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 Replies: 33 / Views: 4,946 |
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Bedrock of the Community
13014 Posts |
Lol it was kind of harsh. I would put it in a more gentle way that people think theyre a lot more prepared than they really are if it happened. Theres absolutely no way to actually prepare for it other than to have it happen. In a lot of ways its like war, plans work until the first shot is fired
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Pillar of the Community
United States
3670 Posts |
Last time I check one of the most basic rules to economical supply and demand is this....
When there are more sellers then buyers the prices drop. When there is more buyers then sellers the price rises. The fact that it appears PHYISCAL silver is deviating from spot price and apparantly hard to find in many areas (or any selection of silver worth buying anyhow), which tells me real simply the price could very well start to rise again....
Now then I know the actual phyiscal trading has little to do with the bigger market picture, or does it?
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Bedrock of the Community
13014 Posts |
Quote:
he fact that it appears PHYISCAL silver is deviating from spot price and apparantly hard to find in many areas (or any selection of silver worth buying anyhow), which tells me real simply the price could very well start to rise again.... I honestly havent noticed it being hard to find at all. Theres over 300k listings on ebay. Its out there if youre willing to give the people the same money they paid for it a month ago. I blame the mints some too. They can make them faster than they are if they really wanted, but they dont want too. They want to slow sales so the other Eagles dont get canceled again for all bullion versions. Plus they barely make anything off the bullion coins theyd rather pump out 250k special sets for 3-4 times spot than a couple million eagles |
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Pillar of the Community
Canada
814 Posts |
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Valued Member
United States
405 Posts |
Solidifier..........those are pretty cool, I just ordered ten  |
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Pillar of the Community
United States
2764 Posts |
Thank you Northerncoins for sharing the info.... good insight into the physical world.
Regarding baseball21 comment: I agree with you that if you are willing to pay higher price then you will pretty much always have the product you need (like winning an auction).
The main focus here is that in normal market, the premium for official world mint is in the range of $2 to $5 coin (commonly in the $3 range). However, as price (paper) drop, physical demand increase. Because of the physical demand increase, premium increased (it's the true market function in action). IF everyone are committed to only pay spot plus $2 then with enough pressure from the buyer, the premium will have to come down (which is not the case - currently happening as well as past major price drop).
Regarding supply of physical PM: It's true to some degree that we are NOT running out of physical PM. However, we are running short on physical silver that's in the form that most people want. I am sure generic bars in 100 & 1000 ozt are not in short supply. The main problem is when paper price drop, more people jump in and buy physical PM in the form of ASE/SML/Philharmonic/Libertad/etc..... all of these coins need a longer process to make (the mint must get their 1ozt blank from manufacturers, which must create those .9999 rounds from either silver ores or from 1000 ozt .999 bullion bars, which required them to be refined first).
If consider all the physical silver above ground as in all the people's storage/home + companies' warehouse + vaults + other storage methods then we are NOT in short supply. It's the manufacturer/sourcer of the high-demand physical PM that's short in supply.
So? Don't buy into the hype of physical PM in short supply and pay extra premium for your PM. Carefully consider all the cost and put a fix premium on top of spot price when buying. If you are consistent with this approach then over the long run, you will average out your acquisition costs. Another way to consider is how much $$ you save per ozt when you a buying now vs when spot price was over $30?
Lastly, physical PM (above ground reserve) is not hitting zero or depleting at lighting speed. As demand increase, price increase, productions will increase also. It's the cheaper physical PM that's running low (harder to find/buy 90% silver at close to face or find in rolls); more and more people recognize and value PM, which mean they are creating a floor-price for PM.
My other thought: Spot price will rise slowly in 6 months or so. As price rise, demand will ease (people don't rush in to buy physical PM and would tend to pace their purchase out), supply/production will catch up ===> premium will drop down to its normal range. So, unless there's major market movement, I will expect to pay about the same $$ for 1oz ASE/SML then, compare to now. As always, if I find a source that's selling any ASE/SML/Libertad/etc for spot plus $2 then I will stop all my other spending to buy as many as I can.....
Happy hunting (for pm deals).
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Bedrock of the Community
13014 Posts |
I agree with a lot of what SA4H said. We definitely are short on the minted coins, which is what I call a perceived shortage as opposed to a real one. With a real shortage there wouldnt be anymore on the way. Instead they just arent putting them out fast enough. Its like when the new xbox or iphone comes out. You cant find it anyway for a little bit but after some time theyre everywhere. A huge drop or rise in price creates those types of buyers that have to have it right then and there. They generally arent the type that consistently buy over time. After that initial rush wears off things will normalize to the new prices.
One of the biggest issues with the manufactured shortage is too many people do take that to mean that silver is running out period which its not which doesn't force sellers to really drop their prices. If their sales were sluggish they would adjust much faster. If the Mints really wanted to they could pump out a few million of the ASEs Maples ect and catch up to the market and calm things down, they have little to no interest in that though since those coins arent really money makers for them and theyd be sacrificing their real money makers to do so.
I think its important for people to remember that what happens in a couple days doesn't create the new standard. Just like the Iphone that has a huge premium when it first comes out those buyers being the first in line after an event are paying a hefty premium right now.
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Pillar of the Community
Mexico
1304 Posts |
With the primiums being so crazy nowadays, the primiums on those are comparibly low!
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Valued Member
United States
410 Posts |
I been wondering about whether there really is a shortage of physical inventory or if dealers are just holding inventory off the market. Take TexMetal's claim posted above. They claim to have sold 350,000 oz of silver and 11,000 oz of gold. Given the price before the recent drop that is $9.8M in silver and $17.4 million in gold. That would mean that they hold $27 million in inventory. That seems to be very high to me. The other thing that makes me suspicious is that if stock is in such short supply to justify high premiums shouldn't they be offering a premium to sellers? If you look at their silver buffalo rounds buy prices they are offering spot + $0.10. That price would tell me that they aren't having any trouble finding silver to buy. ASE's are buy @ spot +1.75 sell for $28 which is suspiciously the same price as spot before the big drop. It is the same deal over at kitco. Kitco will pay you $22.40 for a 1 oz Philharmonic and sell you one for $27.34. Kitco isn't even offering spot to buy your silver but they would like you to believe that physical silver is hard to find. Of course this makes sense to me. If I was a dealer sitting on silver that I paid $28 / oz for and suddenly the price dropped 20% I would pull the majority of my inventory off the market and only sell what I needed to pay my bills. Why sell it all especially if you don't know when you will get replacement stock. |
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Pillar of the Community
United States
2168 Posts |
I've wondered that as well
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Pillar of the Community
United States
511 Posts |
Keep this simple equation in mind.
Spot = theory Physical = reality
If spot fell to $10 tomorrow, does anyone think they could buy silver at $14 or $15/ounce? Spot is an easily manipulated paper price used by those who trade "naked shorts", as in futures contracts not backed by real silver.
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Valued Member
United States
410 Posts |
Spot is also what any dealer is going to reference when they make an offer to buy your physical metal. As we have seen lately, when there is a big drop dealers charge spot+big premium for buyers and spot or spot-discount for sellers. Either way, spot is the starting point.
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Pillar of the Community
United States
1590 Posts |
Let me give you the Dealers prospective.
The reason most dealers didn't have a large inventory of 90% when the price dropped is that for the last 4 years we haven't been holding what we buy.
What I mean is that most dealers buy at a price below spot and, cherry pick it, then sell the vast majority of the rest to a refiner or a bulk buyer; like Silvertowne.
The days of retaining what you buy as inventory are mostly over. Most dealers are afraid of being caught with too much silver, and losing money when the price drops. Like it did.
So when the panic buying started most dealers just had a small percentage of on hand stock. And that percentage was based on current, pre-drop, buy levels.
I concur that there is probably a lot of propoganda out there about a silver shortage to both drive up the price, and drive up business; while having a ready made excuse to drive up premiums.
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Pillar of the Community
United States
1590 Posts |
oh, and if spot fell to 10$, then yeah, the selling price would drop to around $15. Why? Because no one would sell to me at $9 if I was selling at $20. They would sell it themselves on the bay or the list.
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Bedrock of the Community
13014 Posts |
Quote:
Spot is an easily manipulated paper price No its what the metals sell for just like it always has been. Kendalls response gives a good insight. There are 100s of reasons why large premiums are currently in place and not a single one includes that the physical price is somehow entirely independent of spot |
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Posted 04/22/2013 9:43 pm
