“Global Scramble” For Silver - Coins “Hard To Get,” “Premiums Likely To Jump”

Silver has had a torrid time in recent months and has fallen nearly 40% since July. In less than four months, it is down from $21.40/oz to $15.45/oz today. Silver is 70% lower since reaching over $49/oz in April 2011. The selling has accelerated in recent days and silver has fallen from $17.20/oz on October 28 and is down 12% in the last week. 

There is blood in the streets of the silver market with futures speculators long silver, again having their heads handed to them on a plate and incurring sharp losses. However, the silver sell off has again seen a global scramble for physical silver.

Silver in USD – Year to Date 2014 (Thomson Reuters)

In recent days, there has been a global scramble to acquire silver bullion coins and bars after the price falls according to Reuters. Maple Leaf silver coins are difficult to acquire according to bullion dealers, with the  Royal Canadian Mint on allocation from September. There is a concern that supply times will increase and premiums are likely to jump according to Reuters.

“A tumble in silver prices to four-year lows has triggered a global scramble by consumers to purchase silver coins and bars, as the spread between the price of the metal and gold reaches its widest in five years.

Retailers and distributors in Asia and the United States said they were struggling to get supplies of items such as Canadian Maple Leaf silver coins.

While demand for silver has been strong over the last few months, retailers say buying interest soared in recent days as the metal fell towards its lowest since 2010, along with gold.

Demand for silver coins and bars accounted for more than a fifth of total demand in 2013, according to a report by the Silver Institute. A sustained jump in demand should support silver prices, currently at just over $15 an ounce.

The price of silver is currently around 74 times cheaper than gold – the biggest spread since early 2009. Due to its greater affordability, silver sales tend to outstrip gold in volume terms and attract a lot more retail buyers.

The Royal Canadian mint had started allocating, an industry term meaning rationing, its popular Maple Leaf silver coins in September in response to high demand, according to a spokesman.

With the allocation of silver coins in place, the mint continues to produce and take orders for 2014 coins with no anticipated stoppage in shipments, he said.

But retailers are already finding it hard to get hold of the mint’s products as they sell out their existing stock.

Some Asian dealers said they have had to pull Maple Leaf coins from their lineup until they get the mint’s 2015 products.

In mid-April 2013, silver lost nearly a fifth of its value in two days, tracking a rout in gold, prompting a rush to snap up both the metals at a bargain price.

While the Royal Canadian Mint is rationing silver coins, it has no such system for gold.

The U.S. Mint is not allocating silver or gold at the moment. In June, the mint lifted its ration on silver American Eagle coins that had been in place since January last year as strong demand had depleted silver coin blanks.

The U.S. Mint sold 1.4 million ounces of silver American Eagle coins on Friday alone, the highest daily sales since Jan. 13 when the new 2014-dated coins first became available. October was the fourth highest month of silver eagle sales ever.

The Perth Mint, which runs the only gold refinery in No. 2 gold producer Australia, said it was not facing any supply issues as it usually launches a new line of products from September, unlike the other mints.

“We built up a lot of stock for those releases. So we have quite a few months worth of stock,” said Neil Vance, wholesale manager at the Perth Mint.

“If this had been a different time of the year, it would have been a different story.”

Reuters

Silver in USD – 5 Years (Thomson Reuters)

We have seen a significant uptake in demand for silver this week both for maples and philharmonics and for larger 1,000 oz bars. Silver maples are being snapped up by U.S. and Asian buyers as the premiums are lower than that for silver eagles. Silver philharmonics continue to be popular in Europe as they too are less expensive than the eagles and have a similar premium to maples.

Silver coin demand is for both delivery and storage, while bar demand is primarily for bullion storage in Zurich and Singapore. The demand is broad based and coming from both retail investors and indeed high net worth. 

Silver is down 70% in less than four years as stock and markets have surged to record highs. The gold: silver ratio has surged to a peak of 75.4 this morning, its highest since early 2009, as silver underperforms falling gold.

Silver is great value today versus stocks and bonds and indeed versus gold. The smart money accumulates on dips and buys low, to sell high.

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MARKET UPDATE
Today’s AM fix was USD 1,169.25, EUR 933.91 and GBP 730.55 per ounce.
Yesterday’s AM fix was USD 1,170.75, EUR 936.90 and GBP 731.90 per ounce.
    
Gold rose $0.80 or 0.7% to $1,167.60 per ounce yesterday and silver fell $0.13 or 0.8% at $16.03 per ounce. Gold in GBP is now marginally lower year to date after also taking a beating in recent days.

Gold in GBP – Year to Date 2014 (Thomson Reuters)

In London, gold reached $1,143.76, the lowest price since April 2010. In New York, Comex gold for December delivery slipped 1.9% to $1,145.10.  The gold futures market saw huge dumping of gold in illiquid Asian markets overnight, according to Zero Hedge:

“For the 5th day in a row, “someone” has decided that 0030ET would be an appropriate time (assuming the ‘seller’ is an investor who prefers best execution rather than the standard non-economically-rational share-repurchaser in America) to be dumping large amounts of precious metals positions via the futures market. Tonight, with over 13,000 contracts being flushed through Gold – amounting to over $1.5 billion notional, gold prices tumbled $20 to $1151 (its lowest level since April 2010). Silver is well through $16 and back at Feb 2010 lows.”

Zero Hedge

ETF holdings dropped 3.7 metric tons to 1,643.4 tons yesterday, the lowest since August 2009, Bloomberg data showed. The value of holdings has fell to about $60.6 billion from $78.5 billion in March. SPDR Gold Trust, the biggest ETP, are at the lowest since September 2008, which is when Lehman Brothers Holdings Inc. collapsed.

ETF investors may be selling due to poor sentiment but we are continuing to see a move towards owning physical bars in an allocated format outside the banking system.
Silver slid 4.6% to $15.2878 an ounce in London, continuing declines into a sixth day. It reached $15.2051, the lowest level since February 2010. Platinum was off 2.2% to $1,198.63 an ounce, and hit a four-week low. Palladium fell 2.9% to $763.50 an ounce.

Silver’s drastic dip has started a global scramble by store of wealth buyers to acquire silver coins and bars, as the spread between the price of silver and gold reaches its widest in five years (see above).
Distributors and retailers in Asia and the U.S. noted they were struggling to get supplies of coins such as Canadian Maple Leaf silver coins. We reported yesterday very high gold and silver demand in Europe and especially Germany as brokers witnessed a ‘run’ on silver coins. 

While demand for silver has been strong over the last few months, buying interest soared in the past few days as the metal slid to its lowest since 2010, along with gold (see above).