Why are dealers so bullish on ASEs?

Discussion in 'Bullion Investing' started by ahearn, Dec 5, 2010.

  1. ahearn

    ahearn Member

    The Mint claims record ASE sales to dealers for the month (Nov) and the year. At current prices, why are they being so optimistic? Are Mint prices not following spot? Don't they expect a peak sometime soon?
     
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  3. Rono

    Rono Senior Member

    Howdy,

    Sales of ASEs are over 30M this year and they've been going up like crazy since 2006-7 [read: when folks started realizing the bull market in gold and silver was real]. After the financial meltdown and most of the developed gov'ts resorting to Quantitative Easing [read: printing paper money 24/7/365] folks are buying silver as a poor-mans substitute for gold and both as a substitute for fiat currencies that are being devalued.

    Folks are wanting to buy and own something 'real'. Silver is real. AGEs are great stateside because they're fungible [read: you can buy and sell them most anywhere].

    peace,

    rono

     
  4. green18

    green18 Unknown member Sweet on Commemorative Coins Supporter

    Also, ASE's are a recognized and trusted PM comodity. They are also easily liquidated when the time to do so arrives.
     
  5. blu62vette

    blu62vette Member

    I was a t a small show today. While talking to a dealer for a couple minutes we got interupted by 3 people looking for rolls of eagles. The demand is definitely there.
     
  6. desertgem

    desertgem Senior Errer Collecktor

    Well "soon" is a relative term. Most dealers are working with a good margin already on silver bullion, as unlike most end buyers, they have been in the game almost constantly. Those who are newcomers but still dealers, have developed products based on bullion coins that have been sold ( some say hyped) such as slabbed 69s and 70s, first strikes, etc. so their margin can be increased over what they are paying for the units.Include the TV programs also here.

    There will be a peak "someday", but I hope to be good enough to be bullion free within a couple of USD$ and total losses at less than 15%. IMO. I am not a dealer.

    Jim
     
  7. xtronic

    xtronic Junior Member

    Wow...that is a real word! http://en.wikipedia.org/wiki/Fungibility

    Never heard it before. I feel smarter already.
     
  8. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    The dealers I generally buy from have a lot less inventory than a couple of years ago. This has the makings of a real silver shortage by next summer.
     
  9. swagge1

    swagge1 Junior Member

    What were the ASE's selling for at the coin show?
     
  10. Apocalypse Cow

    Apocalypse Cow Junior Member

    Mint sales have nothing to do with dealer optimism. Dealers make money on the bid/ask spread from the transaction. The question you want to ask is why are so many customers buying up the dealers ase inventory.
     
  11. fatima

    fatima Junior Member

    The price of silver is not being set by retail (coin) buyers. It's being set on the the futures and spot markets. If you want to know why prices are going up, you need to gain an education on what is going on there. People in the know, who do understand this but don't have the resources to buy 5000 ounces of silver, (minimum purchase for these markets) are buying coins instead.
     
  12. blu62vette

    blu62vette Member

    Either 32.40 or 33.40

    edit: It was 32.40 from one dealer who had sold some at the price, $3 over spot.
     
  13. Rono

    Rono Senior Member

    Howdy,

    There's also a lot of chatter about more and more traders turning into buyers by demanding delivery of paper silver contracts. Coupled with industrial demand and the quiet mania happening around the world, the folks that are short are getting squeezed. There's quite a lot of belief that some of the big banks like JPM and GS have enormous short positions and are starting to feel the pressure.

    Don't know how true and I'm not much of a conspiracy type. feh. If I can manipulate the market to my advantage I'm all over it. Nothing conspiratorical about it - just plain vanilla self-interest.

    The nut? Take physical delivery and keeping accumulating. Cripes, I was buying silver under $5 and remember a roll of eagles from Paul Sims that cost me under $100 delivered. I figure I can buy this year's roll for $600 if I'm lucky.

    peace,

    rono
     
  14. Vroomer2

    Vroomer2 Active Member

    Because they can sell them at a nice premium over spot...??? Going out on a limb here.

    Then again, weren't we discussing here the inability for some of us to unload their junk 90% silver?
     
  15. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    I've heard the same thing. It is possible that the paper traders who have historically set the price in the futures market are going to get overrun by so many industrial users and hedge funds taking delivery of physical silver that may or may not exist. The game appears to be changing and the futures market is no longer setting the price.
     
  16. medoraman

    medoraman Supporter! Supporter

    Just so others know, these banks have short positions since they are the market makers and that is the only way to create the derivative, to sell the short. They are not NECESSARILY trying to manipulate anything by selling the shorts, they are trying to create the market in which all of us watch.
     
  17. medoraman

    medoraman Supporter! Supporter

    Hot money. That is what is driving this market to consistent new highs, just like housing, oil, tech stocks, internet stocks, PM in the late 70's, etc. Look around, there are no good investment areas right now, nothing else is "hot" and there is a huge buildup of cash in hedge funds. Hedge funds make money by buying above average return assets, and the LBO market is slow, financial derivatives are risky, so they are looking for short term parking of their money to make returns. Its not a fundamental supply/demand imbalance, its money chasing returns, just like previous markets mentioned.

    Thats my belief anyway. In a few years we will see to what extent hedge funds are behind this, just like it took a couple of years to see how much of the oil price rising to $140 was driven by them.

    Chris
     
  18. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    I'm not sure that it matters whether they are market makers or market manipulators. What matters is whether or not their short positions are naked or covered. Now, it is perfectly possible that a bank like JPM is trading on behalf of a large client, like China, who has the silver. Nobody knows. If so, the recent rise is probably temporary -- hot money, as you stated. But if they are naked shorts for whatever reason, then industrial users, individuals and hedge funds can drive up the price merely by taking delivery. And that is what the evidence suggests. As you suggested, the hedge funds will probably move on to the next thing in a couple of years, but if they really are taking delivery, they can force silver prices to the moon in the interim. Time will tell.
     
  19. Rono

    Rono Senior Member

    Howdy,

    Recall a year or so back when there were supply shortages all over and you couldnt' find bullion anywhere without paying some enormous premiums? It was a classic case of Econ 101 with demand/supply curves. Remember what happens when there is a price that's fixed, say by the gov't? Supply disappears. Happen with gas under Nixon.

    I posit that because the paper price of bullion was being kept artificially lower than what the 'market' felt it should be, dealers all of a sudden 'ran out of stock'. If you think the price should be 10 and the market says 8 - are you going to be selling?

    Same thing is happening right now with interest rates. The price of money (interest rate) is so low as set by the Fed OMC, banks are not willing to loan money at this point. Hell, 30 year fixed mortgages are under 5% but do many get written at this rate? I think not.

    oh well,

    rono

     
  20. Rono

    Rono Senior Member

    Hi medoraman,

    There are many who believe strongly that it's a conspiracy. I don't. Folks have been claiming a conspiracy to keep the POG down for years. I liked Jim Rogers comments about this when he said that if there was a real int'l plan to depress the price of gold, someone would have published a book and made a movie. This is because political parties in power change and someone is always willing to tell secrets.

    That said, I'll stick by my human greed premise that if someone is in a position to tweak a market to their advantage and stay on the good side of what happens to be legal at the time, they'll do it.

    peace,

    rono

     
  21. Rono

    Rono Senior Member

    Hi Chris/all,

    Yeah, the never ending search for yield. Hey, interest rates are right around zero and your savings account is paying less than 1%. While this is going on, the Fed and Treasury are dropping dollars from B2 bombers (Quantitative Easing) in hopes of reviving the economy. All that liquidity has to go somewhere and we're seeing an asset bubble created - not in commodities like gold, silver and oil, but to a degree in the stock market. The surge in commodity prices has an element of hot money but also has an element of folks wanting to buy and own 'real stuff'. Real stuff as compared to fiat currencies. And even the stock market, while a bubble to some degree, has an element of demand that is also wanting to own 'real stuff'. For example, a solid blue chip company stock that pays a dividend.

    oh well,

    peace,

    rono


     
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