Will Supply Chain Disruptions Impact Gold and Silver?

While inflation has dominated the thoughts of consumers and investors for the past few months, another threat is facing the economy today – supply chain disruptions. Over the past several decades, US industry has developed a just in time inventory system. Driven by tax considerations and storage costs, US businesses have relied on the supply chain to deliver goods just when they’re needed, allowing businesses to run lean operations that reduce costs. But all that is coming crashing down.

The worldwide COVID lockdowns wreaked havoc on supply chains. Between job furloughs, shipping disruptions, and factory closures, businesses and consumers who were used to getting what they wanted when they needed it suddenly were confronted with the fact that they couldn’t operate as usual. And the problem is getting worse.

You’ve probably heard about the problems plaguing West Coast ports such as Long Beach and Los Angeles, with dozens of ships waiting to dock, containers piling up, and truckers waiting hours to take on cargo. Warehouses throughout the country are seeing fewer and fewer deliveries. And consumers panicking over inflation are driving up demand, causing shortages throughout the economy.

Businesses and individuals who once might have bought just what they needed for the immediate future are now purchasing goods to last them years, so uncertain is the future. And with uncertainty rising, the likelihood of the supply chain normalizing anytime soon is just about nil.

Now the question facing investors is, what effect this might have on precious metals such as gold and silver? There are the obvious effects on price, as rising demand for gold and silver could continue pushing their prices higher. But what about supply? Will you always be able to buy gold and silver when you want it, or will supply chain issues affect precious metals too?

Gold and Silver Supply

Almost all of the gold ever mined still exists above the earth’s surface. However, it’s not a huge amount volumetrically speaking. All the gold ever mined could fit in a cube measuring about 70 feet on each side.

Annual mine production adds a small amount to existing stocks of gold and silver, but in order to be processed into usable metal, gold and silver ore have to be shipped, either by truck or ship. In some cases it can take up to ten tonnes of rock to extract a single ounce of gold. With over 100 million ounces of gold produced each year, that’s an incredible amount of rock that needs to be transported.

While there is certainly a great deal of specialization when it comes to the mining industry, at some point during the production process gold and silver will have to enter the mainstream transportation process. The process of processing ore, refining silver and gold to certain levels of purity, and forming that gold and silver into usable forms all requires transportation to various processing facilities. And at any point in that process disruptions to the supply chain could affect the end users of gold and silver.

Mints, for instance, often require the use of pre-fabricated coin blanks that have to be transported from refiners. Then once the gold and silver coins are produced they have to be packaged and shipped, either to warehouses, resellers, or end users. All of this requires use of the transportation system, and any disruptions here could affect your ability to buy gold and silver coins.

International trade still has yet to return to normal, and some coins produced abroad could become subject to export or import restrictions. The same goes for imports and exports of gold and silver for industrial use. This doesn’t mean that users and investors won’t be able to get their hands on gold and silver. It just means that they could have to pay more for existing stocks of gold and silver, as recycling could become increasingly important, and resales of existing coins and bars could pick up.

All this is to say that investors who are interested in buying gold and silver shouldn’t assume that they’ll always be able to find physical gold and silver coins in stock. At some point, supply chain disruptions could impact the precious metals market too. So if you’re looking to buy gold and silver, it might be better to buy now if you know you can get your hands on precious metals, rather than wait and possibly get shut out in the future.

Consumer Fears and Precious Metals Prices

The other impact on precious metals could come as a result of changing consumer and investor behavior as the effect of supply chain disruptions becomes more and more evident. With the prospect of higher prices and shortages, consumers could become far more nervous about the state of the economy. Investors too could become nervous about future economic growth. And that could result in greater demand for gold and silver as investors decide to hedge against any economic uncertainty.

With the prospect of high and continuing inflation, and supply chain disruptions well into next year, the stage is being set for a rise in the gold and silver prices as more investors look to the safety of precious metals to protect their wealth. Both gold and silver have a history of performing well when the economy is in upheaval.

During the 1970s, both gold and silver saw annualized gains of over 30% over the course of the decade, well above both inflation and stock markets. And in the aftermath of the 2008 financial crisis, gold nearly tripled while silver more than quintupled, all while stock markets struggled to regain their footing.

If you are worried about the effects that high inflation and supply chain disruption could have on the value of your retirement savings, now is the time to start thinking about protecting your assets with gold and silver. A gold IRA or silver IRA can help protect the assets in your 401(k), IRA, TSP, or similar account, and can be funded through tax-free rollovers or transfers from those accounts.

Or if you don’t want to touch your tax-advantaged retirement accounts, you can make direct purchases of gold and silver coins or bars that you can own and hold at home. No matter your needs, there is a gold and silver solution for you.

At Goldco we have years of experience helping customers just like you benefit from adding gold and silver to their portfolios. If you’re worried about the future of the economy and what inflation and shortages could do, maybe it’s time for you to start thinking about gold and silver. Give the precious metals experts at Goldco a call today to learn more about how gold and silver can help protect your retirement savings.