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Thread: Widespread Silver Bar Shortages

  1. #1

    Default Widespread Silver Bar Shortages

    Widespread Silver Bar Shortages

    By Patrick A. Heller on November 18th, 2010
    Categories:
    Featured Articles, Gold and Silver Commentary, Precious Metals


    As of today, there are no longer any regular wholesale supplies of the 1 ounce through 100 ounce silver rounds and bars available for immediate delivery. It may be possible to locate incidental quantities of some product, but most wholesalers are now promising two to four weeks delivery to allow time for the silver to be fabricated.




    As a result of the shortages, premiums have started to rise. So far, the increases have been modest, on the order of 0.5-2%. However, if the shortage grows, expect to see further and larger premium increases in the coming weeks. We could see a repeat of the late 2008 gold and silver buying frenzy, where product availability got as slow as 1-4 months after payment.

    At the COMEX close yesterday, registered (dealer) silver inventories fell below 50 million ounces. Even if you include the eligible (investor) silver inventories in the COMEX bonded warehouses, which are not available to fulfill COMEX deliveries unless the investor specifically chooses to do so, there were barely 107 million ounces to fulfill around 725 million ounces of contractual obligations. COMEX silver inventories are now down more than 10% from mid-June even while the amount of silver owed has soared!
    As the price of silver almost continuously rose from $17.98 on August 23 to $29.36 mid-day on November 9 (a 63% increase), the COMEX had not changed its minimum requirements for leveraged accounts. It would be a normal process to periodically bump us the minimum amounts for margin accounts as prices rise, but this was not done until November 9, when the margin requirement was increased from $5,000 per contract to $6,500.

    On September 16, the COMEX further raised the silver contract margin requirement to $7,250—even though the price of silver had been dropping since November 9! What is suspicious is that a lot of "insiders" were liquidating their silver positions starting the afternoon of November 15. Is it possible that they may have received advance notice of the coming change in the minimum margin account requirement and sold in anticipation of lower prices the next day?

    The next round of gold and silver options expiration occurs on Tuesday, November 23. The attempt to suppress gold and silver prices upon the release of the US jobs and unemployment report on November 5 was almost a complete failure. Unless something is done to knock down gold and silver prices before November 23, a lot of call options will be exercised, which would further increase the demand for physical precious metals.



    I suspect, as do many others, that the two rounds of increasing gold and silver margin requirements were timed for no other reason other than to try to help hold down prices through November 23.

    Don’t be surprised if supplies of other low premium physical silver products, especially US 90% Silver Coin, dry up, with those premiums also starting to rise. If you are looking to acquire some physical silver, I suggest you act sooner rather than later.
    Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes "Liberty’s Outlook," a monthly newsletter covering rare coins and precious metals. Past issues can be found online at http://www.libertycoinservice.com/ Pat Heller is also the gold market commentator for Numismatic News. Past columns online at http://numismaster.com/ under "News & Articles". His radio show "Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know" can be heard at 8:45 AM Wednesday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.
    -END-



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  3. #2

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    interesting. im surprised a big central bank hasn't demanded a huge gold/silver delivery that would deplete the comex. Maybe it has happened and the bank was paid in cash+premium or something.

  4. #3

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    Quote Originally Posted by cubical View Post
    interesting. im surprised a big central bank hasn't demanded a huge gold/silver delivery that would deplete the comex. Maybe it has happened and the bank was paid in cash+premium or something.
    Most of the call options are held by speculators that have no intention of taking delivery ever. As far as the banks are concerned they are all in this together and I don't see them as wanting to take delivery against JP Morgan.

    Tuesday is expiration date on those options and if the price does not drop below 25 industry will act on those options that they hold. We need to consider what the primary purpose of COMEX is. COMEX is used by industry to insure stable prices much like the airlines buy options on fuel so they can keep prices at a level that can turn a profit. Well industry cell phone, jewelry, bullion dealers etc. will want delivery IMO come Tuesday if the price does not go below 25.

    I would guess more than 100 million oz of those 700 million oz of calls is held by industry and they only have 50 million at COMEX held by dealers and ready for delivery. Could be a big problem? We will just have to wait and see. I would guess that Monday and Tuesday they will try and knock the price down. We will have to see if there are any big guns that smell blood and take them on. Normally all the hedge funds sell out when you get a decline like we had and that has not happened this time. Tuesday will be real interesting to watch - I have no idea which way it will go this time?

  5. #4

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    Yeah, but I doubt China or India's central banks care too much about JPM.

  6. #5

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    This shortage crap happens every time there's a huge push and then a minor pullback. I see it at the coin shops locally, and the same thing happens with the larger companies.
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  7. #6

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    Quote Originally Posted by cubical View Post
    Yeah, but I doubt China or India's central banks care too much about JPM.
    I don't think they are the ones holding the options - I could be wrong and maybe they bought a bunch of calls? I am just looking at who needs the silver and only the real stuff will do. To me that is industry.. No matter Tuesday could get interesting if the price is not lowered below 25.

  8. #7

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    Quote Originally Posted by pacelli View Post
    This shortage crap happens every time there's a huge push and then a minor pullback. I see it at the coin shops locally, and the same thing happens with the larger companies.
    No doubt some of the smaller dealers won't sell silver they bought at higher prices and may say they are out.

    I have spoken to the guys at APMEX and they said it does not matter to them as they hedge by buying calls and they will ask for delivery. The problem they have is getting 1000 oz bars minted into something they can sell retail and that takes time.

  9. #8

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    Bullion is the way to go and many are feeling light.

  10. #9

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    I just started buying recently. When I bought my first batch, almost two weeks ago now, Apmex had all their normal stuff in stock. I bought 20 buffalo ounces and then decided to by some more a couple days ago. They were out of buffalo, but had morgans. I bought 20 of those and they immediately started advertising it as out of stock.

    My original goal was 100 oz by the end of the year. But the Max Keiser thing and the less hyperbolic other stuff I've been reading, even for a novice like me it seems it would be almost impossible for it not to go up substantially, either quickly or not so quickly, but it is going to keep going up for some time.

    Anyway, I decided since I currently have a few spare digital FRNs in my checking account I went ahead and converted some more to silver. I bought 6 ten oz bars to get myself up to a 100 oz now rather than by the end of the year.

    Guess what...

    After I bought those 6 they started advertising them as out of stock.

    Interesting times a'coming.

  11. #10

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    The problem is there are way more buyers than sellers.

    There never have been many sellers of physical silver. Only imaginary paper. You read between the lines.
    Last edited by Arklatex; 11-21-2010 at 04:37 PM.

  12. #11

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    Why is this thread getting so much traffic, I wonder? Over 8,000 views and only 9 posts.
    "One of the great victories of the state, is that the word "Anarchy" terrifies people but, the word "State" does not" - Tom Woods

  13. #12

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    Quote Originally Posted by ClayTrainor View Post
    Why is this thread getting so much traffic, I wonder? Over 8,000 views and only 9 posts.

    Some other site must have a link up to it?

  14. #13
    Moderatorus Emeritus Cowlesy's Avatar
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    Is anyone really worried that the world is going to run out of silver to mint into bars/coins, sending the price spiraling out of control?

    I really feel like there will just be delays like 2008.
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  15. #14

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    www.321gold.com has it linked.... it is a good site by the way

  16. #15

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    Quote Originally Posted by Cowlesy View Post
    Is anyone really worried that the world is going to run out of silver to mint into bars/coins, sending the price spiraling out of control?

    I really feel like there will just be delays like 2008.
    If investors keep buying up silver there will not be enough for industry to make all those gadgets like ipods and wash machines. If that happens and at some point it will prices will take off. When is the question and is this that time? I sure don't know - I can say it sure looks like a different market than it has in the last 10 years?

    You may be right just like 2008 all a person can do is wait and watch.

  17. #16

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    Quote Originally Posted by RonPaulGetsIt View Post
    www.321gold.com has it linked.... it is a good site by the way
    That is a good site and silver and gold investors visit there a lot. Maybe some will find this site and join as they all seem to follow Ron Paul.

  18. #17

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    Wow, I just looked at APMEX's site and the OP is spot on. Very few silver anythings for sale but no bars under 10oz to speak of. The Silvertowne 10oz'ers are nice. I bought a couple of them when they were $130. Now $300. Wish I had bought more.
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  19. #18

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    Sounds like I need to visit my local coin shop today.
    I compiled a "brief" history of events since October 2008 that are defining the global currency war and the role that gold is playing:

    Tin Foil Hats, Economic Reality and the Total Perspective Vortex

    Also, have you contacted your Congressional Rep and asked them co-sponsor Ron Paul's Rep. Paul Broun Jr.'s HR 1098 77: Free Competition in Currencies Act?

  20. #19

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    Nothingburger. This happens all the time with gold too, basically your small timers buy up a lot of the small amounts <=1oz gold or <=100oz silver so that runs out, meanwhile there are tons and tons of LGD bars just sitting there.

  21. #20

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    Quote Originally Posted by PeacePlan View Post
    ... Tuesday is expiration date on those options and if the price does not drop below 25 industry will act on those options that they hold. We need to consider what the primary purpose of COMEX is. COMEX is used by industry to insure stable prices much like the airlines buy options on fuel so they can keep prices at a level that can turn a profit. Well industry cell phone, jewelry, bullion dealers etc. will want delivery IMO come Tuesday if the price does not go below 25. ...
    Looks like COMEX is going to be fubared if the current trend holds. Silver approaching $28 now. Will the CME raise margin limits for the 3rd time in two weeks?
    I compiled a "brief" history of events since October 2008 that are defining the global currency war and the role that gold is playing:

    Tin Foil Hats, Economic Reality and the Total Perspective Vortex

    Also, have you contacted your Congressional Rep and asked them co-sponsor Ron Paul's Rep. Paul Broun Jr.'s HR 1098 77: Free Competition in Currencies Act?

  22. #21

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    Quote Originally Posted by inibo View Post
    I just started buying recently. When I bought my first batch, almost two weeks ago now, Apmex had all their normal stuff in stock. I bought 20 buffalo ounces and then decided to by some more a couple days ago. They were out of buffalo, but had morgans. I bought 20 of those and they immediately started advertising it as out of stock.

    My original goal was 100 oz by the end of the year. But the Max Keiser thing and the less hyperbolic other stuff I've been reading, even for a novice like me it seems it would be almost impossible for it not to go up substantially, either quickly or not so quickly, but it is going to keep going up for some time.

    Anyway, I decided since I currently have a few spare digital FRNs in my checking account I went ahead and converted some more to silver. I bought 6 ten oz bars to get myself up to a 100 oz now rather than by the end of the year.

    Guess what...

    After I bought those 6 they started advertising them as out of stock.

    Interesting times a'coming.
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  23. #22
    Member Bruno's Avatar
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    Wow, 14,000+ views!

  24. #23

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    Quote Originally Posted by PeacePlan View Post
    Tuesday is expiration date on those options and if the price does not drop below 25 industry will act on those options that they hold. We need to consider what the primary purpose of COMEX is. COMEX is used by industry to insure stable prices much like the airlines buy options on fuel so they can keep prices at a level that can turn a profit. Well industry cell phone, jewelry, bullion dealers etc. will want delivery IMO come Tuesday if the price does not go below 25.

    I would guess more than 100 million oz of those 700 million oz of calls is held by industry and they only have 50 million at COMEX held by dealers and ready for delivery. Could be a big problem? We will just have to wait and see. I would guess that Monday and Tuesday they will try and knock the price down. We will have to see if there are any big guns that smell blood and take them on. Normally all the hedge funds sell out when you get a decline like we had and that has not happened this time. Tuesday will be real interesting to watch - I have no idea which way it will go this time?
    Any news on what happened with the options expiry?
    I compiled a "brief" history of events since October 2008 that are defining the global currency war and the role that gold is playing:

    Tin Foil Hats, Economic Reality and the Total Perspective Vortex

    Also, have you contacted your Congressional Rep and asked them co-sponsor Ron Paul's Rep. Paul Broun Jr.'s HR 1098 77: Free Competition in Currencies Act?

  25. #24

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    Quote Originally Posted by Bern View Post
    Any news on what happened with the options expiry?
    Yeah, a bunch of silver talk I don't understand.



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  26. #25
    Member Melissa's Avatar
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    Is this when I am glad I at least bought a few lol

  27. #26
    I compiled a "brief" history of events since October 2008 that are defining the global currency war and the role that gold is playing:

    Tin Foil Hats, Economic Reality and the Total Perspective Vortex

    Also, have you contacted your Congressional Rep and asked them co-sponsor Ron Paul's Rep. Paul Broun Jr.'s HR 1098 77: Free Competition in Currencies Act?





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