Best of the Week
Most Popular
1. Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - Nadeem_Walayat
2.Gold Price Focusing on May Cycle Bottom - Jim_Curry
3.Silver, silver, and silver! There’s More Than Silver, People! - P_Radomski_CFA
4.Is the Malaysian Economy a Potemkin Village - Sam_Chee_Kong
5.Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - Troy_Bombardia
6.A Big Stock Market Shock is About to Start - Martin C
7.A Long Term Gold Very Unpopular View - Rambus_Chartology
8.Stock Market “Sell in May and go away” Study When Stocks Are Down YTD - Troy_Bombardia
9.Global Currency RESET Challenge: Ultimate Twist - Jim_Willie_CB
10.The Coming Silver Supply Crunch Is Worse Than You Know - Jeff Clark
Last 7 days
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18
More on that Gold and Silver Ratio 'Deviant Conundrum' - 13th Jun 18
Silver Shares? Nobody Cares - 13th Jun 18
What Happens to Stocks, Forex, Commodities, and Bonds When the Fed Hikes Rates - 13th Jun 18
Gold and Silver Price Setting Up for A Sleeper Breakout - 13th Jun 18
Tesla Stock Analysis - 12th Jun 18
What Happens Next to Stocks when Russell Goes up 6 Weeks in a Row - 12th Jun 18
Gold vs. Stocks: Ratios Do Not Imply Correlation - 12th Jun 18
Silver’s Not-so-subtle Outperformance - 12th Jun 18
Why You Should Brace Yourself for Big Financial Changes - 11th Jun 18
Inflation to Skyrocket When Fed Reverts to New QE & Interest Rate Cuts - 11th Jun 18
Stock Market Topping Pattern or Just Consolidation? - 11th Jun 18
Study: What Happens Next to Stocks When the Put/Call Ratio is Very Low - 11th Jun 18
G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - 11th Jun 18
SPX Unshackled - 11th Jun 18
When Trump Met Fibonacci And Won - 11th Jun 18
FREE Theme Park Entry with Cadbury's Choc's! Legoland, Alton Towers, Chessington.... - 11th Jun 18
Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - 10th Jun 18
End of the World Stock Market Chart! - 10th Jun 18
All US Homes Are Overvalued - 10th Jun 18
Thorpe Theme Park London Car Park Exit Nightmare - Drivers Beware! - 10th Jun 18
Gold Price Summer Doldrums - 9th Jun 18
How to Prepare for Economic Uncertainty with Gold and Silver - 9th Jun 18
5 "Tells" that the Stock Markets Are About to Reverse - 9th Jun 18
Billionaire Schools Teacher in NAFTA Trade Talks - 9th Jun 18
Land Rover Discovery Sport ECO Mode Real World Driving MPG Fuel Economy - 9th Jun 18
Crude Oil Bullish Weekly Reversal vs. Bearish Monthly Reversal - 8th Jun 18
Fed’s Interest Rate Hike is Short term Bearish for Stocks - 8th Jun 18
The Deviant Conundrum Called Silver - 8th Jun 18
Pleasure Island Theme Park Cleethorpes, Last Day Trip Before it Closed Down - 8th Jun 18
America’s One-sided Domestic Financial War - 8th Jun 18
Debt Consolidation Advice: When and Why to Consolidate - 8th Jun 18
Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - 8th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

How to Obtain Silver Coins and Rounds in Short Supply

Commodities / Gold and Silver 2015 Jul 15, 2015 - 11:47 AM GMT

By: MoneyMetals

Commodities

There are two kinds of constraints when it comes to supply in the physical markets, and anyone building a position in physical metal needs to know the difference.

The first type is temporary. The other signals a sea-change, the rush for physical metal going mainstream. When it happens, it’ll be “go time” in the physical markets. The time get your hands on products widely available at low premiums will be over.


Some bullion investors are wondering if it is “go time” now. The events in Greece, the stock market sell-off in China, and silver prices falling to near $15/oz spiked demand for manufactured rounds, coins, and bars.

Premiums jumped almost immediately for one-ounce and smaller silver products.

Anyone involved in these markets over the past 7 years has been through this drill a handful of times.

The drop in silver prices drove up demand, and the U.S. Mint cried “Uncle” (Sam) last Tuesday. Bureaucrats opted to stop taking new orders and instead clear up the existing backlog.

Such a move would have been considered extraordinary a decade ago. But the government-run Mint is pressed to its limit these days, setting new records for silver Eagle sales nearly every year since the 2008 financial crisis. Nowadays, surges in buying activity quickly overwhelm them. The Mint has “turned off the phones” three to four times since 2011.

Silver American Eagles are still the single most popular product in the U.S. When the Mint stops selling them, the effects sweep through the entire marketplace. Premiums jump in response to a scramble for the remaining inventory of Eagles. Demand spills over to alternative products. The pressure drives premiums higher and shipping times longer. This first occurs with government coins, then in rounds, and finally, if extreme, bars of 100 ounces and smaller.

We’re in the middle of another shortage of fabricated silver in the most popular varieties. This demand spike looks manageable for now. The relatively small, but growing, contingent of people concerned enough about world events to buy physical bullion is driving this surge. They see troubling headlines and lower prices as an opportunity, while the mainstream of investors continues to focus elsewhere.

Supply for coins in particular has fallen behind and has to catch up.

Here are some signs suggesting the silver market is suffering a temporary bottleneck in the fabrication of coins and rounds, rather than something more permanent:

  • Spot prices are falling even as demand and premiums for bullion rise. Traders are actively selling paper silver in the futures markets. They remain wholly unconcerned about taking actual delivery of the underlying exchange-sized bars. Mints and the manufacturers who make 5, 10, and 100 ounce bars can still get 1,000 ounce bars or silver grain to melt. They just can’t process them quickly enough to keep up with retail bullion investors who are clamoring to buy.
  • Bar premiums have not risen yet. Bars are simplest to manufacture, making production easier to ramp up. Premiums are less affected by surges than smaller and more labor intensive one-ounce coins and rounds – at least when raw silver remains in adequate supply.
  • Investors can still buy 1,000 ounce bars inside an exchange vault without paying an increased premium. One way to dodge higher premiums during a fabrication bottleneck is to buy exchange-sized bars and keep them parked in segregated storage until the cost of the smaller items, more suitable for delivery, falls. Money Metals Exchange provides this service – just call 1-800-800-1865 to discuss with a Specialist.
  • We continue to lock prices in advance and accept orders for all products, even if we have to quote modest lead times. Responsible dealers won’t take an order unless they are confident they can keep a commitment to deliver when promised. Dealers and their customers can cope with a stretched supply chain, but not one that is broken.

The U.S. Mint expects to resume taking orders on August 1st. That may well signal the end of the current fabrication bottleneck. Premiums may drift lower and lead times may disappear as dealer inventories replenish.

To Capitalize on Low Spot Prices AND Low Premiums, Choose Gold Coins, Bars, and Rounds or Silver Bars

If you ALREADY own a substantial position in precious metals and you are confident spot prices will not rise in the coming weeks, it’s not unreasonable to delay purchases in the interim. Premiums certainly could fall soon.

But don’t delay too long. The contingent of investors with failing confidence in the paper markets for stocks, bonds, and futures is growing.

The day is coming when lots of people respond to increased risk and uncertainty in the financial markets by buying a few coins. Then it is GO TIME. Inventories of above ground metal in any form will dry up, and the market will seek a new equilibrium at much higher prices.

Here is what to expect when a serious supply shortage, rather than a temporary bottleneck, has begun:

  • Premiums would rise across the board – from scrap jewelry to American Eagles. Not only will smaller fabricated products be in short supply, investors and manufacturers will both be bidding aggressively for silver in raw form, including exchange-sized bars.
  • Exchange-sized bars would be hard to find for immediate delivery. The COMEX and other futures exchanges would impose cash settlements on contract holders. Traders would be confronted head-on with a very unpleasant reality when they suddenly decide to stand for delivery. There are 100 times more paper ounces than physical bars to back them. Holders of futures contracts on precious metals would wind up with cash instead of the metal they would much prefer.
  • Bullion dealers would stop locking prices in advance of your payment on orders. If they can no longer be certain of wholesale premiums and/or minting charges for replacement inventory, they will be reluctant to set a price with customers up front. And, if they aren’t certain when inventory will arrive, many will stop accepting orders for a product altogether.

The number of people unnerved by recent action in the paper markets for stocks, bonds, and currencies IS growing. The last couple of weeks have been particularly hard on confidence. Chinese officials now threaten to arrest citizens for selling stocks. Greece is in the vanguard of many nations who can no longer kick the can on unpayable debts. And last week’s surprise shut-down in the New York Stock Exchange highlights just how fragile today’s electronic exchanges are.

“Go Time” in the metals markets may not be here yet, but it’s coming.

By Clint Siegner

MoneyMetals.com

Clint Siegner is a Director at Money Metals Exchange, perhaps the nation's fastest-growing dealer of low-premium precious metals coins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon, puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

© 2015 Clint Siegner - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules