At first glance, market conditions remain largely unchanged:
- Demand for physical metal remains high
- The supply chain remains backlogged (current order fulfillment times are 3-5 weeks)
- Product premiums remain high
Producers, such as the Royal Canadian Mint, PAMP Suisse and other major players are focusing their production on best selling products, notably 1 ounce gold products. As a result, larger format gold products and some best selling silver products are very difficult to obtain at present, including silver Maple Leafs and 100 oz Royal Canadian Mint silver bars. This will be our new reality until either a) demand subsides (unlikely, see comments further below) or b) the Mints ramp up their production capacities, which takes months (i.e. new equipment is required as well as additional trained staff).
Behind the scenes however, significant events are taking place that could have major impacts on the price of precious metals moving forward:
Jeff Clark, Senior Analyst for Goldsilver.com, reported last week that institutional funds, including large pension funds, are beginning to allocate capital towards gold and silver. This is significant for two reasons; 1) historically, pension funds have had zero exposure to precious metals, and 2) a 5% allocation from only a few of the largest funds will create enough demand to drive the gold price into new record territory and beyond.
How high can the gold price go? Well from a technical analysis standpoint, Chris Vermeulen of TheTechnicalTraders.com has stated that we could be looking at gold prices 250-350% higher than today's prices, with silver gaining 550-750%. At first glance these figures may seem astonishing, but the fact that they are based on Chris' expert technical analysis, and not simple speculation, makes them much more reliable.
Conservatively speaking, based on continued extreme demand from new mainstream investors entering the market, coupled with demand from institutional and pension funds, there is no reason to believe that we won't be seeing $3000 gold in the next 12 months.
I look forward to the ride! Happy Labor Day everyone.