LOWER. OUR NEXT GUEST SAYS DEMAND FOR SILVER IS A MEME. INVESTMENT MAY CAUSE IT TO FALL FURTHER IN THE SHORT TERM IN SILVER'S PHYSICAL SURPLUS IS HERE TO STAY.
JOINING US NOW, GEORGE HEPPELL, HE'S THE VICE PRESIDENT OF COMMODITY RESEARCH AT BMO. GEORGE, GREAT TO HAVE YOU WITH US. >> THANKS FOR HAVING ME.
>> YOU KNOW, IT'S FUNNY THAT WE HAD THIS LIST OF FUNDAMENTAL REASONS WHY THE METALS WOULD DECLINE TODAY. AND YET THE MOVE HAS BEEN SORT OF MEME ISH, WHICH IS BY DEFINITION NOT PINNED BY FUNDAMENTAL DRIVERS. SO WHAT DID YOU MAKE OF THE OF THE DROP TODAY?
>> OF COURSE. WELL, I THINK SILVER HAS OBVIOUSLY HAD AN OUTSIZED MOVE AGAINST GOLD OVER THE LAST FEW MONTHS. AND THIS IS ARGUABLY SORT OF AN UNDERSTANDABLE CORRECTION.
I THINK, YOU KNOW, SILVER REALLY HAS ENTERED KIND OF MEME INVESTMENT TERRITORY OVER THE LAST WEEK. I MEAN, THERE WERE TIMES EARLIER THIS WEEK WHEN SOME OF THE SILVER ETFS WERE SEEING INFLOWS SEVERAL TIMES LARGER THAN THE SPDR S&P 500 ETF, WHICH I THINK GOES TO SHOW JUST HOW SORT OF EXUBERANT THE ATTITUDE HAS GOTTEN TO SILVER. BUT THERE'S ALSO BEEN REALLY STRONG PHYSICAL SILVER DEMAND AS WELL, ESPECIALLY IN ASIA.
SO ESPECIALLY IN INDIA AND CHINA, WE'VE BEEN SEEING HUGE SILVER PREMIUMS OVER THE LAST FEW WEEKS. AND CRUCIALLY, THAT WAS NEVER GOING TO LAST. I MEAN, IN THE CASE OF INDIA, THERE WAS THERE'S BEEN A LOT OF BUYING AHEAD OF A CHANGE TO DUTY, BASICALLY A HIKE IN IMPORT DUTIES ON PRECIOUS METALS INTO INDIA.
SO THAT COMES IN ON THE 1ST OF FEBRUARY THIS SUNDAY. SO OBVIOUSLY THERE WAS A LOT OF BUYING AHEAD OF THAT. IN THE CASE OF CHINA, WE OBVIOUSLY HAVE CHINESE NEW YEAR COMING UP IN A COUPLE OF WEEKS.
AND I THINK THERE WAS A LOT OF SORT OF PANIC BUYING AHEAD OF THAT BECAUSE, YOU KNOW, GOLD AND SILVER AS PRECIOUS METALS ARE TYPICAL, YOU KNOW, GIFTS, INVESTMENTS YOU GIVE DURING CHINESE NEW YEAR. IN THE CASE OF SILVER AS WELL, THERE'S A LOT OF PENT UP INDUSTRIAL DEMAND, BECAUSE A LOT OF FACTORIES TEND TO BUY LARGE AMOUNTS OF SILVER AHEAD OF LUNAR NEW YEAR. NOW, NORMALLY THIS WOULDN'T CONTRIBUTE TO PRICE IN THE WAY THAT IT HAS, BUT YOU'VE GOT THAT PHYSICAL DEMAND IN ASIA, COMBINED WITH THE SORT OF MEME STOCK TERRITORY THAT SILVER HAS REACHED IN THE WEST, AND ALSO BEING DRAGGED UP BY THE WIDER MACHINATIONS IN THE GOLD MARKET, AND IT JUST CREATED A PERFECT STORM WHICH SENT SILVER TO 120.
NOW WE'VE GOT THE GOLD SILVER RATIO AT AROUND 60, I THINK, YOU KNOW, AS I'M AS I'M SPEAKING, YOU KNOW, OUR ANALYSIS SUGGESTS THAT WE THINK THE SILVER MARKET IS LIKELY TO SORT OF, YOU KNOW, UNWIND AND SORT OF MOVE INTO A PHYSICAL SURPLUS GOING FORWARD. SO, YOU KNOW, WE THINK THERE'S A LIKELIHOOD THAT SILVER MIGHT GET DRAGGED UP BY GOLD IN THE FUTURE. BUT GENERALLY SPEAKING, WE THINK SILVER'S PROBABLY GOING TO UNDERPERFORM GOLD GOING FORWARD.
>> SO THAT'S THE RELATIVE TRADE. BUT YOU ACTUALLY DO THINK THAT GOLD CAN SORT OF GATHER ITSELF HERE AND AND MAKE ANOTHER RUN HIGHER. >> I THINK THERE'S AN ARGUMENT TO BE MADE THAT SORT OF THE CONSOLIDATION THAT WE'RE SEEING AT CURRENT LEVELS IS PROBABLY HEALTHY FOR THE MARKET.
I MEAN, YOU KNOW, 55, 50, 600 WAS OBVIOUSLY, YOU KNOW, PRETTY UNSUSTAINABLE RALLY THAT WE SAW. I MEAN, WE SAW GOLD REPEATEDLY, YOU KNOW, ABOVE ITS 100 DAY MOVING AVERAGE FOR WEEKS ON END I THINK. AND OBVIOUSLY THAT COULDN'T BE SUSTAINED.
SO THIS KIND OF BLOW OFF TOP THAT WE'VE SEEN IS PROBABLY HEALTHY. I THINK THE UNDERLYING DRIVERS, WHICH HAVE SORT OF DRIVEN PRECIOUS METALS TO THEIR CURRENT LEVEL, STUFF LIKE DEBASEMENT CONCERNS, DOLLARIZATION, INFLATION CONCERNS, I DON'T THINK ANY OF THAT'S NECESSARILY GONE AWAY. DO I THINK THAT GOLD IS GOING TO HAVE ANOTHER 100% YEAR ON YEAR RISE?
PROBABLY NOT. BUT I THINK, YOU KNOW, I HAVEN'T SEEN ANY YOU KNOW, I HAVEN'T I HAVEN'T SEEN ANY REMOVAL OF THE INITIAL DRIVERS THAT SENT PRECIOUS METALS RUNNING UP HERE IN THE FIRST PLACE. >> IS KEVIN WARSH.
I MEAN, YOU KNOW, ANYTHING THAT YOU LOOK AT IN TERMS OF SEEING THE FLUSH TODAY AND SAYING, OKAY, STRONG DOLLAR BECAUSE OF KEVIN WARSH AND THEREFORE WEAK METALS? >> YEAH, I THINK I THINK THAT'S ALSO A KEY DRIVER OF IT, AS WELL AS THE SORT OF BLOW OFF THAT WE SAW IN THE AI STOCKS TODAY AS WELL. YOU KNOW, KEVIN WARSH, OBVIOUSLY HE'S COMMITTED TO, YOU KNOW, A SMALLER FED BALANCE SHEET.
