Are fabrication premiums normalizing? Peter Hug clarifies
As logistics in the bullion sector have improved over the last few weeks, premiums on gold and silver products have declined, and more stability can be expected going forward, this according to Peter Hug, Global Trading Director of Kitco Metals.
“We’re starting to see the supply chains open up, and to give you an anecdotal example, I’ve got shipments because we have a Hong Kong office. Two weeks ago, it would have taken me two weeks to just get a quote. I called this morning, and within three hours I got a quote,” Hug told Kitco News.
Gold coin premiums are now around 1% on average above normal levels, and while silver coin premiums are still a bit higher, levels have already normalized quite a bit, Hug noted.
“If you go back four or five weeks, silver premiums coins were trading anywhere from $12 to $18 over spot. Gold premiums were trading at $150 to $200 over spot. We’ve seen this game before, and we just didn’t play in it, and we believed this was not something to chase,” he said.
Hug added that not all products are equal in terms of liquidity and premiums.
“I have never been a fan of the Silver Eagle. First of all, because I believe in a product that has international liquidity, and the Silver Eagle does not…I much prefer the Silver Maple Leaf. On the silver market, you’re looking at premiums on Silver Eagles still trading at somewhere north of $10, $12. You can get Silver Maples at $5.50 over spot,” he said.
Although premiums are still higher than normal levels, Hug remains constructive on the metals prices as investments, and he expects premiums to continue on the trajectory of normalization.
“To get it to a normal level of premiums in a normal market, we’re not far away,” he said.