Heavy buying of physical metal over the weekend

NK - It is really easy to obtain information about the paper markets for gold and silver. Not so much for the physical market. I monitor inventory (and by extension, sales volume) and premiums to keep tabs on what is happening with retail buying and physical supply. For example, one year ago or so, the spread on the buy/sell premium for 90% silver was much tighter than the spread on ASEs. When the US Mint started running a shortage (couldn't keep up with demand), both buy/sell premiums on ASEs rose and the spread tightened.

What am I hoping to get out of this thread? F me. I'm just sharing an observation. It may or may not portend a shift in retail buying habits, physical metal supply shortages and/or imminent rise in dealer premiums. I should ask -Edited, forum rulesare *you* hoping to get out of this thread?

I tried already to explain - the reduction in inventory was not a gradual change indicating a strategic decision not to replenish supplies during a period of normal sales volume. I'm not going to repeat myself ad naseum for you though.

 

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Almost 30 million silver eagles sold this year so far.

 

I would have to say I agree with NorthKorea's position more. I simply do not know how inventory levels of a seller of bullion "proves" anything. I believe its an interesting observation that could, when coupled with other observations, lead to a conclusion, but its way too weak on its own.

Like NK alluded, there are a myriad of reasons why a retailer's inventory could shrink. PMBug, you said:

"I monitor inventory (and by extension, sales volume) and premiums to keep tabs on what is happening with retail buying and physical supply"

Read more: http://www.cointalk.com/t217193-2/#ixzz2BRrGBK7x

How do you KNOW the inventory depletion was sales? You cannot, there are other reasons inventory could deplete. Also, low inventories could mean the seller is intentionally not refilling because they believe the market will weaken.

I am just saying there are too many unknowns to make any kind of case out of this observation. I still believe its an interesting data point, but without many more data points, (like the same data point for a decade in relation to the market, or multiple retailers similar data points), I simply would be unwilling to make any kind of argument from it. Like I said, though, it is an interesting point and I thank you for bringing it to the boards attention.

Just my opinion.

Chris

 

That's fine, but I never stated that the observation proved anything. I feel like folks here are projecting a lot of things that I never said nor implied.

BTW, more than half of Apmex' 100 ozt silver bar inventory was sold within the last 24 hours. Their inventory now sits at 81 total bars - by far the lowest it's ever been since I've been watching.

 

You clearly stated in the first post of the thread that you expect premiums to start rising due to depleting inventories. The point others have been making is that premiums and sales inventory numbers don't have a causal relationship. Premiums are essentially dictated by cost basis. Since retailers use hedging strategies to minimize risk exposure due to cost basis, the retail sector doesn't influence premiums as much as it may have in the past.

Depleting inventories, if anything, would show a correlation to lower anticipated premiums in the future. After all, if a retailer expected premiums to rise, they would buy more, since the premium spread (discounted for time) is essentially their profitability gauge. So, even in a scenario where we assume causality, the relationship is inverse to what you originally stated when you started the thread.

 

Welcome to the Forums, (especially PM forum). Just as an aside, I wouldn't take too much personally. Many here, including myself, post just to have the other side of the argument heard as well, and not "against" you, know what i mean? We have to be cognizant more people read these forums than participate.

 

NK - "I expect" <> "I therefore prove". Do you remember what happened in April/May 2011? I do. *If* (again) my observations are indicative of a trend leading towards a supply shock in the wholesale market for physical, I expect to see a repeat of what happened during April/May 2011.