Precious Metals Market Expected to Top $400 Billion in Next Five Years
The global precious metals market is on pace to top $400 billion within the next five years. According to Fortune Business Insights, an India-based consultancy company, the precious metals market is on pace to hit $403.1 billion by 2028, driven primarily by the gold market. This is up from $275 billion in 2021. The projected compound annual growth rate (CAGR) for the precious metals market is 5.6%. The report specifically pointed out the relatively low risk in precious metals investments. The increasing investments in a commodity such as gold due to its low-risk factor compared to other investments such as equities, bonds, or real estate are fueling the market. Moreover, gold, silver, and platinum are the most preferred metals to produce jewellery due to their luster and malleability. Therefore, the increasing demand for jewellery from consumers is resulting in market growth.” Gold investment demand is expected to be the primary driver of market growth. According to the report, “The increasing investments in a commodity such as gold due to its low-risk factor compared to other investments are augmenting the segment growth.” We saw investment in physical gold drive overall gold demand to an 11-year high in 2022. Investment demand totalled 1,107 tons last year, a 10% increase year-on-year. Gold bar and gold coin demand grew by 2%, building on strong demand in 2021. In total, global investors bought 1, 217 tons of gold bars and coins, with the second half of the year particularly strong, charting two successive quarters of demand of around 340 tons for the first time since 2013. According to the WGC, “The need for wealth protection in the global inflationary environment remained a primary motive for gold investment purchases.” Investors in the West had a particularly strong appetite for gold and broke an annual record. Combined US and European purchases of gold bars and coins hit 427 tons. That exceeded the previous record of 416 tons set in 2011. The report also pointed out that the green energy drive will continue to push silver demand higher. The use of silver in the electrical & electronics industry, as stated by Silver Institute, accounted for 10.2% of the total silver demand in 2020 as silver is used in solar panels to conduct electricity with the highest efficiency. These factors are expected to drive the precious metals market growth.” In fact, the growing demand for silver in the solar power industry will likely put a significant squeeze on supply in the coming years, and the current price of silver does not reflect the likely shortages. According to a research paper by scientists at the University of New South Wales, solar manufacturers will likely require over 20% of the current annual silver supply by 2027. And by 2050, solar panel production will use approximately 85–98% of the current global silver reserves. The use of platinum and palladium in the automotive industry will also boost overall precious metals demand, according to the report. The platinum sector held the largest market share, making up 26.1% of the precious metals market in 2020. This is attributable to its increased demand in the auto-catalysts application. Moreover, platinum has the ability to capture carbon and other harmful emissions. Therefore, industries are increasingly using platinum group metals to curb pollution. … The growing demand for metals from end-users such as automotive and electrical & electronics is increasing the demand for valuable metals. The automotive industry uses platinum and palladium metals in catalytic converters. Additionally, governments worldwide have become more aware of the climate crisis, therefore to meet the substandard of carbon emissions, vehicles have boosted the demand for platinum.” Growing global demand for jewellery boosted by increasing economic prosperity will also help boost demand for gold, silver and platinum over the next five years, according to the report. Increasing disposable incomes and changing lifestyle choices are a few of the factors driving the market. The demand for these metals is estimated to propel globally for jewellery, and investment applications as gold and silver are of prime importance in wedding ceremonies of Southeast Asian countries. Therefore, the rising population and increasing spending capacity of consumers in the region will contribute to market growth.” Article courtesy of SchiffGold
Chinese and Mexican Mines Are Running Out of Silver
Silver demand set a record in every category in 2022 and is expected to continue growing. Meanwhile, silver production flatlined. Record global silver demand and a lack of supply upside contributed to a 237.7 million ounce market deficit in 2022. The trends indicate that this deficit will expand in the next several years as demand continues to surge as supply begins to shrink, and there are some concerning trends indicating supply may contract rapidly in the coming years. We’ve reported on the increasing demand, especially in the solar energy industry. An Australian study concluded that solar panel production could require most of the silver reserves by 2050. But there are also looming pressures on the supply side. Mine output in several key countries is falling. According to a paper published in China and translated at ZeroHedge, in 2020, China had 41,000 tons of proven silver reserves in the ground. At the current mining rate, that left only about 11 years of remaining silver as of 2020. By 2032, China’s underground silver deposits will be fully depleted, leading to resource extinction.” China ranks among the top five silver consumers globally. The country charted an average annual silver demand of 6,300 tons over the last 10 years. Chinese mines produce about 3,350 tons each year, meaning the country already imports about half of its silver. If Chinese mine production falls as predicted, Chinese demand will put further strain on the global silver supply. From 2033 onwards, China’s static silver demand of 6,300 tons will rely entirely on imports, exacerbating the global imbalance between silver supply and demand.” There are similar concerns about Mexican silver mine output. Mexico is currently the world’s leading silver producer. As of 2020, its silver resource reserves were estimated to be 37,000 tons. At the current mining pace, its reserves will be exhausted by 2026. The list below displays the projected timeline of silver resource extinction given known reserves in the top 10 silver-producing countries. This is based on USGS data calculated in 2020. As a result of the silver resource extinction in China, Mexico, and other major silver producers, global annual silver supply will plummet by 15,450 tons. In other words, by 2036, global silver production will dip below 10,000 tons, while demand will continue to exceed 30,000 tons.” Of course, this timeline could stretch out with the discovery of new silver deposits and technological advances that allow miners to reach metal in more difficult places. But the overall trajectory signals falling mine production in the years ahead. Given the supply and demand dynamics, it appears that silver is significantly underpriced. Article courtesy of SchiffGold
Eight Central Banks Increased Gold Holdings in May
Excluding another big sale by Turkey, central banks were net buyers of gold in May, according to the latest data compiled by the World Gold Council. Eight central banks added gold to their reserves in May with net purchases totaling 50 tons. But with Turkey dumping another 63 tons of gold in May, global net central bank gold holding fell by 27 tons. Turkey has sold nearly 160 tons of gold since March. According to the World Gold Council, this is a response to local market dynamics and doesn’t likely reflect a change in the Turkish central bank’s long-term gold strategy. According to the WGC, “Gold was sold into Turkey’s domestic market to satisfy very strong bar, coin and jewelry demand following a temporary partial ban on gold bullion imports.” According to a Reuters report, the Turkish government suspended some gold imports in February in an effort to soften the economic impact of significant earthquakes. Poland was the biggest buyer in May, adding 19 tons of gold to its reserves. This follows on the heels of a 15-ton increase in April when the National Bank of Poland resumed buying gold. May’s purchase was the largest increase in the country’s reserves since June 2019 when the bank boosted gold holdings by almost 100 tons. In the fall of 2021, Bank of Poland President Adam Glapiński said the central bank planned to add 100 tons of gold to its reserves in 2022. It’s unclear why the bank didn’t follow through. This recent purchase could signal the beginning of another round of buying to reach that 100-ton goal. Poland currently holds 263 tons of gold. The People’s Bank of China extended its gold buying spree for a seventh-straight month with a 16-ton addition to its official reserves. Since recommencing reports of purchases in November 2022, the Peoples Bank of China has added 144 tons to its official gold holdings. Officially, Chinese gold holdings stand at 2,092 tons. The Chinese central bank accumulated 1,448 tons of gold between 2002 and 2019, and then suddenly went silent until it resumed reporting in November 2022. Many speculate that the Chinese continued to add gold to its holdings off the books during those silent years. There has always been speculation that China holds far more gold than it officially reveals. As Jim Rickards pointed out on Mises Daily back in 2015, many people speculate that China keeps several thousand tons of gold “off the books” in a separate entity called the State Administration for Foreign Exchange (SAFE). Last year, there were large unreported increases in central bank gold holdings. Central banks that often fail to report purchases include China and Russia. Many analysts believe China is the mystery buyer stockpiling gold to minimize exposure to the dollar. The central banks of Singapore (4 tons), Russia (3 tons), India (2 tons), the Czech Republic (2 tons), Iraq (2 tons), and the Kyrgyz Republic (2 tons) were the other notable buyers. A statement by the Iraqi central bank said, “The purchase came with the aim of increasing its holdings of gold in light of the economic and political conditions that the world is witnessing.” Along with Turkey, the Central Bank of Uzbekistan and the National Bank of Kazakhstan were both sellers, reducing their holdings by 11 tons and 2 tons respectively. These two banks were the biggest sellers of gold during the first quarter of this year. It is not uncommon for banks that buy from domestic production – such as Uzbekistan and Kazakhstan – to switch between buying and selling. Despite the dip in overall global reserves in April and May due to Turkish selling, it doesn’t appear central banks have lost their appetite for gold. After a record-setting 2022, central banks continued to buy gold in the first quarter of 2023, setting a new Q1 record. Overall, global central bank gold reserves increased by 228 tons through the first three months of 2023. This was 38% higher than the previous first-quarter record set in 2013. Total central bank gold buying in 2022 came in at 1,136 tons. It was the highest level of net purchases on record dating back to 1950, including since the suspension of dollar convertibility into gold in 1971. It was the 13th straight year of net central bank gold purchases. According to the 2023 Central Bank Gold Reserve Survey recently released by the World Gold Council, 24% of central banks plan to add more gold to their reserves in the next 12 months. Seventy-one percent of central banks surveyed believe the overall level of global reserves will increase in the next 12 months. That was a 10-point increase over last year. Article courtesy of SchiffGold
Arkansas Law Makes Gold and Silver Legal Tender in the State
Arkansas Gov. Sarah Huckabee Sanders has signed a bill into law making gold and silver legal tender in the state. The new law also effectively repeals the state capital gains tax on gold and silver. Enactment of this legislation will relieve some of the tax burden on investors, and take a step toward treating precious metal bullion as money instead of a commodity. Rep. Robin Lundstrum (R) and Sen. Jonathan Dismang (R) sponsored House Bill 1718 (HB1718). The law makes “gold and silver specie” legal tender in the state, meaning it is recognized as a medium of exchange. Practically speaking, this will allow Arkansans to use gold or silver coins as money rather than just as mere investment vehicles. In effect, it will create a more favourable legal structure for using gold and silver in transactions. Under the law, “specie” is defined as a “coin having gold or silver content; or refined gold or silver bullion that is coined, stamped, or imprinted with its weight and purity and valued primarily based on its metal content and not its form.” Under the law, specie will include coins issued by the U.S. government or “other specie that an Arkansas court rules to be within state authority to make or designate as legal tender.” By allowing the court to designate additional specie to be used as legal tender, Arkansas could free its citizens from potential supply constraints imposed by the use of only United States-minted gold and silver coin. More importantly, the people of the state of Arkansas will be able to define what specie is considered constitutional tender, further distancing themselves from potential control of their competing currency by Washington D.C. TAXES ON GOLD AND SILVERProvisions in HB1718 will also effectively repeal the state capital gains tax on gold and silver. Specie or legal tender shall not be characterized as personal property for taxation or regulatory purposes. The exchange of one type or form of legal tender for another type or form of legal tender shall not give rise to any tax liability. The purchase, sale, or exchange of any type or form of specie shall not give rise to any tax liability. The law builds on a foundation set in 2021 when Arkansas repealed the sales tax on gold and silver. Taxes on gold and silver raise investment costs. Repealing these taxes knocks down one barrier that might keep some investors from considering physical metal for their portfolios. Also, with the advent of electronic payment services, it’s easier than ever to use precious metals in everyday transactions. Companies like GoldMoney facilitate this. But taxes on precious metal bullion erect barriers to using gold and silver as money by raising transaction costs. Tax repeals take a small step toward undermining the Federal Reserve’s monopoly on money by eliminating one hurdle to using gold and silver in everyday transactions. In effect, states that collect taxes on purchases of precious metals act as if gold and silver aren’t money at all. Imagine if you asked a grocery clerk to break a $5 bill and he charged you a 35-cent tax. Silly, right? After all, you were only exchanging one form of money for another. But that’s essentially what a sales tax on gold and silver bullion does. By eliminating this tax on the exchange of gold and silver, states treat specie as money instead of a commodity. This represents a small step toward reestablishing gold and silver as legal tender and breaking down the Fed’s monopoly on money. “We ought not to tax money – and that’s a good idea. It makes no sense to tax money,” former US Rep. Ron Paul said during testimony in support of an Arizona bill that repealed capital gains taxes on gold and silver in that state. “Paper is not money, it’s fraud,” he continued. The impact of enacting this legislation goes beyond mere tax policy. During an event after his Senate committee testimony, Paul pointed out that it’s really about the size and scope of government. “If you’re for less government, you want sound money. The people who want big government, they don’t want sound money. They want to deceive you and commit fraud. They want to print the money. They want a monopoly. They want to get you conditioned, as our schools have conditioned us, to the point where deficits don’t matter.” Practically speaking, eliminating taxes on the sale of gold and silver cracks open the door for people to begin using specie in regular business transactions. This marks an important small step toward currency competition. On April 3, the House passed HB1718 by an 82-8 vote. The Senate concurred with a vote of 32-0. Gov. Huckabee Sanders’ desk, signed the bill on April 11. The law will go into effect on July 6. BACKGROUNDThe United States Constitution states in Article I, Section 10, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.” Currently, all debts and taxes in the US are either paid with Federal Reserve Notes (dollars) which were authorized as legal tender by Congress, or with coins issued by the US Treasury — very few of which have gold or silver in them. The Federal Reserve destroys this constitutional monetary system by creating a monopoly based on its fiat currency. Without the backing of gold or silver, the central bank can easily create money out of thin air. This not only devalues your purchasing power over time; it also allows the federal government to borrow and spend far beyond what would be possible in a sound money system. Without the Fed, the US government wouldn’t be able to maintain all of its unconstitutional wars and programs. The Federal Reserve is the engine that drives the most powerful government in the history of the world. Sales tax repeals knock down one of the tax barriers that hinder the use of gold and silver as money, and could also begin the process of abolishing the Federal Reserve’s
