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Gold And Silver Prices May See "Fireworks" Soon Should Supply Lag Demand

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(Kitco News) - Investors may be in for “fireworks” this summer if precious metals producers are unable to keep up with what would be very high retail demand should prices drop lower, this according to Peter Hug, global trading director of Kitco Metals.

“I think south of $14 [an ounce for silver], there’s going to be extreme interest in the market from the retail public. And if that happens coming into June, July, when the refineries and the Mints, i.e. the U.S. Mint and the Royal Canadian Mint, tend not to have peak production, that tends to spike premiums, so there could be some fireworks coming this summer,” Hug told Kitco News.

He noted that key support levels will be $14 an ounce for silver and the low $1,200s for gold, as a fall below those levels could trigger strong retail demand.

Hug said that the difficulty in trading gold right now comes from a number of influences pushing on the yellow metal in different directions.

“It’s a really difficult market to trade right now, there’s a lot of different influences on the market. It’s very, very volatile and very thin, and there’s very little participation in the market, so it’s difficult to get a beat on momentum and direction right now” he said.

Aside from seasonality, geographical factors may also come into play, as a lack of interest from American investors is evident due to the stronger U.S. dollar relative to other major currencies.

“But that’s not true in the European context,” Hug noted. “Nor is it true in some of the other markets, where because of the currency depreciation against the dollar, metals have actually been rising, so we are seeing physical offtake in the European markets and to some extent in the Hong Kong market and also in Canada, with the Canadian dollar relatively weak against the U.S. dollar.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.