What we are witnessing in precious metals is truly unprecedented. As readers know we refrain from storytelling; we rely as much as possible on verifiable facts. We reported unique developments lately, including a developing disconnect between paper and physical silver, historic bearishness in terms of sentiment and the biggest gold and silver price drop since 2000. What follows in this article is even more extreme.
During the gold and silver price crash on Friday April 12th and Monday April 15th one million short contracts were sold on the COMEX. That equals 12% more than the annual world gold production (apart from a lot of forests for all the paper). Reports have shown that a massive 150 tons of paper-gold was sold within an hour on Friday.
Now in a world which is functioning based on some sort of logic the recent price crash would imply panic selling across the board in the sector. Nothing is further from the truth. The demand in the physical market is unprecedented. Because real-time reporting about physical gold and silver purchases does not exist, we need to rely on what bullion dealers are reporting. The interesting thing is that they all report highly consistent facts, across the globe, revealing side effects of the price crash.
United States & Canada
CMI Gold and Silver is one of the oldest and largest bullion dealers in the US. They reported the following over the weekend:
“Friday was astounding, as we sold as much bullion as we normally sell in an entire week. If buying continues at this rate, there will be immediate product shortages; and already, Silver Eagles and Maples are seeing delayed delivery. Moreover, I haven’t seen such high premiums on 90% silver coins (junk silver) in decades.”
Andy Schectman, President of Miles Franklin, one of the large US bullion dealers, communicated over the weekend: “We did 116 orders Friday; the craziest day I can remember in 24 years ofbusiness.” Our friend Andy Hoffman from Miles Franklin told us that Monday and Tuesday were much bigger than Friday, with a ratio of 50:1 buyers to sellers. He continued:
Nearly all silver products are sold out, with 4-6 week delivery delays and rising. Silver premiums are surging, as well as junk silver. The spreads below are approaching (if not already above) 2008’s all-time highs.
The President of Liberty Coin Service, Patrick A. Heller, described the situation of earlier this week in his store:
Even though we recently moved to much larger quarters (the size of the showroom quadrupled and we added several phone lines), customers were waiting as long as 30-60 minutes to be served. Many people simply could not get through on the telephone lines because they were jammed with calls. Because of slowing deliveries on bullion-priced physical gold and silver coins and ingots, we had to implement a limitation of $5,000 in sales to new mail-order customers. We accepted orders from established mail-order customers and from in-store customers who were ready to made immediate payments.
Although we did not explore in detail the situation in Canada, we did get some personal feedback from Kamloops Bullion, a smaller local dealer:
I can say from the first hand business end of selling precious metals that we cannot keep enough in stock. The request for ounces are getting larger and larger. We have people cleaning out their savings accounts and cashing out RSP’s to buy into gold and silver.
Let’s have a look at wholesale. Tulving is one of the largest US wholesalers. A lot of their gold but especially silver is “sold out”. Readers can check it out in real-time on their website, on this webpage in the category “silver bullion buy prices” and “gold bullion buy prices”
CNT, one of the largest wholesale suppliers in the US, who is the supplier of gold blanks to the US Mint for Gold Eagles, and is a registered COMEX depository, has sold out of all physical silver.
Over to Australia, where sales from The Perth Mint have surged after the price drop, as appears from this quote.
“The volume of business that we’re putting through is way in excess of double what we did last week,” Treasurer Nigel Moffatt said, without giving precise figures. “There’s been people running through the gate.”
This was confirmed by Ed Steer (editor of the daily gold and silver newsletter) who shared the feedback he got from Bron Suchecki out of The Perth Mint: ”Retail demand is crazy, Depository less so, with a little selling back…but overall net buying.”
No this is not a US only phenomenon. Bloomberg writes about the situation in India. :
“It has been very hectic in the last two days,” said Deepak Tulsiani, owner of Dwarkadas Chandumal Jewellers in Mumbai as he surveyed his 11 employees, who were busy with customers. “There has been a rush to buy gold because now people are getting jewelry 15 percent cheaper than before. It’s value for their money.”
This is reflected in the premiums in India, as appears from the following chart (courtesy Sharelynx)
Our friends at Global Gold at Switzerland just sent us an update about what is happening over there:
Silver Maple Leafs and Silver Eagles are hard to get. Waiting time until the end of May. The physical demand is very high and they don’t have more capacity to produce additional coins. We are forced to offer Austrian Philharmonicas or Armenian Noahs (both legal tender, containing 1oz of pure silver).
With regards to Gold coins, Krügerrands are hard to get as well for the next 2 weeks and Maple Leafs in Gold might become short in the near future as well. However, we will manage to get them but delivery might be delayed as well.
Gold and silver bars remain available for the time being.
Meantime, a couple of days ago, a suspicious amount of metal was taken out of the COMEX depositories (source). Up until now, there is no valid explanation apart from speculation that the metal is short on other places. While the latter could be true, we prefer to wait with a conclusion till the dust settles.
Suppose that the gold and silver price decline was manufactured (which is not unlikely; even Greenspan told Congress openly in 1998 that the Fed would lease gold in increasing quantities should the gold price rise), then its decline seems to have unintended consequences … at least from the point of view of whoever manufactured the crash. It will be interesting to see what will happen in the physical market if the gold and silver price will continue to fall in the coming weeks.
One additional note, Ted Butler wrote today that he does not see the same degree of “shortages” in the wholesale market (think 1,000 oz bars) as in retail. If that would be the case, or if that is about to happen, then we would reach the point of the physical market taking over price control over the paper market. But do not get overexcited … only time will tell when that event occurs.
This article is brought to you courtesy of Gold Silver Worlds.