Silver getting crushed today

Discussion in 'Bullion Investing' started by Soiled, Apr 1, 2016.

  1. longnine009

    longnine009 Most Exalted Excellency

    Last edited: Jan 12, 2019
    CasualAg$ likes this.
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  3. CasualAg$

    CasualAg$ Corvid Minions Collecting

    @longnine009...Great post, great band, great song.

    Staying in the same genre, he should have chosen the sofa payments.

    Death or Glory, The Clash
     
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  4. abuckmaster147

    abuckmaster147 Well-Known Member

    Interesting, Supply cannot make demand!!
    The bullion marketplace has two sides – and sometimes they can act very differently from each other. What do we mean by that? There are two ways to trade precious metals: physical product and paper metal. The former category is what Provident does: buying and selling bullion in the form of coins, bars, ingots, rounds, etc. When we enter into a transaction, actual metal is bought, sold, and physically transferred. In the paper market, however, bullion is traded in the form of futures contracts, ETFs, derivatives, and other promises.

    In theory, both the physical and paper markets involve buying and selling metal. However, there’s one major difference. In the paper world, it’s easy to lose sight of how much physical metal actually exists. Traders can (and often do) buy or sell more metal than is readily available in the physical marketplace. Exchanges like the CME publish how much metal exists in approved warehouses versus the number of open futures contracts. More often than not, traders have agreed to buy or sell MUCH more metal than is available in the physical market.

    Why are we mentioning this today?
    In recent months, the supply of newly-minted physical silver has steadily declined. In fact, it appears that demand is far outpacing the amount of coins and bars available. Granted there are numerous factors in play, but there’s one major reason for this supply shock. Two of North America’s largest precious metals refiners have shuttered – and no one has filled the void. Over the past two years, Dallas-based Elemetal and Miami-based Republic Metals have both ceased operations.

    Private mints like Elemetal and Republic played a vital role in the bullion marketplace. While there are numerous world mints that can belt out coins, only a select few facilities are available to make low-premium bars and rounds. It’s no surprise that just a handful of companies are available to serve this role. The silver bullion market is intensely competitive with exceptionally tight margins; it requires a tremendous amount of capital, patience, and infrastructure.

    [​IMG]
    Consider what goes into making just one silver round. A private mint must buy raw metal, refine it to 99.9% purity, form it into thin sheets, stamp out blanks, mint the blanks, package the rounds into tubes, and then ship them to distributors. This process requires maintaining a large staff and buying extremely expensive machinery. Furthermore, it’s a cash-intensive process; all of this metal must be carried and financed while it’s being fabricated into product.

    [​IMG]
    All of this effort is worthwhile when the market is upbeat and healthy. During periods of strong demand, private mints enjoy an excellent flow of orders. Even though the margins are thin, they benefit from strong volume and non-stop activity. However, when conditions are quiet, mints are stuck with massive overheads and fixed costs. It’s truly a “feast or famine” existence for private mints – and this might be why so few exist in the United States.

    While it’s unclear exactly what led to the downfall of Republic Metals, they were one of the few refineries willing to produce low-premium silver rounds and bars.Following their departure, it’s become increasing difficult to source this product. Low-premium silver has become extremely scarce in the marketplace. While Provident is able to offer a wide variety of live rounds and bars, many refineries are quoting a 2-6 week delay for new orders!

    A Look Ahead
    There are two potential outcomes to this scenario. The first is that premiums will rise as inventories dwindle. The harder it become to find live silver, the more buyers will pay for it. Secondly, refining capacity may catch up with demand. The existing field of private mints will expand production, run more shifts, and find a way to satisfy the growing need. While it’s possible that new firms would enter the market, the massive capital and infrastructure requirement will be a barrier to entry. It seems unlikely that more private mints will open any time soon.

    What does all this mean for you as a silver buyer?
    Chances are that low-premium silver will be increasingly scarce in coming months. Refineries have been caught off-guard and did not anticipate this surge of demand. Between renewed interest in precious metals – and two major firms existing the market – a shortfall of product has developed. Mints will do their best to catch up and increase the output of supply, but in the interim, it’s more likely that premiums will head higher.

    [​IMG]
    The bullion market is more active now than six months ago, but it remains a far cry from what it was a few years ago. During periods of intense demand, silver bars and rounds have traded for close to $2/oz over spot. Now, today, many top-quality products can be had for less than a $1 premium . If you’re looking to add cost-effective silver to your holdings, now may represent an excellent time to lock in. Between upwardly trending spot prices and rising premiums, we see multiple reasons why silver could be more expensive soon.
     
  5. CoinCorgi

    CoinCorgi Derp, derp, derp!

  6. abuckmaster147

    abuckmaster147 Well-Known Member

    No a news letter I got from provident in an email.
     
  7. CoinCorgi

    CoinCorgi Derp, derp, derp!

  8. abuckmaster147

    abuckmaster147 Well-Known Member

    well ya they want to sell that is what they do but its the first I have heard about the big 2 closing.
    what ya think @Clawcoins
     
  9. CasualAg$

    CasualAg$ Corvid Minions Collecting

    Interesting news about those closings. They’re certainly not objective but that doesn’t mean they’re wrong.
     
  10. longnine009

    longnine009 Most Exalted Excellency

    I HAVE SINNED! [waterfall of tears] I read advertising from a bullion dealer.
     
    Last edited: Jan 17, 2019 at 6:37 AM
    CasualAg$ and CoinCorgi like this.
  11. CasualAg$

    CasualAg$ Corvid Minions Collecting

    The ad was posted with no warnings or disclaimers, not even a mention of the dangers of unsanctioned precious metals, so your eternal damnation is reduced to finding an empty tube for Austrian Silver Philharmonics and bringing it to the Church of Our Lady of the Eight Feathers, along with the receipt. Ask for Father O’Blivion.
     
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  12. mikem2000

    mikem2000 Lost Cause

    UHHH, that's an ad....

    FYI... it a lie
     
  13. Clawcoins

    Clawcoins Well-Known Member

    I'll have to look into it.

    But for them there's also another supply .. turned in Silver from all the pawn shops, etc from silverware, silver jewelry, plates, etc. back when silver was $30/oz ppl were selling anything that was silver. Increased supply substantially which helped burst the bubble.
     
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  14. abuckmaster147

    abuckmaster147 Well-Known Member

    I am sure you got one too was this just plain an ad or more like their news letter
     
  15. CasualAg$

    CasualAg$ Corvid Minions Collecting

    Apparently it not all the lie...

    From FXStreet 1/14/19...

    New Shortfall in Production Capacity for Fabricated Silver and Gold

    The two largest private producers of bullion bars and rounds in the U.S. have gone defunct over the past two years. Premiums for silver bars and rounds are already on the rise as markets adjust to the lack of supply.
     
  16. abuckmaster147

    abuckmaster147 Well-Known Member

    from a lot of the posts I have seen lately about people getting what they think is sub par used bullion maybe this is one reason.if they dont have a lot of silver to mint they may be selling more older stock.
     
  17. CasualAg$

    CasualAg$ Corvid Minions Collecting

    Any anecdotal evidence that silver premiums are rising?

    What silver I’ve bought recently has been through holiday “sales” or has been silver coins so I haven’t paid attention to bullion premiums.

    Curiouser...

    Today...
    Apmex quotes Ag spot at $15.41 and sells their house brand 1-oz round for $17.40; $1.99 premium (buy 1 w/cash - typical)
    BGASC has $15.38 spot and sells Indy rounds at $16.83; $1.45 premium.
    JM Bullion has spot at $15.42, sells generic rounds for $16.91; $1.49 premium.
    SD Bullion shows spot at $15.41, sells house round at $16.70; $1.29 premium.
    Provident site down for maintenance.

    Local B&M bullion shop has $1.89 premium for generics.
     
    Last edited: Jan 18, 2019 at 8:16 PM
  18. abuckmaster147

    abuckmaster147 Well-Known Member

    I too bought when the price was in the $13.60's free ship plus a $5. coupon from provident. Will have to see how the premiums increase or not in the months ahead.
     
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