How to Obtain Silver Coins and Rounds in Short Supply

By: Clint Siegner | Tue, Jul 14, 2015
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There are two kinds of constraints when it comes to supply in the physical markets, and anyone building a position in physical metal needs to know the difference.

The first type is temporary. The other signals a sea change, the rush for physical metal going mainstream. When it happens, it'll be "go time" in the physical markets. The time get your hands on products widely available at low premiums will be over.

Some bullion investors are wondering if it is "go time" now. The events in Greece, the stock market sell-off in China, and silver prices falling to near $15/oz spiked demand for manufactured rounds, coins, and bars.

Premiums jumped almost immediately for one-ounce and smaller silver products.

Anyone involved in these markets over the past 7 years has been through this drill a handful of times.

The drop in silver prices drove up demand, and the U.S. Mint cried "Uncle" (Sam) last Tuesday. Bureaucrats opted to stop taking new orders and instead clear up the existing backlog.

Such a move would have been considered extraordinary a decade ago. But the government-run Mint is pressed to its limit these days, setting new records for silver Eagle sales nearly every year since the 2008 financial crisis. Nowadays, surges in buying activity quickly overwhelm them. The Mint has "turned off the phones" three to four times since 2011.

Silver American Eagles are still the single most popular product in the U.S. When the Mint stops selling them, the effects sweep through the entire marketplace. Premiums jump in response to a scramble for the remaining inventory of Eagles. Demand spills over to alternative products. The pressure drives premiums higher and shipping times longer. This first occurs with government coins, then in rounds, and finally, if extreme, bars of 100 ounces and smaller.

We're in the middle of another shortage of fabricated silver in the most popular varieties. This demand spike looks manageable for now. The relatively small, but growing, contingent of people concerned enough about world events to buy physical bullion is driving this surge. They see troubling headlines and lower prices as an opportunity, while the mainstream of investors continues to focus elsewhere.

Supply for coins in particular has fallen behind and has to catch up.

Here are some signs suggesting the silver market is suffering a temporary bottleneck in the fabrication of coins and rounds, rather than something more permanent:

The U.S. Mint expects to resume taking orders on August 1st. That may well signal the end of the current fabrication bottleneck. Premiums may drift lower and lead times may disappear as dealer inventories replenish.

To Capitalize on Low Spot Prices AND Low Premiums, Choose Gold Coins, Bars, and Rounds or Silver Bars

Panic Buying

If you ALREADY own a substantial position in precious metals and you are confident spot prices will not rise in the coming weeks, it's not unreasonable to delay purchases in the interim. Premiums certainly could fall soon.

But don't delay too long. The contingent of investors with failing confidence in the paper markets for stocks, bonds, and futures is growing.

The day is coming when lots of people respond to increased risk and uncertainty in the financial markets by buying a few coins. Then it is GO TIME. Inventories of above ground metal in any form will dry up, and the market will seek a new equilibrium at much higher prices.

Here is what to expect when a serious supply shortage, rather than a temporary bottleneck, has begun:

The number of people unnerved by recent action in the paper markets for stocks, bonds, and currencies IS growing. The last couple of weeks have been particularly hard on confidence. Chinese officials now threaten to arrest citizens for selling stocks. Greece is in the vanguard of many nations who can no longer kick the can on unpayable debts. And last week's surprise shut-down in the New York Stock Exchange highlights just how fragile today's electronic exchanges are.

"Go Time" in the metals markets may not be here yet, but it's coming.

 


 

Clint Siegner

Author: Clint Siegner

Clint Siegner
Money Metals Exchange

Clint Siegner

Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. Siegner, a graduate of Linfield College in Oregon, puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach.

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