What the Silver Shortages Mean
(Rock crushes Paper, Paper does not cover
Rock!)
Silver Stock Report
by Jason Hommel, August 15th, 2008
Silver prices are dropping like a rock, down to
$12.50/oz., and yet, none of my trusted, major, regular dealers have any
silver to sell.
Tulving is sold out of all forms of silver.
I've never seen that before. See http://tulving.com/goldbull.html#silver
My guy in Rocklin is out. Amark is out. Mish in Menlo
Park is out. Klaus in Denver is out. All those guys
cannot find silver to buy from any other major dealer, and they are all
very well connected in the industry.
APMEX.com is sold out of most forms of silver, but
still has some Silver Maples left, I just ordered some this evening:
http://www.apmex.com/Category/2/2008__Prior_Canadian_Silver_Maple_Leafs.aspx
CNI
is out of 100 oz. bars and Eagles, but has other forms of silver.
http://www.golddealer.com/bullionpage.html
David
Bond notes that when silver hit $21/oz. about 5 months ago, the excuse was
that the dealers were out because silver hit new highs, and the public was
buying, not selling. Now, since silver has hit new lows, the public
is still buying and not selling.
For 5 months now, nobody has had 100 ounce silver
bars in quantity, over 100 of them,
available for immediate delivery. Well, that's not true, there have been reports here
and there of one such lot, on occasion. A mere
10,000 oz. has popped up from time to time. Once at tulving, once at
CNI. They are both out now.
But for the most part, for most of the
last 5 months, if you wanted 100 oz. silver bars, the wait would be 8-10
weeks from Johnson Matthey or NWT Mint, the only two places that make them
anymore.
During the last 5 months, Silver Eagles have been
rationed by the U.S. Mint, who makes the excuse that they cannot find or
source silver blanks fast enough, even though they are making twice as
many this year than last year.
So, why are prices crashing when no
silver is available?
Manipulation. Lies. Paper games.
I've covered this many times before in the last few years.
Many of the dealers above
will buy paper futures to offset the silver that they sell. They
don't take delivery, since the public never buys 1000 oz. bars from
them. Instead, they use futures contracts to offset any
losses. They intend to sell the futures for the cash to buy the
physical silver "from the public" when it "comes in the door". Thus,
they can sell physical product if they have it, even if they paid more for
it, simply by buying futures contracts. So, it's not a case of them
being unwilling to part with silver that they bought at higher
prices. They make money on the immediate spread of the immediate buy
and sell.
Think of it. If you could make 1% every week, do
you know how much that compounds to in over a year?
The
compound interest rate calculator tells the tale:
http://www.smartmoney.com/compoundcalc/
It's 68%!
The problem is that
the public is no longer selling physical. The wise ones who have
been educated are buying on the dips. And new public buyers enter
the market when the silver price breaks to new highs.
So, the paper shorts are cornered by the physical market,
who is now squeezing the refiners.
I've heard two rumors now that
there might be a large buyer who wants silver, and is manipulating the
price lower, temporarily, to try to lock in a low price to get
it.
The first rumor was at the yahoo chat boards, the
second rumor was in the musings at http://silveraxis.com/. Who knows
if such rumors are true.
Here's a great chart that shows that the
silver price has likely bottomed out in the up trend
channel.
http://stockcharts.com/h-sc/ui?s=$SILVER&p=W&yr=8&mn=0&dy=0&id=p60185968146&a=148569781
It
seems to me that the silver price should about double, to about $30,
within about 6 months, to a year at the most, at a minimum.
On the
other hand, if the paper market sizes up, or if the physical market
continues to disconnect, who knows what the price will be, it could be
much higher.
Price doesn't mean anything if there is no product
available.
A man emailed me tonight, and asked, "What is a
reasonable price to pay to get 10,000 oz. of silver in 100 oz. bar
form?" It used to be about 50 to 70 cents over spot.
But I no longer know. You cannot find such silver in such
quantity available anywhere.
I continue to offer free
advertising to anyone who has such silver in size. I rarely
hear anything about such silver in such size from my 80,000 readers.
When I do, it's usually sold out within days. But I can no longer
offer free advertising, since a few new dealers turned out to be
scammers. Instead, if anyone has such silver in size, they can sell
it to the dealers listed above, they are all buying, and desperate to
buy. And they will all pay more than the refiners will. All
any silver seller needs to do is to ship the silver to the trusted dealers
above. They all have cash, ready to pay for silver.
My
advertiser, http://www.milesfranklin.com/splash.asp had
50,000 ounces of Silver Eagles a while ago, but they cost a few cents more
than the guys who are all sold out now. I'm not sure what they have
today.
So here's what the shortages mean. The public has
turned buyer, 5 months ago, and has remained a buyer, all the way down on
this dip, ever since. This is a monumental sea change in the silver
market.
Dealers used to buy more from the public than the
public sold, but not any longer. Dealers used to think that meant
that "silver is abundant", and so they would not carry any inventory,
but rather, they would sell the extra to the largest player in the
industry, the "refiners" or the largest refiner, such as Johnson
Matthey. But they no longer have any silver to sell the refiner, and
have little for the public, either. This helps to explain why
Johnson Matthey is taking 8-10 weeks to make 100 oz. bars. I think
it's not a shortage of manufacturing capacity, but rather, a shortage of
silver. If you were JM, and if you used to regularly buy silver from
the public at 1% under spot, you would be in no rush to buy silver at spot
from the COMEX either, but that's what they need to do to remain
reputable, and to catch up on orders. But there is a problem.
I hear that JM is 500,000 ounces behind. Also, maybe JM had orders
to deliver to the COMEX? I hear that you cannot have both a long and
short position at the same time!
Scorners and doubters claim
that the public ought to buy 1000 oz. bars from the COMEX, or the dealers
should, and "clean them out". But that's not our job. It's the
job of refiners or mints like JM to buy those clunkers and turn them into
retail product.
It's also the job of the Perth Mint. This is why I raked the
Perth Mint over the coals for having run out of silver. They never
should. They are supposed to have $880 million worth of precious
metal to be used to make inventory available, so they should never run
out, but they did, as I documented. A day or so ago, an internet
email went out promoting Perth Mint, sent by Peter Schiff. I spoke
with Peter about Perth, so he should know better. His ad contained a
blatant lie:
But what might
happen if demand for gold outpaces Perth Mint's supply?
It can't happen - the
Mint literally cannot run out of metals.
Amazing hubris of them to say that what happened, as I documented in
over 10 emails, containing shortage reports at Perth from over
50 readers, cannot happen.
Perth Mint Crisis Watch 5 June 6,
2008
People in Australia may wish to
shop at the following sources, instead:
www.ainsliebullion.com.au/ in Brisbane
www.ausbullion.com.au/ in
Sydney
Another source: ebay.com
http://search.ebay.com/search/search.dll?from=R40&_trksid=m37.l1312&satitle=100+oz+silver+bar&category0=
Silver
at ebay.com is now selling at $4/oz. over spot. But that's likely
because bids were placed before the current price dip. But we should
watch to see if the price premium for physical, instead of paper, grows
ever larger.
Larger traders may wish to purchase 1000 oz. silver
bars directly from the refiners of the world, instead of waiting 2.5
months for 100 oz. bars:
http://www.lbma.org.uk/good_delivery_silver.html
In the long run, as silver prices outpace everything else, the
cost to refine silver into rounds or bars will dramatically decrease,
relative to the price of silver. So if you plan on selling silver
when the price is 20 times higher, refining cost should be about 1/20th
the cost that they are now, and thus, buying cheaper 1000 oz. bars,
if you can afford and find and get the physical bars, would probably
be wise.
But there are
shortages of 1000 oz. bars, too. Remember there are both position
limits, and potentially delivery limits. Position limits are 7.5
million oz., or 1500 contracts for the spot month.
Another form of
silver to consider are the 90% bags of old silver coinage. Minting
costs for 1 oz. silver rounds, these days, is about $1.50 per coin.
Eagles sell for $1.25 over spot to the primary dealers if they buy in
bulk orders of 25,000 oz. minimum, and then resell for about $2/oz. over
spot. I'm sure it would be more expensive to mint silver dimes,
which is why you cannot find silver 1/10th oz. pieces! Yet, you can
buy a silver dime for under $1 each! Thus, when you buy silver
dimes, the silver itself is essentially free, since the product sells for
less than the minting costs!
Some of my readers think my overall
facts on fundamentals of the silver market are wrong, since the price is
"low". No, my facts are correct. The fact is that the silver
shortages were entirely predictable, and were entirely predicted. If
anything, I've warned about this for so long, some people think I've been
crying "wolf". But price manipulation and price fixing must result
in shortages. That's what happens with communism -- Shortages.
The shortages confirm everything!
Get silver. If you
can find it.
I hope and pray that the silver shortages will
not eventually manifest as gas and milk shortages. That tends
to happen as totalitarianism and communism runs unchecked, and when
people fail to understand the importance of free markets, and when the
authorities refuse to allow markets to function.
Once
again, the beauty of silver and gold is that they are luxury items, and
you cannot eat them. This is why higher prices for gold and silver
should hurt nobody, and benefit everyone. Higher prices for precious
metals make mining profitable, which should encourage byproduct production
of essential things like copper, zinc, and lead, which the developing
world desperately needs to be able to continue to industrialize, which
will help them to modernize, and produce the food that the world
needs.
Sincerely,
Jason Hommel
In case you miss an email,
check the archives:
http://silverstockreport.com/ssrarchive.htm
www.bibleprophesy.org
You can buy silver in
lots of 100-500 oz. at my auctions at www.seekbullion.com
Auctions end M-Th, Sat, At 7PM Pacific, but you can place bids anytime, 24/7.
Wires only. USA Shipping only.
You can also buy silver at www.momsilvershop.com
Mom will
ship overseas, and also in lots of more or less than 100
ounces.
See us also at:
Rocklin Coin
Shop
4870 Granite Drive, Rocklin, CA 95677
http://rocklincoinshop.com/
|