Just remember, when it comes to buying and claiming ownership on gold and silver bullion, possession isn’t 9/10ths of the law, it’s 11/10ths of the law. – Investment Research Dynamics
A good friend of mine scraped together $150 and sent a check to Provident Metals in order to buy one of the Royal Canadian Mint 10-oz bars they were advertising as being in stock. He used Provident for the time ever because they advertised the lowest premium on this bar. He was told by Provident that he had to wait until his check cleared and then wait another five days before they would process his order.
I can understand the first requirement but I knew something didn’t smell right when he told me the second condition. So up to this point they’ve had his money for about 10 days and have not processed his order or sent him an update.
Today – ironically one day after he told me the above story – he gets this email note from Provident:
The Royal Canadian Mint has suspended RCM 10 oz Silver bar sales indefinitely. Due to a sudden surge in demand for RCM products, there has been an unforeseen production and allocation error by the Royal Canadian Mint. We will not be receiving our shipment of RCM 10 oz Silver bars. This coupled with an internal inventory discrepancy has effected a few of our customer orders. We have been working diligently each day to secure RCM bars through various sources for our customers at any cost. Unfortunately, we were unable to fulfill some orders, including yours.
We are committed to each of our customers, and we would like to discuss with you how to reconcile this dilemma. Please call our Customer Service Department (800-313-3315 option 4) at your earliest convenience.
I highlighted the section in red and underlined it for point of emphasis. That is a pile of bullshit that Provident has served up to people who prepaid for these bars. They took money in and pre-sold bars they did not have in inventory after representing that they did have them in inventory.
While this part of the story is extremely interesting and everyone needs to be careful about sending money to any online bullion dealer – especially after the collapse of Tulving and the very recent collapse of Bullion Direct – the more interesting part of this story is the RCM suspension of production and sales of the 10-oz bar.
Why has the Royal Canadian Mint suspended production of a silver product that has a lot of demand but they have not suspended production – yet – of silver maple leafs? Because suspension of 10 oz bars doesn’t make news but suspension of 1 oz maple leafs does make news. They stopped the bars because they can’t get ahold of enough refined silver to make both.
There were no news announcements like there would have been if the RCM had suspended sales of maple leafs. The only reason I knew about this is because Provident defaulted on delivering the bars to prepaid customers.
This gets to more serious issue. At some point there is going to be a severe shortage of available silver in all forms. Bill Murphy’s source in London is right when he warned about rumors circulating around LBMA traders that there was going to be a serious shortage of silver at refiners this fall.
Retail demand is starting to go parabolic. APMEX today sold 100,000 silver eagles in 5 hours. They have announced on their website that they are out of stock of the “random year” 1 oz silver eagle coin product – click to enlarge:
My bet is that the U.S. and Canadian Governments have directed their mints to do whatever is necessary to keep producing silver eagles and silver maple leafs. But they will not be able to contain the wave of demand for gold and silver at the retail level:
Bullion coin sales soared for a second month in a row, U.S. Mint figures for July show, with American Gold Eagles the highest in 2-1/4 years and American Silver Eagles the best since January despite a nearly 3-week suspension in sales. – CoinNews.net
Not only that, but India’s demand for gold is accelerating as we enter India’s largest buying seasonal buying period in a couple weeks: Gold imports up 61% at 155 tonnes in April-May – LINK
And we know that deliveries of gold into the Shanghai Gold Exchange is starting to go parabolic (see my post from August 6th – LINK).
The manipulation of the price of gold and silver is starting to show serious unintended consequences. There is a serious shortage of available bullion coming at us and the first sign of this is the email notice above my friend received today.
As I told my buddy: from here on out, if you want to make 100% sure that you will get the bullion you pay for, take the $150 you should be getting back from Provident and go to a local coin dealer with cash and buy from him. At least you will have the bullion in your pocket at the same time you tender payment.