More hearsay about physical demand

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Gold

Gold is a little bit backlogged. The premiums are slightly elevated. Products commonly traded, such as gold maple leafs, American eagles, and refiner one-ounce bars are 2-3 weeks out. And for some of my colleagues further away in the supply chain, 4-6 weeks out. The premiums are up to maybe $5 to $15 dollars an ounce over normal.

Silver

Silver is another story. The demand for silver has completely overwhelmed existing inventories and the ability of the mints and their refiners to produce more product. The other big mystery is: how much more silver is there to make product out of? Will the buyers be able to keep the pressure on until the price of [physical] silver and paper silver have to move up just to return the market’s equilibrium? Right now, 100-ounce silver bars, which a few months ago were trading dealer-to-dealer around melt or a little over, are now 75 cents to a $1 an ounce – not retail, our cost – and 4 to 8 weeks out. 1-ounce and 10-ounce refiner product used to be 30, 40, 50 cents. Now it’s $1.10-$1.25, our cost, 2-4 weeks out. Silver maple leafs, our cost from the prime American distributor of the Canadian Royal Mint today: $3.75. It was $1.70 a month ago. 3-4 weeks out. Silver eagles, normally a little over $2, they are $5 if you want them live; $4 if you want them in 4-6 weeks.

These premiums are the physical market saying, we are willing to pay this for real silver right now. Whether the suppliers can meet this demand and bring the premium down, we’ll see weeks from now. It is much different this time than it was in the past, in that the drop in price is bringing in buyers rather than sellers. It used to be that a rally would bring in the buyers. So we have had an important change.
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GoldCore said:

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Premiums for gold and silver bars have jumped higher all over the world. They have surged to multi-year highs in Asia. Reuters reports overnight that premiums are surging due to "strong demand from the physical market, which has led to a shortage in gold bars, coins, nuggets and other products."

Shortages of gold and particular silver coins and bars is not confined to the small coin and bar market and there are also supply issues in the larger bar market with kilo bars being increasingly difficult to secure.

Swiss refineries are struggling to meet global demand for refined gold bars. They have been cleared out of their stock of kilo gold bars – the preferred form of gold bullion amongst many store of wealth, affluent buyers in Europe and Asia. Buyers have been told that they will have to wait until late May prior to receiving delivery on paid for product.

Shortages are most prevalent in the silver coin and bar market where premiums have surged.

Silver coins and bars can now not be bought from the largest bullion dealers in the U.S. who have been cleared out of stock in recent days. Unlike after Lehman Brothers where there were shortages and delays of 3 to 4 weeks, there is no guidance being given as to when certain gold and silver coins and bars will be available again.

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Australia’s Perth Mint, which refines nearly all of the nation’s bullion, said that demand has jumped to the highest level in five years after prices plunged, with the factory kept open through the weekend to meet orders.

There’s been strong interest, including from the U.S., with buyers speculating that the metal will rebound from the decline, Ron Currie, sales and marketing director, said in a phone interview from Perth.
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“We haven’t seen levels like this since the 2008 global financial crisis,” Currie said yesterday. “Compared to March sales, April sales have doubled or tripled,” he said, without providing figures.
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“We worked all weekend to keep the factory running to make more stock and that was only to fill orders,” Currie said from the facility founded in 1899. “We’re being inundated with people buying products.”
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Hong Kong retailers report they were swamped over the three-day May Day holiday by tens of thousands of mainlanders in search of one thing: cheap gold.

After the recent slump in gold prices, Hong Kong's already healthy community of gold shops, mainly in its traditional tourist areas, has increased, with a flurry of new openings. But traders report they have been overwhelmed by the mainland shoppers.

Gold prices in Hong Kong are lower than in the mainland.

On Wednesday in Causeway Bay there were long queues outside shops, which blocked the popular shopping area's narrow streets and sidewalks.

"It's cheap, so what else do you need to know?" said Wang Zhongxin, a shopper from Shanghai as he left one Chow Tai Fook outlet.

He had spent around 30,000 yuan ($4,760), or twice the monthly average wage in Hong Kong, on three gold necklaces and a couple of rings. He said he wanted to buy bullion, but they had already sold out.
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