Just in the course of this week, the availability of several forms of physical silver has tightened.
A few days ago, it still looked like American Silver Eagles would be available for delivery in about three weeks. Today we were told by one of the US Mint’s Primary Distributors that more 2011-dated Silver Eagles for orders placed today would not be shipped until June.
As a result, premiums are increasing. Today APMEX, a US Mint Primary Distributor as well as a retailer was offering for immediate delivery some US Mint-sealed 500-coin boxes of 2009-dated Silver Eagles for just under $33,000. At that price, buyers would be paying almost $66 apiece! APMEX is willing to take orders for 2011-dated Silver Eagles for delayed delivery at prices that range from $5.49 (for 500 or more coins) to more than $8.00 above the spot price.
There has been some liquidation of 100 ounce ingots this week, so their supplies are not so tight. However, smaller bars are flying out of dealer inventories almost as soon as they arrive. For instance, at my own company, if we unexpectedly purchase a few hundred 1 ounce silver rounds lately, they are invariably all gone within 1-2 hours. Most customers looking for a quantity of 1 or 10 ounce ingots are now having to wait up to a month for delivery.
One of the larger coin dealers in the metropolitan Detroit area told us today that he has not been able to secure any physical products to have available for immediate delivery for a week now!
Naturally, there are a few wholesalers who have some live silver in stock, but they seem to be pricing their inventory at premiums about 50% higher than what it would cost for delayed delivery. My own company has a ready supply of US 90% Silver Coin in stock at reasonable premiums because that is where the capital of this company is invested. In other words, we keep a much higher inventory of 90% Coin than what we would need for typical trading activity. But I have heard stories of national competitors who have not had any 90% Silver Coin to sell for up to two weeks.
I expect these supply shortages and higher premiums will get worse before they get better.
Today is the first day of notice for delivery of COMEX May silver contracts. If someone holding a long contract did not want to take delivery, they need to have sold out their position before the market closed yesterday. As of the COMEX close the previous day, there were still more than 134 million ounces owed for open May silver contracts. The total COMEX registered silver inventories dropped to less than 34 million ounces, its lowest level in years.
It looks like we will see a repeat of what happened when the COMEX March silver contracts matured. Then, a higher than normal percentage of contracts were settled for cash rather than by delivering physical metal, with a surprising number being settled for prices at least 30% above the silver spot price!
Don’t be surprised if the silver spot price reaches at least $60 by the end of May. Also don’t be shocked if it becomes almost impossible to acquire physical silver for immediate or short-term delivery.
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 bimonthly columns on collectibles can also be read at http://www.lansingbusinessmonthly.com under “Articles” and “Department Columns.”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.