Why bullion prices don’t seem to be in line with demand
Despite record demand for gold and silver bullion coins month after month, the prices of both metals continue to linger within limited ranges. Gold even pulled back to just above $1,800 during Friday’s trading session. So what’s going on? Why isn’t the clearly-demonstrated demand driving prices higher?
U.S. Mint director Ed Moy, whose tenure stretched from 2006 to 2011, recognizes today’s situation and draws many parallels to the start of 2008:
The last time demand was this high was during the [2008-2009] financial crisis. People were panicking and buying into gold, and prices were shooting up. Then the government started injecting both fiscal and monetary stimulus, and you saw gold correct down maybe 20-30%. And then, over the next three years, gold began to climb until it set a new record of $1,925 in 2011. Afterward, gold didn’t decline until it became clear that the economic recovery was going to be slow, which eliminated the uncertainty. The Fed also had the time to mop up all the excess liquidity before it caused inflation.
The former director explained that, besides overloaded mints and supply chain disruptions, there are several other factors that could play an interesting role in shaping up gold’s price over the coming months and years. Moy believes that perhaps the biggest reason for the disconnection between price and demand lies in Wall Street’s shorting of the metals.
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