Happy Thursday, GoldBuzzers!

Last night I spoke to Andrew Sleigh at Sprott Money for the first time since August. This time I went in with a list of questions drawn from every conversation we’ve had since January, and what came out of it is one of the clearest reads on the physical market we’ve had all year.

Ok. Let’s get into it. ⬇️

Gold slipped for a fourth straight day on Wednesday, touching its lowest level since October 15 before steadying around $4,115, while silver eased about one percent to the $57 range.

The pressure is coming from oil. Fresh attacks on Red Sea shipping pushed Brent crude back above $110 a barrel, and expensive energy feeds straight into inflation, which keeps central banks leaning toward higher interest rates - the one thing that reliably cools demand for metals that pay no interest of their own.

Markets still expect the Fed to hold steady at next week’s meeting, with the decision due October 28, but they’re now pricing roughly 90 percent odds of a December hike, and next week’s PCE inflation report will shape that call.

Across the Atlantic, UK inflation hit an 11-month high of 3.5 percent in September, making a Bank of England hike on November 5 look close to a done deal. One detail worth your attention: gold firmed late in the session as Treasury yields slipped, a sign there are still buyers waiting just beneath the surface.

Check live prices and this morning’s gold and silver commentary at our sister site, GoldPrice.Live

Gold is down about 26 percent from its January record, and silver has lost more than half its value. This week, analyst Tavi Costa pointed out that the only other time gold was down this much was at the bottom of 2008.

Charts only tell you so much, though. So last night I caught up with Andrew Sleigh, senior dealer at Sprott Money, to find out what the selloff looks like from behind the counter. He’s been our window onto the dealer desk since January, and this time I went back over everything he’s told me since then, to see how it’s held up.

The bottom that never came

In July, with silver around $56, Andrew told me he was waiting for $54. He had his own cash ready, and so did a group of his clients.

Silver got as low as $54.74 on July 17 and turned. “I was watching it at 55 and change, and I was just looking for one more day to have it go down,” he said. “And it went up.” Two trading days later it was back near $59.

He bought at around $58 anyway. “It was more important for me to get my money out of the banking system,” he told me. Three months on, silver is around $57, barely below where he bought. “I have no regrets about doing that.”

He’s not a trader, he says, and doesn’t have the time to be one. The aim was to own metal instead of money sitting in a bank, and he got that done.

A quiet desk, not a panicked one

Smaller buyers have disappeared. The calls for buying $10,000 or $20,000 of metal are “pretty quiet,” Andrew said, and the phone hasn’t been “ringing constantly by any means” for the last two months.

However, the bigger money is still coming in. Wealthier clients are buying every month, and others ring when there’s a good dip and buy a couple of hundred thousand dollars’ worth. One client has moved $3 million into metal over the past four months, buying a few hundred thousand a week, to get out of the paper money system.

There’s no sign of panic, either. Buyback spreads, the gap between spot and what a dealer pays you for your metal, haven’t moved since July. They’re still three to four percent on coins, seven percent on silver bars and five percent on gold bars. A Silver Maple costs about $6 Canadian over spot, roughly half the premium at January’s peak. And the product is easy to get, Andrew said, “because sales are low.”

In January, buyers were waiting weeks for coins and paying hefty premiums. Now there’s plenty of metal for not much over spot, and hardly anyone’s buying it.

Andrew has a pointed message for the people who bought near the top. “They should be backing up the bus right now,” he said. Buying more at half the price would bring their average cost down sharply, but most of them won’t.

Out of the banks

Over the summer, Andrew told me he’d never seen so much metal leaving bank safety deposit boxes for private storage. That hasn’t slowed, and he thinks it’s only the “tip of the iceberg.” People want their assets closer to home, he said, “and the bank is not close enough to home for them.”

The Fed and the next few weeks

The Fed meets next week, and markets put the odds of a December rate hike at about 90 percent. Gold pays no interest, so the prospect of higher rates is the main thing pushing it down right now.

Andrew’s customers aren’t even talking about it. He expects the hike, but he’s watched what happened last time. “On the last meeting, it only affected gold and silver for the afternoon,” he said. “After that, it roared back two days in a row.”

The data backs him up. On September 16, the day of the decision, gold dipped to $4,235. Over the next two sessions it gained almost three percent.

In the short term he’s cautious. He’s bearish “for about two more weeks,” and thinks the charts leave room for gold to slip as far as $3,500 to $3,700. But he’s treating the coming weeks as “a very good accumulation period,” and calls the whole selloff “a pretty temporary wash.”

Nine months on

In January, with silver just under $90, Andrew told me it would reach $120 by the end of January or February. It touched $121 within a fortnight. The bigger targets he talked about after that never came close, and he’s candid about it. Gold and silver “can always prove us to be liars,” he said.

He agrees the long, grinding stretch we’re in now is normal. Bull markets have always needed months of boredom before people believe the next leg is coming.

What the dealer desk is telling us

Andrew’s price targets were very nearly hit in July. In the end he paid a few dollars more, because owning the metal mattered more to him than the perfect entry.

His desk tells the same story on a bigger scale. The nervous money left months ago, and the buyers who are left are experienced and putting serious sums to work, at premiums far below January’s. He expects a couple more rough weeks. For anyone who already owns gold and silver, the view from behind the counter is calm, with nobody rushing to sell and plenty of metal for the people quietly adding to their stack.

That’s all for this Thursday, folks. I’ll see you on Sunday.

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Rick Adams
Founder, GoldBuzz
rick@goldbuzz.com