I was sitting here writing a post about how even though gold and silver prices are down, dealers are facing shortages of one-ounce bullion coins — and how in the past such imbalances have produced bull markets in precious metals.
Then this video from Mike Maloney pops up, in which he tells the the story perfectly. Here’s a representative quote followed by the video:
“At no time in human history has silver been this cheap relative to gold.”
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Here is a good article to compliment Maloney’s video:
https://www.streetwisereports.com/article/2020/03/18/is-there-a-real-shortage-of-physical-gold-and-silver.html
The main take away from all of this is there is a difference between a real, actual, literal, physical (call it what you will) shortage of a commodity, and an “economic” shortage.
Basically, what can seem like a real shortage may be because the holders of a commodity may not want to sell at a particular price level, NOT because they literally have nothing to sell. On the other hand the same appearance of a shortage may actually be because of a lack of supply.
There is, however, a way to tell the difference, without having to guess: It’s the premiums charged in a dealers BID price. The bid price is what a dealer will pay you for any commodity that you want to sell. If the dealer has plenty of stock (supply) then they will not pay a premium to get more of it, and hence the low bid price compared to the spot price. If the bid premium is low then the dealers don’t really want more supply.
Contrarily, if a dealers premium charged to sell a commodity to you is high it COULD mean it has limited stock, but it could also be because the dealer’s stock was obtained at a relatively higher price and so it doesn’t want to sell at a loss, which is the situation now with silver (and gold to some extent too.) As explained in the article, the prevailing spot price for silver has been just above $17 an ounce for many months so that’s what the dealers paid for their inventory. When the silver price suddenly dropped to $11 – $12 they don’t want to sell it for less than $17 – $18, hence the high sales commissions. If there was an actual physical lack of supply then they would be willing to offer a higher bid price to obtain more.
Bottom line is we are now in a buyer’s market for silver and only “weak hands” sell their silver now. Someday, it will be a seller’s market when the bid premiums will be much higher than spot, because there really will be a dearth of physical, or because dealers expect the future prices will be even higher than the spot futures.
How often have we heard this before. LOL.
Something I’ve never seen before: online retailers have tripled the order requirement for free shipping. This time may be different.
I tried last week end to buy Gold bullions and coins in Bangkok, all shops are sold out, no stock.
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