The Strained Supply Line of Silver Buying

The Strained Supply Line of Silver Buying

When in 2008, the price of silver took a 50% haircut, demand did not.  At the time, I heard reports of bullion dealers in the US who were not selling the monster boxes of Silver Eagles they had already. Physical metal was hard to find even amid a riveting selloff.

silverbull storm turned for the better in a dash, and silver began to rise in price all the way up to $50 an ounce.  So, it is reasonable to  have believed that, once the price approached $50 or thereabouts, it would correct…even if in a real way. As Jim Rogers said the other day, to paraphrase, “50% haircuts are common in bull markets.”

Silver still consolidates in the shadows of gold’s headlines.

Even today, under $20 (!) an ounce, silver has represented a formidable store of value when one considers the amount of return the metal has gotten compared to interest in savings. Holdings silver and gold has been like running one’s own business.  This explains the demand. Many world mints (especially in North America) cannot keep up.

This has meant, in order to buy silver, one has had to deal with increasing premiums.

Just check out the awesome website Compare Silver Prices. The website has an algorithm that tracks silver premiums.  Look at the 10% increase in the price of junk silver.

But, the retail public has not only had to deal with considerable premiums, but also long queues for the metal.

In January, the US Mint notified the public:

Authorized Purchasers,

The United States Mint has temporarily sold out of 2013 American Eagle Silver Bullion coins. As a result, sales are suspended until we can build up an inventory of these coins. Sales will resume on or about the week of January 28, 2013, via the allocation process.

Please feel free to call us if you have any questions.

Regards,

Jack A. Szczerban

Branch Chief, Precious Metals Group

Department of the Treasury

United States Mint

After that note, the Commonwealth nation of Canada’s Royal Canadian Mint began allocation and limiting the quantity of sales of the popular Silver Maple Leaf, .999.  That means that there was a temporary silver shortage spanned Canada and the US. Mexico’s La Casa de Moneda de Mexico (the oldest mint in the Americas), has however a fully supply of 2013 Libertad coins. The catch? The US suppliers do not…silvereagle

Supply Line Woes Or Physical Shortage?

Alongside the aforementioned conditions of the physical silver market, there has been a play of mergers and acquisitions from within. Elemetal Capital was founded in 2012 due to the merger of NTR Metals and Ohio Precious Metals, with the latter seemingly being the more established company.  From there, it has been discovered that Provident was then also bought by Elemetal Capital along with the company Dallas Gold & Silver Exchange. On the latter, Elemetal Capital has taken about a $10 million loss on DGSE’s share price.

That is a lot of drama for one market.

Increasing demand for silver will be fueled by stock market volatility. It might not matter what the price of silver is in the future, for its premium on physical might double.  And, too boot, you might not be able to get physical at the retail level. A mixture of physical shortages and ecosystem oriented supply line problems could only lead to a more unpredictable supply line. The details are clear in someways, and unclear in others.

When we buy silver online, we’re also disconnected from the plumbing of the gold and silver ecosystem.

 

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