Gold, Silver Take a Break for Holiday

Almost every year over the past quarter-century, the prices of gold and silver have been repeatedly clobbered over the Thanksgiving holiday weekend. The reasons why it happens are easy to understand.

The prices of gold and silver are effectively report cards on the U.S. government, U.S. economy and U.S. dollar. If precious metals prices are rising, that reflects poorly on the U.S. government.

One result would be a need to pay a higher interest rate on Treasury debt to entice buyers to hold them.

Therefore, the U.S. government has a huge incentive to use its Exchange Stabilization Fund, the primary trading partner banks of the Federal Reserve Bank of New York, and allied central banks to hold down gold and silver prices.

When holiday weekends occur, traders tend to take time off. When trading volume declines, the impact of any trades that are executed have a larger impact on the market. With Thanksgiving effectively being a four-day holiday weekend, that offers an even more attractive opportunity to knock down gold and silver prices. This has been almost a consistent pattern of gold and silver prices falling over Thanksgiving weekend, only to begin to recover by the following Tuesday at the latest.

This year, there was even more reason than usual for the U.S. government to want to push down gold and silver during the Thanksgiving holiday.

On the COMEX, both the gold and silver futures markets had large numbers of December contracts maturing. The trend over the course of 2020 was for a greater percentage of maturing contracts to be called for delivery of the physical metal rather than rolled over into contracts with expiration dates further in the future. It looked like the demands to deliver metal against maturing December gold and silver futures contracts this year could be at record-high levels. An increase in such demand could put extreme pressure on physical gold and silver markets that were already experiencing shortages – risking a spark in higher prices.

Another potential problem was that there were over 70 million ounces of COMEX silver option call contracts at strike prices of $24 per ounce or lower that expired two days before Thanksgiving. Had the COMEX silver price closed above $24 on Nov. 24, that risked another huge demand for the delivery of physical metal.

The solution, from the perspective of the U.S. government, was to arrange for a major price suppression effort on gold and silver for Thanksgiving week.

We alerted our readers on our company’s Facebook page on Friday, Nov. 20, to expect a major suppression of gold and silver prices the following week through Monday, Nov. 30. After that, we forecasted that prices would start to recover.

That is exactly what happened.

By early trading in foreign markets on Nov. 30, gold bottomed at $1,766.00, down 5.7 percent from the close on Nov. 20. Silver dropped all the way to $21.93, a drop of 9.9 percent from Nov. 20.

Then prices started to recover, right as we predicted. As of the COMEX close on Dec. 2, the price of gold had regained 3.4 percent and silver 9.6 percent from the Nov. 30 intraday low.

The recovery of gold and silver prices is almost certain to continue. From 2015 through 2019, the price of gold has risen from its December lows by 6 to 10 percent by the end of the following January. This time around, the increase could be even greater.

Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award, 2012 Harry Forman National Dealer of the Year Award and 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild (including twice in 2020), Professional Numismatists Guild, Industry Council for Tangible Assets and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Mich., and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at www.libertycoinservice.com. Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio archives posted at www.1320wils.com).