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Dear Subscriber,
Silver and gold recently had a massive selloff in the paper markets which also resulted in a huge demand increase for physical bullion.
Major mints such as the US Mint and the Royal Canadian Mint have been swamped by orders - causing allocation quotas to be made, much longer delivery timelines and increased premiums.
I just arrived in Canada after visiting a number of key bullion suppliers in the US and found the same feedback from all sources: very high buy volumes on physical bullion and very tight silver coin and bar supplies. Supply of Ggold coins is also becoming tighter.
The situation is reminiscent of late 2008 when silver and gold's abrupt drop resulted in a similar run on physical bullion and delivery delays of over four months. This was the event that prompted us to start bringing physical bullion to Singapore in the first place.
This newsletter is mostly about the supply situation and to share the feedback we received from Suppliers and Mints.
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| Paper sales and physical buying |
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Markets and prices are a very effective rationing mechanism which we are all familiar with. When a good becomes scarce the price for such goods increases to the point where demand is reduced to match the existing supply, thereby rationing the product and preventing a breakdown of the market.
Physical bullion is in a bit of a conundrum however, as spot prices of gold and silver are not affected much by the availability of bullion but are determined in the futures markets whereby :
- the vast majority of transactions are simply price exposure transactions which do not involve the presence of physical bullion. As a matter of fact a typical future exchange has less than 5% of net long positions in physical reserves
- the transactions are typically highly leveraged so that a 10 USD position can control 100 USD of paper positions.
It is therefore possible to have drastic moves in the silver and gold markets through paper transactions without the need to sell or move any physical bullion.
Futures markets have many types of participants but a large portion are short term speculators that hold highly leveraged positions and as prices crash the collateral is quickly used up. This causes forced sales or margin calls which in turn cause prices to fall further. For speculators with long positions an abrupt 30% price decline is devastating.
Bullion investors on the other hand normally own the full asset itself for the long term and are not leveraged. For most bullion investors therefore the 30% price decline is of little concern - unless they are forced to sell their bullion- and for many this is an excellent buying opportunity.
In the last week we saw these two groups in action as a massive sell-off in paper positions by short term paper traders caused very strong buying by physical bullion investors. However as the paper market dwarfs the physical bullion market the bullion buying had little effect on the traded price of gold and silver. The demand did however exhaust available bullion supplies causing the described shortages.
The market is reacting somewhat as silver coin premiums are increasing across the industry to help reduce demand but it will take time and either stable or increasing silver prices before a stable supply comes back. The supply situation is likely to sort itself out more quickly than it did in 2008, as the current coin and bar shortages are due mostly to limited minting capacity rather than shortages of silver itself.
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| by Gregor Gregersen |
| Featured Bullion - Platinum |
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Platinum Coin Platypus - 1 Ounce
Interested in Platinum?
The one ounce Australian Platinum Platypus bullion coins are struck in .9995 pure platinum and have a limited mintage. Each coin has a diameter of 32.60 mm, weight of 31.12 grams, and is presented in an acrylic capsule. No more than 30,000 of the coins will be released.
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See more products and prices at www.silverbullion.com.sg.
Best Regards
The Silver Bullion Team
Silver Bullion Pte Ltd
Registration Nr: 200907537M
Floor #03-02A Certis CISCO Center II
20 Jalan Afifi, Singapore 409179
Singapore
Phone: (65) 6100-3040
Fax: (65) 6826-4022
Email: [email protected]
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Information provided here should not be considered as advice or as an offer or enticement to buy, sell or trade. The contents of this publication, including any opinions and analysis, are strictly intended for educational use. Opinions expressed in bylined articles are those of the individual author and do not necessarily reflect the views of Silver Bullion Pte Ltd.
Silver Bullion Pte Ltd. makes no warranties, whether expressed or implied, as to the accuracy of the information provided or for eventual results obtained by using the information. In no case shall Silver Bullion Pte Ltd. be liable for direct, indirect, or incidental damages resulting from the use of the information.
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Silver Maple Leaf - These coins are in very heavy demand causing massive allocations / rationing by the mint. Our local stock is sold out and the next incoming 14,000 coins are already pre-ordered by customers. New shipments beyond the en-route coins are unlikely to arrive until end of May, hence our pre-order timeline was raised to 6 weeks. In-stock availability is unlikely to return until June.
Gold Bullion - Gold Maple Leaf supply is becoming tighter but in-stock availability should return much earlier than silver.
Perth Mint Silver Coins and Bars - Supply is a bit tighter. Additional coins are on the way.
Platinum - We have added Perth Mint Platypus Coins. These are available for local pickup.