BEWARE: What If This Retail Silver Investment Shortage Doesn’t End?

Not only has the present retail silver bullion product shortage continued for several months now, what happens if it never ends?  This may seem like a play on hype, but if the U.S. or World experiences another Black Swan event like the Lehman Brothers collapse in 2008, physical silver demand will likely explode to levels much higher than today.

One of my readers contacted me yesterday with some interesting information.  He stated that he called his coin shop and found out that new Silver Eagle orders will not be available until 2016.  I wanted to know if this was true, so I contacted some of the large online Dealers and asked them what the current situation was in the silver supply demand picture from their perspective.

I did get conformation from one source (dealer) that they were no longer taking new orders for 2015 Silver Eagles.  Now, this does not pertain to “pre-ordered” Silver Eagles by some of the retailers from the Authorized Dealers.  Thus, some retailers may have purchased Silver Eagles 6-8 weeks ago, and will finally receive delivery in say 3-4 weeks.  So, when an individual goes to one of these online dealers websites and notices Silver Eagles for sale with a 3-4 week delivery wait time, these were already pre-sold by the Authorized Dealers.

Basically, a good portion of the Authorized Dealers allotments of Official Silver Coins such as the Silver Eagles have already been sold to the Dealers.  So, when the U.S. Mint sells their allotment of 750,000 Silver Eagles to the Authorized Dealers beginning of each week… they are already accounted for.  Which means, many of the Authorized Dealers (wholesalers) have sold 2+ months forward of their Silver Eagle allotments.

This is why we are seeing wholesalers and retailers turning to selling the Perth Mint new 2016 Silver Kangaroo and the Britain Silver Britannia.  The Perth Mint is only selling the 2016 Silver Kangaroos in large volume orders.   Investors switching to buying Silver Britannia may help increase the Royal U.K. Mint’s lousy annual silver bullion sales of 2.1 million oz (Moz) in 2014 (2015 World Silver Survey).

The present retail silver shortage (of certain products) that started in June is now in its fourth month.  While investors can still purchase 2015 Silver Eagles, it looks as if many dealers may have to wait until the 2016’s come out in January to acquire new orders for the coin.

CNT Depository Registered Silver Inventories Plummet

The CNT Depository held the most Registered silver inventories at the COMEX.  Here are the Registered silver inventory levels of the six COMEX approved vaults at the peak in April:

COMEX Registered Silver Inventories April 2015 (million oz = Moz)

CNT  = 29.5 Moz

Brinks = 20 Moz

JP Morgan = 8 Moz

Scotia Mocatta = 4.5 Moz

HSBC = 4 Moz

Delaware = 3.5 Moz

If we look at the chart below, we can see just how much the Registered silver inventories declined at the CNT Depository:

CNT-Registered-Silver-Inventory-092415

What is interesting about the CNT Depository is that it seems to function more as a physical delivery depository compared to either JP Morgan, HSBC, Scotia Mocatta, Brinks or the Delaware Depository.  Of the 25 Moz decline in Registered silver inventories since April, the CNT Depository accounted for 21.5 Moz, or 86% of the total.

CNT stands for Coins ‘N Things.  Coins ‘N Things first started out as a small retail coin shop in Bridgewater, Massachusetts and later moved into the wholesale market.  CNT Inc. continued to grow and According to Wikipedia:

In fiscal year 2011, the company became the U.S. federal government’s largest supplier of precious metals, with government gold sales that accounted for about half of the $3.8 billion in contracts to supply silver and gold to the United States Mint during the year.

With the huge increase in physical silver investment demand, the CNT Registered silver inventories have continued to fall significantly over the past several months.  This steep decline in Registered silver inventories at the CNT Depository is not taking place at the other COMEX vaults.

While Scotia Mocatta’s Registered silver inventories declined from 4.5 Moz in April to 3 Moz currently, the other four warehouses experienced moderate declines or additions.

Silver Product Shortages… Even With Three Times The Production Volume

SilverDoctors interviewed Tom Power, CEO of the Sunshine Mint back on Sept 7th.  If you haven’t listened to that interview, I highly recommend you do.  The Sunshine Mint is one of the largest silver mints in the United States.  They provide a good portion of the silver blanks for the U.S. Mint.

One of the interesting things Tom said during the interview was that the Sunshine Mint’s annual silver production level increased three times from 25 Moz in 2008 to an estimated 75-80 Moz this year.  We must remember, there was a huge spike of retail silver investment demand in 2008 when the price of silver fell from $20 to $8.50.  There were huge product delays and high premiums… much like the present conditions today.

However, this present silver product shortage is taking place at a time when the Sunshine Mint has ramped up its silver production volume three times its 2008 level.  And remember, this huge increase in physical silver demand is still from only 1% (or less than 1%) of the entire market.

For the folks who continue to regurgitate that “There is no real silver shortage until it hits the wholesale market”,… WAKE UP.  There has never been a wholesale silver shortage before.  So, when it finally occurs, it will be the FIRST TIME IN HISTORY.

Seriously, this is not something to wish for.  Which is why it’s important to continue monitoring the retail silver market as well as the dozen of Black Swans flying above.  If just one of the dozen of Black Swans lands, it could totally seize up the silver market in a way the world has never experienced before.

In my conversation with one of dealers who has been doing business for 30 years, they said this present precious metal buying situation is unprecedented.  Many of the dealers remarked that the amount of new buyers has picked up significantly during the recent surge in physical gold and silver buying.  These are not just small time investors, but included many new wealthy investors as well.

Also, what seems to be interesting is that the metal of choice by investors is silver, unless it’s not available.  Furthermore, large volume buying tends to be in the Official coins such as the Silver Eagle, Maple, Philharmonic, Kangaroo and Britannia… not the larger 100 bars.

Dealers told me the larger 100 oz bars were in short supply due to the fact that there are a smaller amount of companies that produce the larger silver bars compared to 10 oz bars or 1 oz rounds.

Setting The Record Straight On The Silver Supply vs Silver Product Shortage

There seems to be a difference of opinion about the present surge in physical silver demand.  Some investors and analysts claim there is “HYPE” in the silver market as this is only a production shortage and not a wholesale shortage.  Furthermore, others claim that while certain silver products are not available or wait times are 6-8 weeks, there are other silver coins or rounds that can be purchased.

This is quite true.  However, the important factor to understand is that most investors go after the WELL KNOWN product first and then switch to other products when availability is an issue.  Anyone who regurgitates that there is still plenty of silver to purchase fails to grasp the underlying cause of this recent surge in silver investment.

I spoke with James Anderson from JM Bullion and he sent this announcement from the largest precious metal wholesaler in North America on the only three silver products they are currently selling:

Largest-Wholesaler-Silver-Selling-Items

You will notice that the first delivery data for Silver Eagles is December 2nd (2+ months away).  The U.S. Mint normally stops selling 2015 Silver Eagles in December to switch over to producing the 2016’s.  This is why many dealers are no longer taking orders from the customers for 2015 Silver Eagles.  They don’t know if they will be able to get supply.

Again, many small and large volume buyers of precious metals are new to the market.  They decided to start buying gold and silver due to the upcoming crash of the broader stock markets or distrust in the government and the U.S. Dollar.  I believe both of these reasons are quite valid.  Moreover, it’s not a matter of if, it’s a matter of when the market finally crashes and the U.S. Dollar becomes seriously devalued.

We must remember, Peter Schiff and a few others were warning of the collapse of the Financial and Housing markets back in 2004-2007 on CNBC, Fox Business and Bloomberg.  I used to catch Peter Schiff discussing the coming collapse of the banking industry and the economy only to be ridiculed by the hosts or the other guests.  To them, Peter was just a Gadfly or a Doom & Gloomer.

Well, the entire U.S. Investment Banking system collapsed in 2008 along with the Housing Market as the economy was thrown into a severe recession.  If it wasn’t for the huge liquidity pumped out by the Fed in its Quantitative Easing Policy over the next five years,  the U.S. and world would have entered into the worst Depression ever.

So, for all the individuals that continue to state “THIS IS NOT A SILVER SHORTAGE” and blame others for creating hype or fear mongering, what happens if we finally do get the Black Swan from Hell?  What happens if the highly propped up broader stock and bond market finally cracks?  Again, this is not a matter of “IF”, it’s a matter of “WHEN.”

Investors need to understand the U.S. Financial System died in 2008.  While we still have large banks acting like everything is okay, they are a huge Ponzi Scheme.  All Ponzi Schemes come to an end…. it’s just a matter of time.  The huge spikes of retail silver investment demand starting in 2008 continue to indicate SOMETHING IS SERIOUSLY WRONG. 

Unfortunately, this upcoming collapse of the broader stock markets and financial system will be far worse than 2008.  The huge increase in overall buying of physical silver reflects the ongoing fear investors have that something is dangerously wrong.  This present surge of physical silver investment is taking place on top of huge increased buying since 2007:

Global Physical Silver Bar & Coin Investment1

Before the U.S. Investment Banking and Housing Markets collapsed in 2008, investors only purchased 4,712 metric tons (mt) of silver bar and coin (151 Moz) during the three-year period from 2005-2007.  Even though its been seven years since the collapse occurred, investors continue to by record silver bar and coin.  As you can see, silver bar and coin demand nearly quadrupled 2011-2013 to 18,419 mt (592 Moz).

Which means, physical silver investment demand is the largest growth sector in the entire silver market:

Percent Change In Silver Demand In Segments of the Silver Market 2007-2014:

Bar & Coin = +290%

Jewelry = +17%

Silverware = +1%

Industrial = -9%

Silver Bar & Coin demand continues to be the largest growth sector in the silver market regardless of the spikes in retail silver demand.  I spoke with an individual in the financial industry who knows the system is on its last legs.  He stated, “What product do you have to put 100% down, and not receive delivery for 6-8 weeks.. without impacting the price?”   This is why the premiums on certain products are going for $4-6 an ounce.

2015 Silver Mine Supply Is Down Compared To Gold & Copper

I published this graph on Australian and Canadian silver production in a recent article:

Australia-&-Canada-Silver-Production-2014-v-2015

I thought it was quite amazing that the 4th largest silver producer in the world (Australia) experienced a 30% decline in silver production Jan-Jun 2015.  When we add in Canada (11th ranking) overall production from these two countries was down 28% in the first six months of the year.

Now, if we include the top five silver producing countries, we have the following:

Top 5 Silver Producing Countries Jan-Jun Change:

2014 Jan-Jun = 8,213 metric tons

2015 Jan-Jun = 7,792 metric tons

Thus, Mexico, Peru, China, Australia and Chile experienced a combined 5% decline in silver production in the first six months of the year.  According to the data put out by Chile’s Cochilco, global silver production is down 2% in the first half of the year.  If find this surprising as the top five are down 5%.  Regardless, here is rate of change in Global production in the following metals:

Global Gold, Silver & Copper Production Jan-Jun:

2015 Copper production = +3.6%

2015 Gold Production = +3.5%

2015 Silver Production = -2%

As we can see, Global silver production is down compared to gold and copper.  I actually believe the estimated global silver production by Cochilco is probably overstated due to the fact that the Poland (ranked 8th) is only up marginally (1%), while the U.S. (ranked 9th) is down (3.7%) and Canada (ranked 11th) is down 20%.  In addition, global silver mine supply is down at a time when investors are purchasing record amounts of physical bar and coin.

If the U.S. and world suffer either a market crash or Black Swan event in the next several months, we will see the current silver product shortage extend to a point that it may never end.  If we do not get the highly anticipated market crash or Black Swan, then this present tightness in the physical silver market may lighten up by the end of 2015 or beginning of 2016.

However, investors who are trying to time the market crash to get into gold or silver may be quite frustrated when it finally comes.  Why?  I gather there are thousands of folks who are also ready to PULL THE TRIGGER.  Unfortunately, there may be very little silver available when the avalanche of buying arrives.

————————

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68 Comments on "BEWARE: What If This Retail Silver Investment Shortage Doesn’t End?"

  1. I placed an order online at silvergoldbull.com for some sunshine silver. Estimated delivery time is end of October.

    • randomGuy,

      Depending on the product, wait times can be 2 weeks to 2+ months. Again, investors go after the most popular products first and then purchase what has a shorter wait time or can be purchased right away.

      steve

      • And what is the probability of dealers going out of business? I can place an order and never get any silver.

        • eva,

          That’s why you need to make sure you are buying from an excellent source. However, I don’t think you won’t never get silver at this point… but who knows how things unfold in the future. At some point, I think folks who placed orders may not get delivery. But this is when the FAN HITS THE CRAPPER.

          steve

  2. 98% of the world population isn’t interested in gold or silver, or simply don’t care or are too stupid to understand what’s going on. The rest got into pm’s after Lehman. Since 2009 we all read about the collapse of the monetary system, and got into phyz, to see the paper price collapse year after year. Even today, most silver- and goldbugs look at the price of pm’s. First mistake of pm phyz holders is to measure their value in fiat money.

    The paper price is managed through tbtf trading desks from the FED, the BIS, Citadel etc, like ALL statistics nowadays, that’s why it’s called TBTF.

    This time is different? I think so. But it’s hard for the soft belly of the pm community to read ‘shit’ about physical silver and gold after being raped by the paper illusion, over and over.

    They have to understand that they own the ultimate hedge against their own illusion.

    When the shortage in physical silver shows it’s ‘ugly’ face; what about gold? What about wheat, steel, copper? What about company bonds, state bonds, bunds, JGB’s, treasuries? What about the f*cking collateral chain? What’s with supply lines, energy & communication hubs?

    Fiat money is based on trust, the more trust vanishes, the more owners per ounce of silver on the Comex, the more trust vanishes, the more owners per ounce of gold…..

    This time is different. Nothing new under the sun though; the pendulum does it’s work, for thousands of years.

    And counting.

    • houtskool,

      Excellent comment… couldn’t agree more. The problem with many of the folks who think this RETAIL SILVER SHORTAGE is no big deal, is that they have been boiled slowing like a frog in the pot by the Fed and Central Banks. Sure, the Fed and Central Banks have proved the Precious Metal Community wrong on the timing of the gold and silver reset, but when it finally comes… it will be BIGGER and FASTER.

      Interest rates can’t go up or the $18+ trillion in U.S. Debt makes the annual interest payment head toward the moon.

      steve

      • While its true the interest payments would soar- it really isn’t a problem to one running a ponzi scheme. There is already $19 Trillion that can’t be paid, hundreds of trillions of dollars in unfunded liabilities and yet there isn’t a default.

        The US pays off itsr debts with the principal from the newly issued bonds – Ponzi 101.
        If they need higher rates to attract more bond sales, they can cover the extra interest payments from the newly issued bonds.

        • The leveraged interest rate swap derivative however are loaded and primed well enough to leave a crater.

        • It’s worked so far but won’t work ad infinitum.

          “The US pays off itsr debts with the principal from the newly issued bonds – Ponzi 101.
          If they need higher rates to attract more bond sales, they can cover the extra interest payments from the newly issued bonds.”

          Only while there is a buyer for more and more of the debt [bonds].

        • smaulgld,

          True, the FED & U.S. Treasury can continue to print bonds to cover the interest or debt, however many other countries whose currencies are valued against the Dollar would not take it to kindly. Furthermore, while the FED may be able to print bonds to their heart’s desire, they can’t print barrels of oil.

          The coming collapse of U.S. oil production will mortally wound the Dollar. Again, we may see U.S. oil production down by 30-40% by 2020 and 60-70% by 2025.

          steve

          • “Again, we may see U.S. oil production down by 30-40% by 2020 and 60-70% by 2025.”

            Steve, I guess that is one reason to buddy up to Iran, we want their oil. And there is always military action to “leverage” oil from other foreign sources

          • David,

            Agreed. I believe this is the reason we are seeing the U.S. Govt destroying many oil producing countries. If Libya is totally destroyed, including economy and infrastructure, then its people won’t need the oil. Less domestic consumption, more for America to import. So on and so forth.

            However, I believe Russian & China have now checkmated the U.S. Govt by both putting military forces in Syria.

            steve

        • Rain can not be forever.

  3. I have been able to buy large amounts of silver Eagles at a local coin shop. They have had them in stock !! I’m assuming they had purchased them in advance, but I’m wondering if there are counterfeit ones being put out there. Should we be concerned about that and checking what we buy?

    • If you have a known legitamate sample, you can place a dingle ply of (kleenex for example) tissue over it and the questioned piece. They should have the same hue of “whiteness” showing through. I seen this done with clad coins vs silver coins. Plated panda-fakes vs authentic silver pandas etc. It works, and sound of the coin is what I use too.
      (The only other way it wouldn’t work is if the metallic content is the same.)

    • “I have been able to buy large amounts of silver Eagles at a local coin shop. They have had them in stock !! I’m assuming they had purchased them in advance,”

      The local coins shops are buying them from customers who are selling them for cash. Sometimes estate liquidations.

      A coin dealer in my area is buying ASE’s from the public for $16.19. A large online dealer is selling new ASE’s for $21.24 [$20.84 for quantities 20-99 which I would guess most purchases fall]. The buyback price from this online dealer is $16.90. So as long as the retailers can get ASE’s the spread is great for them.

      Personally I wouldn’t pay that spread when other sovereign coins are over $3 less.

  4. Great work Steve

    I have been telling people that a shortage doensn’t mean there is NO silver to be found but rather high premiums, product delays, limited product availabilty.

    Failing that, I tell them the reservoir doesn’t have to be bone dry before there is a water shortage.

  5. @ Smaulgld, “Failing that, I tell them the reservoir doesn’t have to be bone dry
    before there is a water shortage.”

    I agree, but in the case of silver there is no ‘supply – demand mechanism’ that gives
    a signal for a shortage. SRSroccoReport does a good job at giving us some facts.

    What could happen is that Industrial Users of silver will get ‘late supply’ (no physical) and
    as a result they cannot make their products: sunpanels, phones, tablets, computers, bearings,
    electric cars and so on. That can cause a panic and a HUGE spike in real silverprices.

  6. Great article Steve,
    I have stacked a lot silver over the last 8 years. But thinking about the possibility of a imminent shortage in the wholesale market with defaulting futures markets makes me really nervous. In case of that life will change for everyone living on this planet, for 98% it will get worse or end. And even for people with a lot Metal it won’t be a nice experience either. Times are interesting now more than ever.
    Fasten your Seat belt!

  7. Johny Come Lately | September 25, 2015 at 4:44 pm | Reply

    Great Work! I’ve been stacking since 2011 and my friends laugh. I keep trying to explain to them that the silver price is $20 Canadian and if you add in the premiums you are looking at between $24 – $30 CDN. I’m starting to turn the corner and make a fiat profit on my position. They look at me googly eyed.

    One thing though, I buy a lot from Kitco. I walk in at the trading desk and walk out with metal in hand. No waiting–that’s what I like. I read an article by Bill Holter titled “Is Your Pool Full?” It leaves me wondering if I’m walking out of Kitco with other people’s pooled silver? When people “call in” their silver from their pool accounts, will there be blood?

  8. With the rates of decrease in production happening, would those figures reveal the different qualities of the mining industries in those countries? Say qualities in ores, financing, distribution etc.?

  9. I don’t know if I’m understanding the announcement about the JM Bullion’s 3 silver products availability. I just visited their site and they have many silver products to choose from, they are in stock and I’m able to add large amounts to the cart.

    • Walter,

      “I spoke with James Anderson from JM Bullion and he sent this announcement FROM THE LARGEST PRECIOUS METAL WHOLESALER in North America on the only three silver products they are currently selling:”

      I read it that the largest WHOLESALER [not the retailer JM Bullion] is currently selling three products. Other wholesalers are selling other products than these three [and possibly these also].

  10. I’ve received shipments of American Eagles and Canadian Wildlife silver from APMEX recently … no problem and no delays.

    • Deric,

      AMPEX is an exception to the rule. APMEX is one of the 11 Authorized Dealers. They get to purchase directly from the U.S. Mint and then get to sell directly to the public. Most other Retailers have to buy from the Authorized Dealers.

      steve

  11. Silver Eagles are attracting a 42% premium in the UK for 500toz.

    Will the US Mint sell as many ASEs this year as it did in 2014? If it is not significantly higher this looks very much like a real shortage of silver than a productive capacity issue as productive capacity was there last year. Sunshine Minting products are also likely a good indicator.

  12. Well for me if there is stress in supply with at best maybe 10% of investors even looking at silver…what happens when the other 90% realise they are nekid..you know, no clothes on…hmm ..panicking yet mr schmo…JMO

    • Red,

      If you are in the U.S. it is about 1-2% of investors that own more than a few old silver coins in the desk drawer.

    • The U.S. Mint only produces enough Silver Eagles each year to provide about ONE to each US household. I guess dad and the kids could then fight over that one. Or wait a few years and mom, dad, and the kids would each have their own.

      The point is that an incredibly small percentage of Americans care anything about silver. This is not a store of value that the masses will ever use. At best you will see Americans going, “Hey, my grandpa bought some of those when you could get them for under $20 apiece. Now they are $500. Lucky bastard. I’m saving up to buy one from him later this year.”

      Mike

  13. I have been prepping and stacking for several years. I use JMBullion and they have been great. I like the 1oz bars. Johnson-Mathay was the first to sell out… then the Sunshine bars got hard to get.

    To my surprise… The Fed has been able to keep the economy duct-taped together for much longer than I thought possible. I am an old fart with a degree in Finance… and I had to toss my economic books out years ago. The only thing bigger than the debt is the lies.

    Everything is a bubble… and when one pops… they are all going to pop. Do not stack out of greed… Stack out of survival… and pray.

  14. Here in Australia you can’t buy Eagles that were selling for A$30. They are saying the Ozzie dollar could fall to 50c US. Which would make eagles A$40 without the price going up. I bought my eagles when the Australian dollar was worth US$1.07.
    It’s not just silver going up that matters it is also currencies going down in relation to US dollars.

  15. Steve

    Why doesn’t the US mint go and buy Silver on the Comex and take delivery??

    • For one thing the U.S. Mint wants ready-to-press blanks with recent certified assay rather than large bars.

      For another the government is not going to be an agent standing for delivery of real metal on the COMEX. That erodes the illusion government wants to maintain about PM’s, their fiat currency, the stability of the current financial system, and the commodities futures market’s role in the whole scam.

    • The government subcontracts all sorts of activity. I see no issue with that. They are simply hiring companies that already have refining expertise and equipment to make the blanks. If they did this themselves I suspect Eagles would cost more to produce and they would not be selling them to authorized dealers at $2 over spot.

      Mike

  16. Steve, you described the current situation well. But I am puzzled when you make negative comments about those who say there is a retail production shortage and not a silver supply shortage. The Sunshine CEO stated exactly that in his Sep. 7 interview. We are seeing high demand for retail silver products and the production of these items is not keeping up. We are not seeing difficulty in obtaining 1,000 oz bars. Clearly this COULD change with a Lehman moment. What you will see then is even more demand for the retail products and you will see 1000 oz bars dumped on the market like we did in 2008. At that time all commodities were dumped.

    Also keep in mind that silver has been falling in 2011 just like gold, copper, aluminum, and even agricultural commodities.

    So this is not hard to grasp. The retail products account for 22% of mine supply as you have stated. Demand spikes of these retail products simply are not impacting the silver price much at this time. I expect it will in the future, but we are not there yet. 22% just isn’t enough.

    Mike

    • Mike,

      You misunderstand the point I was trying to make. I realize this is just a retail shortage. However, some analysts or commenters are being adamant that those who say there is a shortage are guilty of propagating “HYPE”. This is where I disagree and become a bit frustrated. So, no… I don’t care if someone points out this is a retail shortage and not a wholesale shortage, because that is what I have been saying all along.

      By the way… when we do finally get a shortage of 1,000 oz bars, then it’s too late to do anything about it. So, waiting for a shortage in the wholesale market is like waiting for the Titanic to sink before doing anything… A VERY SILLY POINT OF VIEW.

      Furthermore, your notion that the huge spike in SILVER BAR AND COIN over the past several years is just taking up the slack of increased mine supply… is incorrect. Why? Haven’t you been keeping up with the annual supply deficits I have been writing about and discussing for several years?

      Over the past decade, the total cumulative silver supply deficit is nearly 1 billion oz. This is not chump change. The overwhelming majority of that deficit occurred due to the massive increase of physical investment demand. So, now… the supply-demand situation is totally out-of-whack.

      So, the $64 trillion dollar question is… how much of that unreported above-ground stocks are remaining to fill in the void? I think one hell of a lot less than there was 10-15 years ago.

      Lastly, the value of gold and silver will switch from a commodity based pricing mechanism (supply & demand) to a high quality STORE OF VALUE due to the peak and decline of U.S. and global oil production… on top of a rapidly falling EROI – Energy Returned On Invested.

      steve

      • I agree. As a buyer of retail products you just have to sit on the sidelines right now. Paying $5.49 over spot for monster boxes of Silver Eagles doesn’t make sense. You would only do this if you were fairly certain that NOW is the impact moment. But I don’t think it is. Nothing is happening to change the trend in the cost of a 1,000 oz bar of silver. Prior to July was a good time to buy when SD bullion had monster boxes for $2.25 over spot with free shipping.

        APMEX is still taking delivery on monster boxes from the mint at $2.00 over spot. They are then turning those around on their website for $5.49 over spot. That’s $1,750 you have to pay APMEX for EACH monster box they make available to you. I’m no fool. 🙂

        Mike

        • Mike,

          Trying to tell whether this will turn into the “SILVER SHORTAGE FROM HELL” is a tough one indeed. People do not have to purchase Silver Eagles at $5 or $6 over spot as they can purchase 2016 Kangaroos or Britannias for a few bucks over spot. In addition, from some of the dealers that I talk to, some of their clients don’t really give a rats azz about the price… they just make their 6 or 7 figure purchases every two weeks. You know, folks with that silly money.

          Again, AMPEX is an exception to the rule as they are one of the 11 AUTHORIZED DEALERS. They buy directly from the U.S. Mint and then get to sell directly to the public. I believe they are one of the few with this ability. So, they can offer quicker delivery and lower premiums.

          Now, WHAT IF THIS TURNS OUT TO BE THE SHORTAGE FROM HELL as the situation in the markets gets out of hand in the next 2 months? Would anyone care if they paid $6 over spot when they at least got silver?? As I have mentioned several times, AIG stock went from $1,150 in 2007 to $30 in 2008. Things can change on a dime. To be complacent and wait to purchase silver may turn out to be a lousy investment decision when there are a dozen BLACK SWANS flying above.

          steve

        • At 5-6 dollars over spot you’re still paying a paltry $21 for an Oz. Clearly buying it cheaper is a better deal, but when TSHF people will gladly throw fiat toilet paper in mass quantities for real money. So says the wizard.

        • Mike,

          “Más vale pájaro en mano, que ciento volando”

          Bonifaci

  17. Simply stated the level of mined global silver supply is less then what it was in the past.
    Along side of no large reserve stockpiles held by governments any longer. They are gone.
    Most mined silver is a by-product of mined base metals, zinc, lead, copper, etc. Which are listed as commodities and are suffering a worldwide downturn in demand.

    Mines are closing or are being put into hibernation, further reducing supply.
    CAT has just announced that their world retail sales have suffered 33 months of straight negative growth, and a further reduction of their workforce.
    Whereas the worlds largest handler of used heavy equipment ‘Richie Bros. Auctions’ are having a banner year, with their first half net profit up 65% over last year! What this says is the mining industry is in dire straights, either buying used or selling off equipment.

    Bringing production back online is time consuming and expensive. These sources of supply in the past, will require capital expenditure and a lengthy period to reestablish their level of production in the future. The current physical silver shortage will persist without mitigation for some time to come.

  18. Steve,

    I really appreciate the work that you do in the precious metals space. You are one of the few clear voices still out there that doesn’t rely on over the top predictions and conspiracy chatter to get your point across. Your fundamental analysis particularly regarding silver is excellent and I always come away from your articles feeling as if I have learned something. Keep up the good work.

    With that being said….I have a question for you. One of the counter-arguments I have heard regarding rising silver premiums is that the dealers are expecting a big drop in price going into the end of the year. For that reason they are raising premiums to discourage sales as they would rather sit on their inventory versus selling it at a loss. The argument doesn’t make a lot of sense to me as I would think they would be doing the opposite if they were expecting a drop in price. Also, how long can they sit on inventory and remain in business? You know a whole lot more than me about the silver market so does this make any sense to you?

    • Anthony,

      Appreciate the positive comments. One of the things I try to do at the SRSrocco Report is report on new data and fundamental changes in the market. Investors want to know the facts so they can make up their own mind. While the markets are rigged and manipulated, I see no need to continue regurgitating this mantra as a focal point of my work.

      When I spoke to James Anderson at JM Bullion (formerly in charge of media at GoldSilver.com), he told me how the largest Wholesaler in North America is only selling three products. Now, as you notice from the graphic in my article, they were charging some pretty hefty premiums. If they had additional product, they could have also sold it with high premiums, but they were only selling three items.

      We have to remember, the wholesalers (especially the largest) sell to many dealers. These retail dealers have been buying a lot of stock from these wholesalers since June. Thus, it makes sense that the wholesaler is out of stock of many items because the actual mints (public and private) are backed up. I believe the CEO of BullionStar stated that they had a good inventory of certain products, but when they ran out, they were probably not able to acquire additional stock because their wholesalers were wiped out.

      When I asked James about the Silver Pandas, he laughed. He said when he spoke with the traders at the wholesalers, that they joked how incompetent the Chinese Mint was. Seems as if they don’t hedge their metal prices. So, when they started selling Silver Pandas at the beginning of the year for say $20+, and then the price of silver falls $2-3 bucks, they don’t lower their price for the rest of the year, because the Chinese Mint won’t sell them for a loss… LOL.

      James went on to say the Mexican Mint that produces the Silver Libertad is even more incompetent than the Chinese Mint.

      I don’t believe the majority of wholesalers are holding back silver products. Again, they could raise their premiums. And most of them have successful hedging programs.

      steve

      • Awesome Steve, thanks for the feedback. That makes perfect sense regarding the Chinese Pandas. I had always wondered why the premium on those is so excessive. I understand that they change the design every year so there is a bit of semi-numi appeal to them but that still doesn’t warrant the huge markup.

  19. smaulgld, it’s worse. They are monetizing stocks as we speak. The BoJ is buying stocks all over the world, with printed money, because they know they have to diversify. It’s a worldwide circlejerk; Japan has to be bailed out when it goes down, Apple stock would go down severely and take the rest with it. China is dumping treasuries in large quantities.

    Next up is monetizing student loans and fracking oil companies. Diminishing returns of central bank policies is there for all to see, and, as the lender of last resort they are, they are approaching endgame territory.

    What in hell is buying stocks with freshly created fiat money? Owning companies with employees, customers and blind 401k suckers with currency out of (thin) air is pure desperation.

    Fiat money and 7 billion sheep though is a combination that leaves enough room to play with. For now.

    Shit will get worse, first slowly, then suddenly.

  20. i’ve seen 4+ week delays before. the guy at my local coin shop, run/co-run (?) by Ed Steer, said that back in 2011 delays were 10+ weeks on their supplier’s end

  21. Steve, when dealers experience long delays before they receive delivery, do you know how the transaction typically works? Surely the dealers are not making payment months in advance. I imagine the contracts vary, but what is the typical arrangement? I ask because I want to get an idea if they are purchasing promises for future delivery just like retail customers sometimes do. SD Bullion and APMEX are currently, and have in the past, taken money for future delivery. The result is that the customer thinks they have paid for and own silver. Their demand for silver is then removed from the market, yet no silver has changed hands.

    Mike

    • Mike,

      It depends on the Dealer. Doc from SilverDoctors told me that when you see 3-4 week delivery times, this is bought and paid for silver. For example, Doc purchased those Silver Eagles from the wholesaler 4-6 weeks ago and will finally get delivery in 3-4 weeks. When a customer of Doc’s purchases Silver Eagles today, they will receive the Silver Eagles Doc purchased 4-6 weeks ago, but won’t get delivery for another 3-4 weeks.

      Some Dealers are selling Silver Eagles to customers without having coins coming in the pipeline. They are just hoping that they will receive their 2015 Silver Eagles before the U.S. Mint stops making them.

      We must understand each Dealer and Wholesaler are on different waiting periods and etc. Even though some wealthy buyers could go to another Dealer if their Dealer is quoting 2 month wait times, the buyers trust their Dealers (maybe for 10-20 years) and will not go to another Dealer even though they could get product.

      Which is why two of the Dealers I spoke to stopped taking orders for 2015 Silver Eagles, because their wholesalers can’t promise them delivery until Dec 2nd or later. Thus, some Dealers have more stock or have purchased more Silver Eagles in the past and have them coming. Again, each Dealer has different circumstances.

      steve

      • Who typically holds the money during the waiting period? Is everyone getting paid in full at the time they are promised future delivery? Is so, then that puts the money in the hands of the US mint many weeks before delivery.

        Mike

        • I don’t trust dealers that take money today for something they don’t have in stock right now. Take a look at what happened to Tulving and other metals dealers that were taking customer money for product they did not have on hand. If you really think about it that is the same thing and shorting. Not a good business practice in my opinion.

  22. It is exactly the same as naked shorting. It is ironic that people who have figured out they need to hold physical metal are willing to purchase yet another promise.

    Mike

    • 100% agree

      • PSLV currently has a premium of just over 2% of NAV. I understand well the benefit of actually holding the metal, but people need to realize that we have seen premium spikes on retail products so many times in the past. It is always temporary. At the moment you will have to burn through nearly 30% of your capital just to acquire the physical metal now. Or you can buy PSLV and then trade that for coins at a time when premiums are lower.

        Or you can let someone convince you that all paper will burn in tonight’s blood moon and only physical silver will be left standing next week. But that just won’t be true. 🙂

        Mike

        • I disagree. I thought you were talking about people who place orders and pay for silver to be delivered.

          From your second message it seems you refer to silver itself.

    • Exactly. Anytime I see “anticipated delivery date….” I go to another site.

  23. Don’t take any perceived shortage at the Perth Mint as an indication of tightness in the market, because the Perth Mint at this time of the year are always tight with product, purely for the fact that there is seasonal demand around this time of the year, every year.
    And the Perth Mint struggles to keep up, purely because of their own manufacturing constraints.

    • Peter,

      Apparently it isn’t purely becasue of the season, it is also because silver production is down about 30%, unless they have easily been able to import that amount of decline without delays.

  24. Not energy related, but this podcast from jan 2015 summerizes what’s going on in the paper versus physical markets:

    http://www.safehaven.com/article/36534/lbma-data-points-to-gold-and-silver-default

  25. Silver Eagle premiums drop 30 cents at APMEX. It’s like a broken record. When there is a run on these coins they first sell to people who will pay most any premium for the privilege of buying some silver, then they drop the price. It will continue to come down. For the past two weeks there were people paying over $20 each in monster box sizes. It just boggles the mind that this takes place, because it is nearly guaranteed that we will be able to get them for less in the weeks ahead.

    Yes, yes, you tell me the world could come unglued between now and a few weeks, and that the price of silver will do the opposite that it did in 2008/2009. Instead of dropping it will skyrocket.

    Silver is a great investment at these prices, but let’s be real about it.

    Mike

  26. The black swan arrived.Yest.But to the minerstocks.It’s unbelievable.At this most worse level, they drop 10-15% again
    That’ s the next step in direction south.

  27. I paid a $2.49 premium on silver eagles when I bought monster boxes when silver was priced at $40. It’s not much of a stretch to say I am happy to pay a $5.49 premium and get my silver for $20. After all it’s having silver now rather than not being able to buy some at any price when and if there is none available to purchase, that what’s important.

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