Physical vs paper markets and Shanghai arbitrage

Craig Hemke, Founder and Editor of the TF Metals Report, joins me to kick off the first full trading week of 2026, reviewing the strong close to end last year, and the even stronger start to this year in gold, silver, copper, and the precious metals stocks.   We also break down the macroeconomic factors that matter moving into the year to come.

We start off reviewing the big moves higher today across the metals complex with gold, silver, copper, at or near all-time highs in what is typically a quite seasonally strong period of the year for this part of the commodities sector.

Craig points out that while the metals have been undeniably strong, that the related mining stocks have only had lackluster responses over the last few weeks, considering how much their profit margins and project economics have expanded.

• This brings up the lagging valuations in lieu of the much higher average metals price in Q4 over Q3, where gold, silver, platinum, and copper all closed the month of December, the fourth quarter, and the year at all-time high closes on the longer-duration charts.
• Craig feels that this is what is truly germane for institutional investors and analysts as they tend to block out the short-term noise and focus on the longer-term trends in motion.

When we look at where metals prices are here to kick off the year in early January they are a levels that are so much higher than those average prices in Q4, that it is hard to imagine that Q1 isn’t going to see even higher average metals prices, and thus even higher record revenues or project economics.

• This raises the question of why more investors are not getting in front of those trends and bidding the quality mining shares much higher than they’ve responded thus far?
• Craig feels a great deal of this lack of leverage in the mining stocks lately is coming from sympathetic lack of belief from most investors that these prices are going to stay up at these levels.

One factor that has continued to tamp down futures pricing in gold, silver, platinum, and palladium over the last few weeks has been the COMEX rising of margin requirements.   Many investors are concerned that if this raising of margins requirements persists that it could trigger a selling cascade lower.  Craig weighs on the history and dynamics around these moves by the Chicago commodities exchange. 

The conversation then transitions over into what factors are going to keep underpinning higher metals prices. 

• We review the arbitrage between the physical and paper markets both in terms of the current backwardation between higher spot prices over future prices, and from prices seen on the Shanghai exchange versus the COMEX.
• Craig mentions that while he doesn’t feel there is a direct safe haven bid today after the weekend geopolitical events between the US and Venezuela, that it still may underpin other nations central banks to keep buying gold and diversifying out of US dollars as a precaution.
• Another key factor he is watching is what we’ll see in 2026 with regards to central bank monetary policy here in the US, once Trump installs a more dovish head to the Fed mid-year. Craig also continues to watch for potential yield curve control through monetary policy, if the interest rates get too extreme in either direction.
• Following up on our last conversation, and looking ahead to Craig’s coming 2026 Macrocast report due out later this week, we revisit the potential for Scott Bessent and the treasury department to monetize aspects of the US balance sheet (notably a potential repricing in gold) to help fund a sovereign wealth fund.

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This content is for informational and educational purposes only and does not constitute investment advice, an offer, or a solicitation to buy or sell any security. Investing in equities and commodities involves risk, including the possible loss of principal. Do your own research and consult a licensed financial advisor before making any investment decisions. Guests and hosts may own shares in companies mentioned.