Premiums rising for physical silver (and gold)

pmbug

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Bron says all is well:
...
Of course PSLV is backed by physical metal so how can we explain the fact that PSLV has not had one physical redemption since it listed and is only trading at a very small premium to net asset value if the “silver market is seizing up”? Obviously because wholesale players have no problem acquiring 1,000oz bars and thus don’t want to pay the costs of redeeming from PSLV. ...
More: http://research.perthmint.com.au/2015/09/14/who-is-the-player-and-who-is-being-played/
 

pmbug

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I agree with Turd that the Comex numbers are largely meaningless which is why I stopped paying attention to them some time ago. I really don't care for the personal attacks and haughty "gold bugs are idiots" attitude that I see from Bron, KD, Trader Dan, et. al. on the one side and similar and opposite tin foil hat shrieking I see from the other. If they have some relevant facts, information or arguments to present to people, it can be done without the insults. $.02
 

11C1P

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ASE's right now are carrying a ~$5 premium, CSM's are a bit better at ~$3.50 for the best prices shown on compare silver prices dot com.
 

Christian

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It is important to know that acquiring Gold will allow our savings not to be devalued, we are talking about a cryptocurrency that allows the acquisition of the precious metal.
 

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* {super} bump *

Silver is dirt cheap right now. People are apparently buying physical again. The temporary sell out of Silver Eagles has sparked a jump in premiums on silver across the board.

I read this morning where someone claimed that premiums over spot for 90% silver dimes (Roosevelts) were $1.99 while the premiums for 90% silver quarters (Washingtons) were $0.99 at Apmex and that this might be indicative of supply constraints in the wholesale/dealer market. But when I checked just now, I see the premiums for both at $1.99.

Either the initial report was mistaken, or Apmex updated their pricing on the quarters within the last 24 hours or so. Either way, if the spot price of silver stays this low, we might see junk silver becoming difficult to source once again.

Ah... memories:

... 90% silver however does seem to have a high premium - $5.99 /ounce over spot.
 

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Hearing more rumors about tightening supply in the wholesale market for 90% silver. 90% silver is the canary in the coal mine with respect to the physical market IMO. They don't make it any more and what little supply exists that actually gets traded around disappears when the public gets serious about buying silver (as we experienced circa 2010-2011 when silver was heading to $50/oz).
 

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* COVID 19 bump *

I'm seeing a lot of online metal dealers warning of long shipping times due to large order volume.

Some retailers (Provident, JM Bullion) seem to running out of stock on 90% silver.
 

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Posted on March 13, 2020

We wanted to provide our customers with important updates about our company, including a new temporary $299 minimum order, as well as the overall state of the industry.

Over the last few weeks, we have seen record order volume, with yesterday being our largest sales day of all time. We are on pace for another record day today. As a business, we are doing everything we can to keep up, but with a 3-5x increase in order volume, we are unable to answer our phones and ship orders as quickly as usual. You can expect temporary shipping delays of 5-10+ business days while we scale up our operations to satisfy this unprecedented level of demand.
...
The increase in demand is also beginning to strain supply chains, with the US Mint announcing yesterday that American Silver Eagles have temporarily sold out. We expect to see ripple effects at other suppliers and mints in the coming weeks. ...
https://www.jmbullion.com/jm-bullion-update-3-13-20/
 

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Dear TPM Clients,

As you all know, the effects of coronavirus (COVID-19) have accelerated what is now a precipitous decline in equities. Access to liquidity in the markets has become an issue, and all asset classes are being affected - including precious metals. This historic turn of events has created a demand shock in the physical precious metals industry. Following years of slow to moderate sales following the Greek crisis in 2015, the entire industry has been cautious to build large inventories. This includes the United States Mint, which experienced a terrible production decline of Silver American Eagles, down to only 14.9M ounces minted in 2019.

As of this morning, the United States Mint is out of Silver American Eagles, and the backlog is tremendous. To ramp up manufacturing production to meet demand will likely take weeks, if not months. If the US Mint is forced to suspend operations due to coronavirus, it remains unclear how drastic the impact will be to the supply chain. Making matters worse, it now appears that imported supply from Europe is going to be cut off. As it now stands, other products are being bid up to help fill that void.

The effects of these events will cause an increase in premiums on the sell side as well as the buy side. We have begun raising premiums on products to compensate for supply/demand constraints. To put it simply, inventory is getting more expensive for us. Additionally, we will be raising our buy back prices aggressively on popular products to help offset demand.
...
https://www.texmetals.com/news/important-update-3-12-2020/

 

Unobtanium

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Also seeing a couple of online dealers calling the demand "unprecedented".

Below is a statement from Goldcore CEO:

Note that he states that premiums will start increasing for those *selling to* Goldcore. Did that happen back in 2008-2011 on the "sell to dealer" transaction?

Important Notice Regarding Our Services At This Time Of Unprecedented Demand
17, March
GoldCore remain open for business and we like most mints,
refineries and dealers continue to experience record demand.

In light of the unprecedented demand for precious metals and significant disruptions to logistical networks as borders and nations are closed in national lock-downs, we have taken the following decisions and actions:

◆ All new order deliveries will be held in our secure vaults and delivered as soon as is feasible when transport systems return to normal. There may be delays in the delivery of existing orders
◆ Our minimum orders have been increased to $5,000
◆ Maximum credit card transactions have been reduced to $10,000
◆ Silver bullion coins are currently unavailable for delivery or storage.
Clients may purchase silver bars (100 oz and 1,000 oz) in Secure Storage and switch to silver coins when they become available again. Bar availability is becoming limited
◆ Online trading may be suspended in the coming days and be replaced by clients having to trade on the phone
◆ We will only be buying coins and bars from clients who have their assets stored in GoldCore Secure Storage with us for the foreseeable future
◆ Globally premiums on gold and silver coins and bars are set to increase on the buy and sell side
◆ We will buy silver bullion coins at 10% over spot and silver bars (100 oz) at 7% over spot and silver bars (1,000 oz) at spot. This is subsequent to change in the coming days.

Our offices have been closed to visitors since last week but our team are working hard and are here to assist you with your precious metal needs.

We are sorry that we have had to introduce these measures and we hope that they are short term. They are due to significant demand and increasing logistical, financial and systemic challenges in the EU and globally that are beyond our control.

On behalf of all the staff of GoldCore and myself, we wish you and your families good health in these trying days.

Best regards,

Stephen Flood
GoldCore CEO
 

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...
Note that he states that premiums will start increasing for those *selling to* Goldcore. Did that happen back in 2008-2011 on the "sell to dealer" transaction?
Yes. Premiums rose on both the buy/sell sides of a deal. Of course dealers made a vig, but it's a business. It was especially noticeable on products like 90% junk (which no one is making anymore, so ...).
 

Unobtanium

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Bug, didn't you keep a spreadsheet on premiums back in the 2008 era? Might be interesting to do a spot check see how this eras premiums are comparing so far to back then.

And do you recall if the "sell to" premium rose to as much as 10% on silver eagles?
 

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Yeah, it's been years since I kept up the premium watch, but I'll have a look tomorrow (don't have time right now) and update the old thread.

I recall that both the buy and sell to premiums on ASEs rose disproportionately to all other forms of silver as the US Mint couldn't keep up with demand and dealers were desperate to shore up inventory to take advantage of buying demand. The US Market prefers ASEs in a crisis (at least, it did circa 2008).
 

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...
The demand experienced industry-wide over the past 5 days has been unprecedented. This is worse than Y2K, 9/11, or the Great Financial Crisis. It is the speed at which demand spiked (seemingly overnight) that has crippled the industry. Volume is up over 10x (in some cases much more) in a matter of days. This has strained customer service, logistics, and - relevant to this article - supply. The industry is built for elasticity. We are used to big spikes in demand. We can handle a 1 or 2 standard deviation move. We can't handle a 5 standard deviation move in 5 days.

Distributors sold out of stockpiles in 48 hours. Dealer inventory disappeared immediately. ...

To accommodate for depleted inventories, the distributors place desperate orders with mints, which are caught flatfooted, and immediately attempt to ramp up production. This requires sourcing raw materials and beefing up staff. Since a 1,000% output is impossible, the mints create allocations to distributors which are estimated deliveries tied to production (but not certainties) and represent only a fraction of what they need. The distributors forward sell this expected (but uncertain) volume to dealers, and make up any shortfalls by bleeding into expected allocations which are even further out in time. In normal times (i.e. no National Emergency) the allocations are tenuous at best. During a time of rising civil shut-ins, the distributors are selling future production at historic premiums with unknown delivery dates. That is where we stand today. All production from Europe is entirely cut off at this point, which compounds the supply shortage dramatically.
...
https://www.texmetals.com/news/demand-shock-the-forces-behind-rising-premiums/

I think he's slightly overstating the issue. If dealers were as desperate as he claims, they would be raising their "buy from the public" prices/premiums too (which they might have in the last day or two since I last checked around, but as of my last survey, it wasn't the case).
 

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The last time I updated my spreadsheet on Apmex inventories and premiums was roughly 7 years ago (found here).

I was shocked by what I saw this morning:
  • 10 ozt gold bars - Zero inventory. Few items offered for "pre-sale" on expected future inventory. Premiums ranged from $47.8 to $97.8 over spot
  • 1 ozt gold bars - Zero inventory. Few items offered for "pre-sale" on expected future inventory. Premiums ranged from $50 to $80 over spot
  • 100 ozt silver bars - Zero inventory. Few items offered for "pre-sale" on expected future inventory. Premiums ranged from $4.49 to $5.49 over spot

Unfortunately, my spreadsheet only tracked inventory over time. I have premiums recorded for my last update which was circa January 2014. Premiums now are much higher across the board.
 

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More and more refineries, mints and fellow bullion dealers are suspending their operations indefinitely. At BullionStar, we are facing significant operational and stock inventory challenges. There’s an acute shortage for particularly Gold Coins, Silver Bars and Silver Coins. For Gold Bars, some of the private refineries are still open and take orders but have long backlogs.

What does this mean for price premiums?

Due to the paper spot and futures precious metals markets no reflecting the demand and supply for physical precious metals, premiums are high and are fluctuating a lot.
...
In a scenario where the paper spot market doesn’t rally to balance physical demand and supply, physical precious metals will no longer be priced based on the spot market. Bullion dealers will stop pricing metals. Many have already done so by suspending the accepting of orders.

When preferences in the derivatives paper spot and futures markets, which are unbacked or only partially backed by precious metals, differ from supply and demand in the physical market, prices disconnect.

The window for purchasing physical precious metals with fiat currency is quickly closing. At this time, it is still possible to settle physical precious metals purchases in fiat currency with some bullion dealers. At BullionStar, we are still accepting orders for precious metals settled in fiat currencies, and priced based on spot with a premium, but that is subject to change.
...
https://www.bullionstar.com/blogs/b...recious-metals-with-fiat-currency-is-closing/

A little bit over the top? Or are we there yet?

... However, if its physical silver you wish to purchase, good luck finding it anywhere near the spot price. At two renowned precious metals dealers I surveyed this morning, physical silver is selling at massive premiums to the spot price.

What is known as "junk silver", primarily 90% pure silver coins minted in the U.S. prior to 1965, with no numismatic value, can be had for about $20.62/an ounce ($1475 for a $100 face value bag of junk silver which contains 71.5 ounces of silver). That's a premium of nearly $8, or a whopping 63% above silver's current spot price. One-ounce Silver American Eagle coins have even higher spreads to the spot price, in lower quantities it can be $12/ounce, a 95% premium to spot.

Business is brisk and inventories are low or empty, as consumers clamor for physical metal they can hold in their hand. I've never seen premiums this high, which is an indicator of the fear that is so prevalent. Silver is especially popular because it can be purchased in very small increments. In the doomsday scenario, silver coins dime, quarters, half dollars, silver dollars (and even nickels minted between 1942 and 1945, which contained 35% silver) are small enough that they could be exchanged for smaller goods. That's one of the draws here, but the disconnect between the spot price and physical silver is astounding.
...
https://realmoney.thestreet.com/inv...on-playing-out-in-the-silver-markets-15268913

I managed to score a little bit of gold and silver at my LCS over the last couple of days. I've bought metal at lower price points, but I'm not sweating the deals I got. At least I was able to buy some.
 

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This is likely to exacerbate the shock to the physical markets:
With the ongoing challenges of the COVID-19 pandemic, The Royal Canadian Mint is implementing a temporary suspension of production effective Friday, March 20, for a period of two weeks. This is part of the Mint's on-going efforts to proactively modify how we work, and take necessary measures to safeguard our employees' health and safety.

The Mint remains open for business. You can continue to view and order our products on mint.ca and with our Customer Service Representatives at 1-800-267-1871. However, your parcel shipment will be safely held at the Mint until shipping operations have resumed.

We have a plan to resume modified production in two weeks, which will allow us to reduce the risk to our staff and maintain critical services. We do however anticipate a longer suspension of production and shipping for our Numismatic collectable coins as we prioritize the support of trade and commerce.
...
https://www.mint.ca/store/mint/cust...en_CA&rcmiid=tf|tb|covid19&PageSpeed=noscript

I wonder if other mints are similarly scaling back or halting production.
 

Unobtanium

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Not sure what descriptor to use for this situation. Fascinating? Intriguing? Devastating?

Looks like the Austrian Mint has also closed temporarily. Having a tough time finding any other mints that have suspended production.

https://www.muenzeoesterreich.at/eng

IMPORTANT CUSTOMER INFORMATION
ATTENTION!
Dear Customers,

As the spread of Covid-19 has led to a lockdown in Austria to stop the virus from spreading further, we would like to inform you that the Austrian Mint shop at Am Heumarkt 1 will be closed as of Monday 16 March until further notice.

Our team is available to attend you from their home work stations and our products can still be ordered online at www.muenzeoesterreich.at . There may, however, be some delay in delivery and we ask you for your kind understanding at this challenging time.

We are extending the pick-up period for all orders until our shop opening hours get back to normal. Details can be found on our website. We are not able to dispatch products that have already been ordered for pick-up. Thank for your understanding at this challenging time.

Please take care and we hope to see you in the Austrian Mint shop in the very near future.
 
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