Heavy buying of physical metal over the weekend

I've been tracking Apmex inventory levels (what's available for sale from their website) since December 2011. Their inventory took a massive hit just before Halloween and again over the last weekend.

There are signs that the extreme BTFD activity wasn't limited to just Apmex either:

More: http://kingworldnews.com/kingworldn...ing_Surge_Of_Retail_Gold_&_Silver_Buying.html

If this is a trend and it continues, I expect premiums are going to start rising.

 

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Buying requires a selling by someone also. I would agree with the "heavy buying " if the spot price for PM didn't decrease during the time period mentioned, but it did.

It is more accurate to say "Heavy Selling" of Physical Metal over the weekend, as this was what was happening, as the POG was decreasing. IMO.

 

Good point. I frequently think the same way whenever I hear some analyst talk about Xtrillion dollars sitting on the sidelines in money market funds that could be invested in the stock market. To be invested, all of that commercial paper and those T bills have to be sold to someone else, or else corporations must shrink their use of commercial paper. It's a mirage.

 

Correct in theory but beside the point in reality. Sellers (in synthetic instruments) can take down the price even as Buyer (of the the physical commodity) create market shortages.

Look at Oil. Are we sure "the market" is "efficient" ? No, but this kind of disconnect continue for years before such obfuscation ultimately FAILS.

Used to be some DoE govt bobblehead or the President could jawbone down Price of Oil by 'threatening' to release the Strategic Reserves. IMO that ruse will also fail, eventually.

I see on GasBuddy.com a gallon is only $3.59 in New Jersey. That's not more than many other states. So why are there still gas-lines?

 

There're still gas lines because the stations that have power to pump the fuel are limited in number.

 

Synthetics are still tied to the physical, and at the best are a forward indicator rather than a determinate force due to their speed of reaction unlike the delayed slow physical action. But conspiracy theories ( most bullion dealers/sites) obviously prefer to ignore that. That being as it may, what actual indication ( if not the downward price of gold) do you base your idea that the opposite is true and it was heavy buying?
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Ha! You're too honest for someone in the biz, desertgem. I thought it was called "hype"?

You drew the correlation between APMEX stocks and the PM Spot, not me. I don't believe such a correlation must exist but in Efficient Market Theory (EMH) it should.

I think EMH is largely bunkum now - that's a very political opinion, btw - and I certainly don't want to veer off-track with "conspiracy theories." ; )

I have no idea if/what, with regards to any dealers' stocks. There was something peculiar in the AGE market a few years ago (I advised clients to avoid that overpriced bullion, then) : what was up with that? Is there a better thread or keywords you might recommend to investigate said ('planchet shortage'?) AGE incident?

Regards.

 

Not with strong validity IMO. Even the mint's comments are suspect when dealing with bullion availability as they intend to sell their products at the highest possible margins. They seem to have enough on hand when they start striking a new product. It seems to be in the initial stages where they tend to comment one way or the other, usually blaming it on the miners/planchet suppliers. If the TPG companies had said they wouldn't grade/slab their bullion products, the market participation would be much less IMO. Not to get political by naming names, but I wouldn't do any thing until thursday or later, to see what the world thinks of our elected leaders effects on the USD. The DX is now 80.83 up about 15 cents, but gold is also up about 8.90. Interesting. IMO.

 

I expect premiums to rise also. Then go back down, followed by another rise, and another drop, etc., etc. Think ocean, think waves. It will happen.

 

I have always seem "premiums" to have a lot more to do with price expectations from sellers than any physical buying. If the market crashes $5 but sellers expect it to go back up, I don't care how much or little physical buying is happening, expect "premiums" to increase.

Many sellers in the early and mid 80's had large premiums on their PM since they expected it to go back up, (plus not wishing to recognize a loss). These premiums took years to disappear.

 

It's still a hypothesis. The fact that it's largely disputed as "bunkum" further reinforces its place as a sub-theory, or hypothesis.

As for equating APMEX sales figures to the stock market, I think that actually reinforces the idea of market efficiency. One reason the markets are inefficient at pricing securities happens to be the same thing that caused a perception of efficiency: real-time trading (and the legal restrictions that accompany it). If people were allowed to transfer securities without Medallion Guarantees and transfer fees, the markets would more efficiently price demand for securities.

Securities are sold at a limit price. This is basically what happens with physical bullion retailers. They are looking to sell at a price where they lose very little when commodities take a bath. This is why spreads widen at price extremes. When the price is topping, commodity retailers buy to fill demand and current inventory. When the price is bottoming, they still buy to fill demand and future inventory. However, even in this latter case, they won't significantly increase inventory in terms of liquidation.

The retailers are ALWAYS sellers. If their inventories are shrinking, that usually indicates a price top, not a bottom.

 

That's the insight I was working my way toward. If retailers are letting their inventories drop, it's likely that they're expecting to replenish them at lower prices. I don't believe any retailers have perfect future knowledge, but I'm betting they have better knowledge than I do. It seems unwise to bet against them.

 

I think the market for bothing selling and buying has expanded massively since the '80s and is far more volatile IMO. The buyers can find cheaper prices more quickly and the seller can sit on his premium waiting for the price to go back up. Volume dealers will dump product just to move it and cut their loss.

 

As I showed on another thread, 2012 Summer Seasonality was normal, November is statistically & historically the most BULLISH month (~ +3%), and big hurricanes are typically followed by a strong positive UP month for Gold.

I agree. This year looks different. Why?

The NY Gold market decline following Hurricane Irene should be a major ABERRATION ; assuming it's not, a new trend (Superstorm Retracement) would suggest Gold's ~ -7% Decline is imminent.

Severe guess? Better too harsh than optimistic, and I don't think a -15% retrace should freak out the prudent, defensive, and long-term PM holders.

Based on recent POG declines, average retrace (-14.8%) from the recent peak of $1,791 (10/4/2012) ... POG at ~$ 1,525. over the next 12 to 16 weeks.
Less severe, -11.8% > $ 1,580. Low in Late February or so.

The unknown of the new Adminstration might push it out (mid-March) but US stocks should be sideways-up if Wall St. likes Mitten: call it 'portfolio rebalancing.' Bullish bets (NYSE)? HII, CNRD, LMT, NOC, BA, GD, RTN, UTX, LLL

otoh, if we get a repeat of Florida 2000 in +3 states I think there will be blood: bigger declines on uncertainty. SHORT THE PIG, head to cash, etc.

There I've read my tea-leaves, exogenous events unfactored here, invest at your own Risk, yadda-yadda.

 

desertgem - no idea Edited ~ forum rules you are on about. The OP was very specific with respect to retail market action for physical metal and makes no statement (or inference to same) with respect to the spot price or futures market.

NK/jeffB - Apmex inventories had actually been rising over the last two months. Their inventory got decimated the day before Halloween with ~10 times greater sales volume than they normally see on a good day. They started restocking last week, but that restocking was again decimated over the weekend. As someone who has been watching their inventory ~daily for almost a year now, I can tell you this was highly unusual activity. If the KWN report is indicative of what retailers in general are seeing, and Apmex isn't an outlier, I expect that premiums will be rising soon.

 

1 million silver eagles already sold this month reported by the U.S. mint as well. Last year for the entire month of Nov only about 1.3 million were sold.

 

Does the election have anything to do with it? How are the sales compared to Oct/Nov 2008?

 

Maybe they are raising cash to stock the new palladium coin LOL LOL. That makes as much sense as anything I've read above.

 

The reason dealer inventories can deplete is because they are hedging. They balance their physical position with a short and make money strictly on the spread so you can't really infer anything from low inventories except that more non-dealers (people whose method of income doesn't depend upon it) are buying than selling.

 

For starters, WHY? Why are you watching the daily inventory? Why have you done it for a year?

Next, WHO? Who is affected by retailer inventories? Who is buying?

Now, with those major questions out of the way, we go to WHAT? What are you hoping to get out of this thread? What is your point about decimated inventories? What do you read into it?

Again, you're talking about precious metals retailers. They're in the business of selling metals. When their inventories go down, that's simply an indicator that they don't feel pressure to boost inventories. Perhaps there were indicators in house for APMEX that there would be a silver buying season among retail speculators. I'm not privy to their supply chain management decisions in house. I doubt you are either.

Since we don't know the supply side decisions on inventory control, the logical assumption is that inventory is largely controlled by the demand side of the equation. APMEX (and arguably every PM retailer) has a goal of making money. They don't make money on the fluctuation of the price of the metal. They might make some on the velocity of the metal's price rise/decline, but that would be determined by their hedging strategy.

This all means... RETAIL INVENTORY NUMBERS FOR PRECIOUS METALS RETAILERS MEAN NOTHING.