WATCH: Gold & Silver Markets React to Trump’s Trade Policy

Here is a transcript of this video filmed on Friday January 17, 2025 by Scottsdale Mint CEO Josh Phair about market fluctuations reacting to the possibility of Trump’s Tariff policy.

Since Trump’s election victory, much of the world has been frozen in uncertainty about what’s coming. In the precious metals industry, what is normally fairly smooth sailing has become quite interesting. Just over 30 days ago, if you were a buyer from one of the bigger banks or refineries purchasing COMEX deliverable brands or LBMA (London Bullion Market Association) raw material, banks started charging a premium. This left many people wondering what was happening and if there was a silver shortage.

As time progressed and we got closer to Christmas, people began connecting the dots to the potential tariff situation. There’s still uncertainty around Trump’s tariff plans – whether they’ll apply to raw materials, finished goods, or if there will be exemptions for gold and silver. In response, banks started pricing in risk.

Let’s consider silver at $30 an ounce. If Trump implements a day-one 10% tariff, suddenly someone owes $3 on each silver import. Many people don’t understand that banks typically work off of pennies. Traditionally, a bank will short or sell a contract on the COMEX in a forward month, then purchase physical metal from various sources – Korea, Poland, South America, or London.

They wait for shipping and importation, which takes more than a month, before delivering into that contract. They profit from this spread, but this arbitrage is now at risk because if you’re importing raw material and Trump adds a tariff, you’re trying to make pennies while taking on dollars of risk.

As we entered the Christmas season and moved into January, we’re facing even higher premiums. This is known as an EFP (Exchange for Physical). Typically, our industry doesn’t discuss this with retail customers, and most don’t even know it exists.

An exchange for physical means converting from a paper product to taking delivery. Usually, the fees are minimal – pennies or a nickel. Now they’re averaging 60 cents to over a dollar per ounce for raw material.

Most of the coin industry and bullion shops aren’t aware of this situation because they’re not active in this marketplace. However, as manufacturers who use many of these brands, we’re facing an interesting situation as Trump’s inauguration approaches.

The impact isn’t limited to silver – we’re starting to see EFPs affecting gold prices too.

Another significant change occurred today in metal leasing. Traditionally, large manufacturers and commercial industries lease metal from banks at very low rates – typically 1-3% over the last couple decades, sometimes even under a percent.

Out of nowhere, the lease rate on gold jumped to 12% today – a roughly 10% increase in one day. This dramatically affects manufacturers’ bottom lines, particularly in industries like jewelry where leasing programs are common.

This raises questions about potential metal shortages in gold and silver. The reality is that the metal exists somewhere in the world, but is it in the right form and the right place? We’re seeing what some call a “stock out.” Metal is currently flowing from Europe to the United States at unprecedented levels.

I’ve spoken with armed transport companies who report never seeing this volume of material scheduled to arrive before inauguration day.

While this benefits the United States by increasing precious metals stockpiles, the question of replenishment remains critical. Consider that only 18% of silver consumption in the United States comes from domestic sources – more than 80% is imported.

What happens if Trump imposes a 25% tariff on Mexico, a major silver producer that supplies much of this material to the US? We’re facing truly interesting times in the precious metals market.

 

Follow Josh Phair on Twitter.