’s been going on. So, in 2018 and 2019, they had a lot of gold and silver compared to the demand for their coins, because they had built up inventories based on previous years of higher sales, 2018-2019 were low and they scaled back on their inventory and their operations, and then with the pandemic and the recession there was this massive surge. Like I said, it’s tripling of the volumes of gold and silver that investors were buying and they had to scramble to make enough coins to meet that demand. Expressly, at the same time that, because of the pandemic, they were cutting their production by two-thirds in order to keep their people protected from catching COVID-19. So, I think, that’s one of the factors that’s caused it. I know the other mints, I don’t know the specific policies they’ve been following, but I know a lot of the other mints have done similar things to protect their staff and that has caused a reduction in production capacity at exactly the same time when investors are saying, “No, we don’t want fewer coins, we want more coins.”
To answer your other question, this is probably going to go on for at least six or nine months. It will get better when the pandemic gets better and when people are able to scale up their production again.
Sean Brazney: Real insightful. Now, our report that you have put together for us and your group has put together for us, A Better Future With Precious Metals. That’s a lot of great details in there that we’ll have a chance to go over throughout the year with you. Hopefully, on camera for our viewers as well.
Remember Monex. Call Monex today. Talk to an account representative. Ask them for, A Better Future With Precious Metals report, as well as the other CPM reports that we produce. Thank you for joining us today.