February 7, 2025 – Gold and silver have seen significant price increases, with gold reaching record highs. In today’s Big Picture segment of the Financial Sense Newshour, Jim Puplava speaks with metals expert Bob Coleman at GoldSilverVault.com who focuses on the effects of potential U.S. tariffs on these metals, particularly how they could affect bullion movements from London to the U.S. Coleman explains the logistical challenges at the Bank of England with gold storage and the implications of tariffs on metal with foreign hallmarks. They also discuss the impact on market premiums, the influence of central bank buying, and the role of ETFs and cryptocurrencies. Lastly, Bob discusses the potential for the U.S. Treasury to revalue its gold reserves from the current book value of about $42 per ounce to market prices and how this could be used to strengthen the Treasury’s balance sheet.
Transcription
Jim Puplava:
Well, one of the star performing assets this year has been gold and silver. On the day we’re doing this broadcast, gold is breaking out to an all-time record. What does this mean? Where is it going? Joining us on the program is Bob Coleman. And Bob, it was thought that the tariffs would be put into place and a lot of bullion has left London. Coming to the US on the concept of higher tariffs would be placed on bullion. I’d like to get your take on that. Is that what is driving the movement of bullion out of London? That would be my first question. And the second question is why are there delays of four to eight weeks on this? It almost seems like a default on delivery.
Bob Coleman:
Yeah, I can answer the four to eight weeks real quickly. I know the bank of England has come out and other experts in the industry have come about actually how the gold is stored in England. At the bank of England, there’s about 400,000 gold bars. And the way they store it is in an allocated format. So everybody has like a numbered bar. The problem is these bars kind of get shifted around and traded amongst central banks or large players. So the bars may not move, but the owner does. And so they have to go out and look for all these serial numbered bars. That’s one of the problems that they’re running into is just the logistics of trying to find all this metal and then get it shipped out. What’s interesting on the tariff side, I’ve been sort of in front of this entire issue. Back In, I think December 5th, I put something out on my X feed, really discussing tariffs and explaining what it actually means. And you have to almost start back in 2018, if you remember Trump, Trump’s administration put a tariff on China across, it’s almost across the board. But what people didn’t understand back then is they actually tariffed gold and silver refined bullion. And not very many people understood that. So in 2022, we had a client that was actually trying to bring metal over into the country. They actually owned metal they bought probably back 15 years ago, but it happened to have a Chinese hallmark. They were sold a bar with a Chinese hallmark. They weren’t storing it in China. It was stored in Hong Kong or Singapore. What ended up happening was when they tried to bring that bar in, it had a 25% tariff associated with it. I contacted the CME which runs the COMEX, and they weren’t even aware of it at the time. And so the market, I started realizing, wait a second, these tariffs could become very restrictive to COMEX. Deliveries because you know, even though that Chinese bar was from China, it was from a good delivery refiner. That is acceptable hallmarks from for, for the COMEX and the LBMA. Now fast forward to last November with the election and so forth and the tariff talk starting to rumble. What people didn’t realize was these hallmark bars, he’s talking about Mexico, he was talking about Canada, Australia. These are massive exporters of precious metals around the world. But Mexico and Canada specifically are huge exporters. Mexico is a huge exporter of silver into our country. I think about half the silver that comes in comes from Mexico. But obviously Canada is obviously a huge exporter of metals as well. And not only that, the hallmarks, they’re very well-known brand name hallmarks that come out of Mexico as well as Canada as well. So what happens is these bars, even if they’re not coming from Mexico or Canada, let’s say it’s royal Canadian mint 1 kg gold bars for example, and they’re stored over in London and Trump institutes a tariff. All of a sudden if you’re trying to ship Royal Canadian Mint bars, even if it’s not coming from Canada, it’s coming from London, the customs looks at the product of origin. And so when that bar is brought into the US it’s declared as a Canadian hallmark. So therefore it would be susceptible to tariffs. That has what’s awakened this sort of sleeping giant in a way with the tariff issues. And not very many banks really understood this going back into November and early December when I wrote about it, it was really ahead of most research houses and refinery reports out there that were even discussing it. And then all of a sudden mid December I posted this everywhere and it kind of went. And then all of a sudden mid December you started to see the EFP, which is the exchange for physical premium. And this is where it gets, this is what starts to tie in the paper world to the physical world. The, the, a lot of banks short on the, the futures market because the futures price tends to be a little bit higher price than the spot price. You’re, when you’re in a contango and you have interest rates at 4 or 5%, you know, there’s a cost to carry and a value of money as you go a little bit longer in time. So the price is naturally a little bit higher. And so what happened was the EFP started typically what happens, the banks short the exchange for physical premium because they’re trying to capture a spread between a future price of gold, for example, and today’s price and ultimately, when you get closer and closer to the expiration of that futures contract, both those prices come to parity. Well, what was happening was all of a sudden these players were short and they were sitting on a lot of metal in London, for example. And they were like, some of these bars may actually have tariffs potentially attached to them. We got to get these bars over to New York and get them in front of the tariff if the tariffs are instituted. So you had this big rush of metal coming on. At the same time, a lot of players were starting to panic and starting to close out short positions on the futures markets because they realized, wait a second, I may not be able to get that metal, or I never really had metal, I was just playing the spread on paper, so to speak. And so they started buying back the EFP. And that was instead of the EFP naturally dropping, it was actually accelerating to the upside. And the futures price was accelerating faster than the spot price. So you started to see a widening of that EFP, which was creating a lot of losses in the industry. Banks were starting to tighten up transaction activity. They were pulling thousand ounce bars from offers in December and into, into January. They didn’t want to sell their metal, basically, they wanted to deliver it to the COMEX. So you had a lot of dynamics that were happening in the industry that was putting pressure on the mechanism that really creates the influence of the precious metal prices that we see every day.
Jim Puplava:
And so if you take a look at where gold is today, almost at an all time record, we know that central banks have been big buyers. Individual investors have been mainly outside the market. Bob, you deal in coins as well. And we saw, oh, a little over a year ago you saw the premiums on Silver Eagles. They were about 80%. You even had bigger, not as big, but you saw premiums on gold coins. As a dealer, what are you seeing are investors coming back into the market. Why have these premiums been reduced and what’s going on with buying?
Bob Coleman:
Yeah, the, and I was, I was, because I run a hedge fund and I run a depository. I see a lot of different activities out there besides the buying and selling of bars and coins. So what started to appear in late 2023 was the market slowing down. And I started alerting, really, I did interviews talking about this and so forth. And then in 2024 you started to see more metal, more people selling metal into the market. Retail was sort of disengaging. You know, they were frustrated maybe with the price not moving or they, you know, that was being used as A sort of a money market or store of value. And now it became a source of funds and so, or they were moving into different assets. So the retail started to sell into 2024, not believing in the rally. So as the market started to lift higher, a lot of people that bought said I’m just going to take profits. You know, they’re probably going to, you know, the metals are probably going to come right back down because that’s what we were used to for three years. And they’ve been selling really all the way up. And at the same time the industry, the, the retail and wholesale industry has been buying all this metal back. And as they’ve been buying it, their balance sheets have been bloated, their cost of carry has been rising because interest rates have been going up, the hedging costs are going up as well. And so the bids are completely collapsing. For example, on the wholesale level right now you’re talking almost 1% under spot to sell back a gold eagle in which we have never, we haven’t seen that since 2019 when the, when the industry was really in a lot of trouble. A lot of players were losing money back then. So it’s telling you that there’s a lot of stress that’s going on in the retail wholesale model at the moment and that, and, and that’s as the prices continue to rally. And I think the retail doesn’t want to feel like they’re chasing because they’ve been buying, you know, from 2020 to 2023 all they heard was, you know, the, the US dollar is going to fall apart, the debts are going to blow up, real estate’s going to blow up, the stock market’s going to blow up. But what’s happened is the stock market’s at all time highs, the dollar has been falling, you know, the world has an ended, so to speak. And so what a lot of these promoters and dealers were selling to their clients to get these high premiums never really turned into fruition. So there’s been a lot of frustration out there. And that, and that’s where you’re at now is premiums of probably the lowest that they’ve seen since 2019. And you have to remember a lot of dealers can’t hedge the premium. Volatility can hedge the price, the spot price. So there, there are dealers that are taking severe losses that may have bought product two, three, four months ago that haven’t been able to sell it back. And so you’re starting to see the wholesale market starting to sell by cutting their, their Bids, they’re, they’re starting to sell to the refiners. And, and so they’re saying to themselves, well there’s a big demand for large bars right now. Thousand ounce bars of silver, kilo bars of gold. They’re just remelting basically a lot of this refined product bars and coins to satisfy the, the bigger industry demand.
Jim Puplava:
Well, one of the things that we’ve seen, you know, people are saying buy gold because the dollar is going to collapse, the markets are going to crash. They didn’t. The dollar went up, interest rates went up, but so did gold. And we hear stories that central banks have been huge buyers of that. What do you think is driving the price of gold now?
Bob Coleman:
Well, at this point a lot of this happens to be that the, from really from December to now has been really the tariff issue and the tightness that’s really created from the rush of moving metal basically from London to New York. So there’s been a very big demand for physical product to try to take advantage of that arbitrage that the difference between that elevated futures price and the current spot price. And so you’ve had this, this rush where people have been going out trying to get the bigger bars. This really doesn’t really affect the, you know, the 1 ounce gold coins or the 100 ounce silver bars. It’s really affecting the thousand ounce silver bars and the 1 kg gold bars and the 400 ounce gold bars and the 100 ounce gold bars that are good delivery products to the COMEX. And so what’s happened is that that need to get actual physical metal has created an increase in lease rates. Financing costs have been rising. You look at the borrowing rates to short SLV shares, that thing has gone from 0.6% to now over 16% just in the last day, for example. I mean it’s just an incredible move. So a lot of, a lot of players are shorting this market trying to take advantage of the arbitrage. The danger to that is that if they can’t get the metal into the COMEX in time and you have to remember the March contract right now is the silver contract. That’s the lead month futures contract. So they have really in essence, you know, a few weeks to get that metal securely into the COMEX against any short positions that they, or short contracts that they have. If they can’t, they have to buy back that short position. If they can’t deliver the metal, that is the risk in the market at the moment and it could be very explosive.
Jim Puplava:
Okay, I want to talk about something like silver. We’ve seen silver demand go up, mainly industrial. What about, let’s say, outside central bank buying, outside individual investor buying? What other factors do you see coming into this market that could drive prices? We know the BRICS countries are using gold in terms of settlement and trade since they don’t have a, let’s say a large market to invest dollars in like they do here in the US what other factors do you see coming.
Bob Coleman:
Into play here in terms of the political uncertainty? I mean, you look at the macro factors that could drive the metals, you know, administration, the president’s policy toward trade, nationalism, trying to maybe use tariffs as a way for revenue, tax revenue coming into the country, and then maybe lowering income tax rates to try and offset maybe any economic weakness that comes about from the increased tariffs. These are all uncertainties that tend to help the metals, the precious metals, they kind of thrive in times of uncertainty. And that’s, that’s been an underlying theme. That’s one of the things maybe helping drive, you know, the metal prices a little bit right now as well. And you have to remember when metal prices start to move, it’s an extremely emotional asset class. You tend to also then get the momentum guys coming in and then the derivatives and option players coming in. So you have, you know, prices will attract money, so to speak. And so then you get this sort of this unusual event where all of a sudden the paper world starts driving the, you know, the price action, maybe not necessarily the actual physical retail buying and so forth. You know, that the public may, may, you know, most of the public may be thinking is, well, nobody’s buying the metal. Why would the price go up? But there’s a lot of other factors that, that can influence that.
Jim Puplava:
So we have these things. I, I want to talk about demand because you, you said that investors were selling into the rise of gold last year, didn’t believe that the rally would be permanent. Or let’s say you and I would be talking about almost $2900 gold today. Explain to me the Costco effect because they’re selling, I, I hear like 100 million a month. I mean, you go on Costco’s website, you try to buy gold eagles or gold 1oz bars. I was on there one day and I’m looking at something and I changed the page. When I came back, it was no longer, it was out of stock.
Bob Coleman:
It, Costco is an interesting story. The 100 million a month really came from, I think it was a Wells Fargo analyst that made the assumption, but it was so far there’s been no concrete sort of numbers coming from Costco how much are actually moving. What’s interesting with Costco, it’s definitely affected the retail dealer model because Costco tends to undercut. They don’t necessarily move with the spot price action. They’ll just buy, you know, metal. If they make profit on it, they’ll just sell at that price until they sell it. And so what happens is if the prices are rising, it’s actually very beneficial to maybe buy because, you know, Costco isn’t adjusting their price relative to the market. But what’s happened interesting enough with Costco is a lot of players, a lot of retail dealers and players in the industry have been buying from Costco and then with that and play in the arbitrage. So what they do is they buy from Costco, they get the 2% cash back, they also get points on their credit card, then they go ahead and sell that metal into the wholesale market. And you have wholesalers that are buying this product back. And so it’s actually coming back into the market onto the wholesalers balance sheets. And that’s actually been a bigger problem really for the last six months, which hasn’t really been talked about.
Jim Puplava:
Why do you think as we look at this and you talk about some of the political uncertainty. I can’t think of, Bob, a period of time where the political uncertainty or the politics have had such an influence on the market. Whether it’s what the Fed’s going to do, what Trump’s going to do, what central banks or other governments are going to do, but the uncertainty in volatility, certainly we’ve seen that over the last two months.
Bob Coleman:
Yeah, I think it has a lot to do with these policies that Trump’s bringing in that is sort of shaking up the traditional model, I guess, in, in Washington. So the question is, with all this disruption in potential spending and you have the spending cuts and so forth, what kind of damage would that do to the economy? Because in essence, the economy has been used to all this deficit spending to keep this whole game in motion. And so if you start cutting that deficit spending, that’s less money coming into the economy and that’s partly what’s driving metal prices. Because not knowing that we may be walking in right into a recession. And when that happens, typically the first thing you’re going to see is interest rates being cut. You’re going to see stimulative policies from the Federal Reserve. And obviously you have Trump talking about trying to maybe even bypass the Federal Reserve and try to cut Interest rates on the longer end of the curve as well. So there’s a lot of gamesmanship that’s going on. And then you have a lot of players out there, especially foreigners, saying, okay, I’m looking at this landscape. I have a lot of dollar assets. Well, maybe with all this uncertainty, will Trump do what’s best for the United States or will he do what’s best for the entire world? And so some players may be starting to pull back a little bit or diversify into a neutral reserve asset, such as gold and silver.
Jim Puplava:
Let me throw out an interesting theory if you take a look at Trump would like, or at least he’s been on record, and so is Vance, for a weaker dollar. But tariffs can strengthen the dollar. Higher interest rates can strengthen the dollar, which would not be good for, let’s say, the earnings of our S P500 companies. So maybe one way to counteract that. And there was a comment that Bessent made about monetizing U.S. assets for the U.S. taxpayer. What about promotion of gold as a theory of rising gold to, let’s say, dampen the rise of the dollar?
Bob Coleman:
I, it’s, it’s funny you mentioned that. I, I wrote a, a post a couple weeks ago on my X feed talking about the potential of using gold to strengthen the Treasury’s balance sheet. And, and you’re probably aware they, they put gold on the balance sheet. I think they have it priced at $42 an ounce, something very, very low. Well, what could happen with this idea of tariffs and the sort of, the scare and the wave of millions of ounces of gold and silver coming back to the New York markets? In essence, what the treasury could do. It was sort of a post that I titled, if Trump hired me, to maybe come up with an idea to strengthen the Treasury’s balance sheet. What the government could actually do is potentially use the Exchange Stabilization Fund, which is already in place, which actually deals with foreign currencies, gold and so forth. They could actually lift the bid on gold, for example, to say, $5,000 an ounce. And then what they could do is make a market if they did institute tariffs, and gold and silver were part of that, all of a sudden, that would actually, that would actually have a beneficial price for the price of the metals. It may not be great for goods and services, but it would show that the price of the metals would go up. But then the government or the Federal Reserve or using the Exchange Stabilization Fund, could actually basically make a market. They could become a market maker where they buy a hundred dollars either way, of $5,000 that bid or offer. So people could actually sell back to the United States metals. But in essence what they would be doing is the 8,000 tons that they have a gold they have on their balance sheet with it also ratchet higher than in turn that higher price of, of value of gold on the balance sheet would then be used to basically strengthen the balance sheet against maybe for example foreign owned debt of Treasuries. So therefore foreign owners of U.S. treasuries would not be as, as maybe fearful of selling the Treasuries right away because they’re worried about exchange exposure or default risk or repayment without some degree of inflation. So there’s some interesting things that could really come about from this.
Jim Puplava:
Yeah. Because the Treasury Right. Or US official gold reserves are 261 1/2 million ounces. At $42 an ounce on the balance sheet that’s about $10.9 billion. If we look at where gold is today at 2850, that 10.9 billion would rise to 3/4 of a trillion. If we get to let’s say 4, $5,000 gold, $6,000 gold, where people say gold may, we may see that in this decade you’re talking about the balance sheet going from where it is today. 10.9 it could go all the way up to almost 1.6 trillion.
Bob Coleman:
Yeah, it’s interesting because back in the 70s if you took the US treasury debt that was owned by foreigners then it took an $800 gold price to basically represent the gold value being held on the Treasury’s books. What U S Treasury, foreign, foreign owners of U S Treasuries had and, and it balanced each other out. If you actually took, I think if you really took that number today due to the increase of U S Treasury debt, I think you’d have to get to, I think it’s like $30,000 an ounce, which I don’t, you know, that’s not what I’m saying is going to happen. But, but the, but the idea behind it is you can actually increase the balance sheet by simply increasing the price of the metal. And you can use it, use the tariff as a backdrop to, to do that.
Jim Puplava:
You know one of the things that I wonder if you can distinguish there’s, there’s kind of like two investors in the market. You got traders, hey if this sector is moving, I’m going to move in it, I’ll buy it. Then you have most of the people that I know, clients that I have that own bullion, they buy it Bob, and they Sit on it, they don’t trade it. Versus, let’s say what you see on the exchange with SLV and gld. Do you see that in your practice?
Bob Coleman:
Yeah, I mean running the depository, we store almost 800 million in assets here. So we see a lot of long term investors. And then you tend to see also people that are using it as a store of value for maybe a short term purpose as well. So, so, but, but I think, I think you’re right. The, the average bullion investor is really sitting on this as a quote unquote insurance policy, more so than maybe some type of tactical trading asset. And so it’s at least when you deal with the physical world now if you’re, if you’re going over into the ETF world, that’s an entirely different animal. And there’s obviously, you know, the ETF buyer is a much different buyer than the physical buyer. You know, the phys looks at counterparty risk, systemic risk, and a lot of these other issues that, that the securities markets cannot really diversify away from.
Jim Puplava:
So given what you’re seeing with the price of gold and what we’re seeing in silver right now, as an investor, what would you be doing, Would you be buying here on the idea that it could go higher? And we talk about just some of the geopolitical risk and all the uncertainty plus not to mention all the debt levels of governments around the world.
Bob Coleman:
Yeah, to me, I think until this market, until there’s, you know, sometimes you look at sentiment and you look at the public and you say, okay, if the public is euphoric over the price of gold or if they’re lining up around the street corner to buy it, that’s usually a sign that maybe we’re, we’re topping out. We’re seeing the exact opposite. In fact, you know, most, most retail investors do not want to chase it. You know, they’re, they’re more fearful of the downside move than, than the upside. And, and the players and individuals that have been holding this for a very long time, which have been frustrated and the reasons that they bought it maybe 10 years ago, whatever it may be, are still true today. But it’s that loss of faith, I guess, that the metals will, you know, of course even you see Bitcoin going up and the crypto market going up 100% every other week. You know, you see these things going on the stock market at all time highs, it’s very easy to get frustrated with, with this asset class. So to me this is a very, it’s It’s a bull market that’s sort of doing what bull markets do. It tends to sort of shake out the weak holders and keep people at bay from participating. And that’s, I think, what, what’s actually happening right now.
Jim Puplava:
I want to talk about two final factors here. One is the role of ETFs, because they tend to be tradable, they’re liquid. You know, it’s very easy to go in and buy contracts and GLD or SLV. So they tend to be tradable. What influence do you think that has on the market? Because if there’s a dip and traders see a dip coming in the charts, they dump. They dump it. It drives the price of the ETF down, drives the price of the bullion down. So that’s one question. And the second question is the role of cryptocurrencies as, let’s say, an alternative to gold. I know a lot of millennials, you want to talk to them about gold. That’s barbaric. You know, they’re into crypto.
Bob Coleman:
Yeah, the fast money. I mean, it’s certainly when you see prices rising in any asset class. I mean, I’ve listened to your program since the early 2000s. You know, you watched the Internet bubble in 99, 2000. You look at the, you know, the real estate and finance bubble that happened in 2006, seven into 2008. I mean, these things can take on a life of its own. And so it’s very easy for these traditional assets that have a very deep market to get kind of put to the, to, to the side, you know, while the fast money goes into these, you know, very high performing markets at the, so we’re fighting that. But the ETF market, what’s interesting with the ETFs is that when people go in and buy an ETF like silver, for example, the silver ETF, SLV, which is the largest ETF in the space for silver. What they don’t realize, and I did a post on this the other day, was that the two largest of the top three holdings with SLV, China, Chinese bars and Russian bars are the two largest countries of origin of bars being held with SLV. And what I find interesting with that is the US Government’s policy toward Russia and China because we still have 25% tariffs on gold and silver coming in from China. Why would these ETFs hold so much, especially Russian bars, when, when, you know, they’re telling us as US Citizens, you know, we don’t, you know, we have sort of this embargo on Russian new Russian bars being made. Why is London buying so much of this? And this is actually pervasive in Aberdeen’s silver ETF as well as wisdom trees. And so people don’t understand is the, the London market is moving a lot of metal from around the world that traditionally may never even come into the US because it’s just our policy. So you have to really understand what you’re investing in but also who are you supporting. And, and I’ve, I’ve been a long advocate. If you’re going to go into ETFs, they’re more of a trading vehicle because it’s obviously the, the cost to, to buy and sell is much cheaper than moving physical metal. But at the same time, if you understand the dynamics of ETFs, it’s the authorized participants, the broker dealers for example that actually provide the liquidity to these ETFs. What you’re doing is you’re really the investor has become the product and their money flow is what the authorized participants are making money off of. So they’re using money flow coming in and out of that ETF and they’re capturing these arbitrage spreads when things go to a discount or premium to nav. And that gets a little bit more into the nuance of how ETFs work. So what I’ve always kind of guided, you know, high net worth investors or just investors in general is if you’re looking at the physical metals and you really want to support this market, the precious metals, just buy the physical. Try to stay away from the ETFs if, if, if you can.
Jim Puplava:
Unless you’re a trader, correct?
Bob Coleman:
Yes.
Jim Puplava:
Okay. Well listen Bob, as we close, if our listeners would like to find out more about your company, both your storage and bullion, you’re one of the cheapest people I’ve seen in the country when it comes to buying bullion. Tell them how they could do so.
Bob Coleman:
Yeah, we have a website, goldsilvervault.com, all one word that you could go to that has a lot of information on it as prices that we, we offer precious metals at. I also manage a hedge fund so just for full disclosure it’s in precious metals. So but there’s information on that and just on my, my background, that type of thing. You could find me on, on Twitter or X at Profits plus id. So if you’re looking for day to day type of commentary, I get into a lot of the, the more of the dynamic structure of the markets talk about, you know, the, the, the whether it’s lease rates or borrowing fees to short SLV or, or GLD, and how these, these rates, which have been rising, how that affects the market. I deal with a lot of the more of the technicals of the industry and try to educate the public on how the industry operates, rather than taking that that narrative that a lot of dealers and promoters do, which is they just try to sort of fear monger and drive sort of this it’s us versus them type of attitude. So it really tries to educate people and explain how the market works.
Jim Puplava:
Well, you’re one of the most knowledgeable people I know in the gold industry. Well, listen, Bob, I want to thank you for coming on the program and clarifying some of the things that we’re seeing in the market. And I hope you come back and talk to us again.
Bob Coleman:
Sure. My pleasure. Thank you.
To learn more about Financial Sense® Wealth Management, give us a call at (888) 486-3939 or click here to contact us.
For a link to our full podcast archive, see Financial Sense Newshour (All) and don’t forget to subscribe on Apple Podcasts, Spotify, or YouTube Podcasts!
Advisory services offered through Financial Sense® Advisors, Inc., a registered investment adviser. Securities offered through Financial Sense® Securities, Inc., Member FINRA/SIPC. DBA Financial Sense® Wealth Management. Content is for informational purposes only and does not constitute financial, investment, legal, or other advice.