Gold and silver prices fall in December; Trump’s tariff talks hit futures traders.
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As markets prepared for Trump 2.0 in December, interest rates increased (10-year Treasuries jumped 39 basis points) and the dollar rallied (DXY gained 2.6%). Precious metals prices fell against that backdrop.
There is concern that President Trump’s plans to grow the economy are inflationary and deficit-widening. Fed speak is clear: interest rate easing will slow in 2025. In December, gold prices lost $40, or 1.49%, to $2,641.00[1]. Silver prices fell $1.70, or 5.46%, to $29.41. Platinum and palladium prices lost 5.53% and 8.59%, respectively.
From the vantage of FideliTrade’s trading desk, the lower prices are not surprising. On a net basis, customers have been selling more than they have been buying for months. This held true in December. Coin premiums were low at year-end. Will there be interest in 2025 bullion coins?
Tariff trouble in metals – even before any tariffs
Many professionals hedge their inventory price risk by selling CME futures contracts. (Other sellers include bearish traders). The price difference between spot, or metal available for delivery, and its futures contract is based on a formula. The costs of money, leasing silver, and shipping are the inputs. Shipping because futures settle in New York but most physical is in London.
Futures and spot prices move in sync unless there is a stick in the wheel. President Trump suggested 25% tariffs on imports from Canada and Mexico to retaliate against drug flows and illegal immigration, which frightened some traders who were short futures.
The futures premium, usually a few dollars in gold and pennies in silver, had been pressing higher.
It exploded on the 11th, when gold futures prices traded $60 above the spot. In silver, futures prices traded $1 over than spot. Why? Canada is the fourth largest gold-producing country (6.1 million oz.), and Mexico (4 million oz.) is the 9th. Mexico produces the most silver - 202.2 million oz.
While many think Trump is only trying to gain an edge in trade talks, some dealers who were short thought it was safer to unwind their futures positions. If dealers had to import tariffed metal to cover their positions, losses would be huge. Futures premiums remain elevated but have retraced from the extraordinary levels seen on the 11th.
Looking Ahead
Tariffs
National debt limit
Central Bank gold activity
A possible additional reason: it is less likely gold can be weaponized like the dollar.
Top 20 Gold Reserves, by Country
[1] All prices are CME futures most active contract unless otherwise indicated
Jennifer Ropiak is a precious metals market specialist with over 30 years’ experience, including 20 years of trading (15 at Morgan Stanley). In 2014, Jennifer launched Trusted Partner Metals, an independent consultancy whose clients span the metals industry. Services include expert witness opinions in precious metals cases. The information contained in this article is for educational and informational purposes only.?
The information is not intended as, and shall not be understood or construed as, financial advice, investment advice, legal advice, or other professional advice. The information is not a substitute for professional advice, and we strongly encourage you to contact a financial advisor if you have any questions about purchasing or selling bullion. Any reliance that you place on information provided is strictly at your own risk. We disclaim all liability and responsibility arising from any reliance placed on such information by you or by anyone who may be informed of any of its contents.