Supply Crunch for Gold and Silver to Continue

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Bullion investors shouldn’t expect to see a drop in premiums anytime soon as the supply crunch for gold and silver coins continues to grow, according to Peter Hug, global trading director for Kitco Metals.

However, in some good news for investors, Hug said that investors holding bullion have a little more selling power.

“Dealers will pay up for physical material so they have something in their inventory to meet the demand on the other side,” he said. “I'm not suggesting you sell, but if you're in a situation where you're trying to raise cash or you believe the market is, this would be a time to negotiate a bid with the dealer.”

Although Hug said that he is bullish on gold because premiums are so high, it might not be a great time to chase physical bullion.

Retail premiums are expected to stay where they are, given supply-side disruptions, Hug said.

“I think it more impacts the production of the gold Eagle and gold Buffalos. There is a shipment that is scheduled to be delivered this week to the dealers, and I think that will be it for a while,” he said.

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