There’s A Supply Problem In The Silver Market

We’re seeing more buying interest than at any time since the 2008 financial crisis. If we see a further spike in demand, the whole supply chain could be cleaned out. – Money Metals Exchange LINK

I spent a lot of time discussing the Provident Metals situation with my friend on whom Provident defaulted on delivery of the 10 oz RCM bars.  It’s not Provident’s fault per se, other than the fact that they took his money for a bar that they represented as being in stock.  Instead, Provident was waiting for the delivery of the bar from the Royal Canadian Mint.

In the past after 2008, pre-selling silver that was presented as “in stock” but was on order from the U.S. or Canadian mint was not a problem.  Supply of silver blanks was adequate.  It’s not a problem til it’s a problem.  And now it appears to be a problem.

Provident made the situation worse for itself by using the old “the dog ate my homework” excuse when it stated that it had an internal inventory problem.  That excuse is an insult to the precious metals audience.   This segment of the market is not the CNBC audience.

An now we have unintended consequences of the U.S. Governments effort to drive physical gold and silver out of the system:

Public demand for gold and silver coins, rounds, and bars suddenly skyrocketed since mid-June – particularly among first-time customers – to multiples of earlier demand levels, according to Money Metals Exchange, a national precious metals dealer in the U.S.

From June 16 to July 31, Money Metals Exchange experienced a 135% surge in gold and silver sales over the prior 45-day period (which was representative of the early months of 2015). Since June 16, the number of first-time customers rose even more dramatically, with 365% more new purchasers than the prior period.  – ( Mac Slavo’s SHTFPlan.com as sourced from Silverdoctors.com)

Not only is retail mint demand spiking up to the extent that it’s depleting the ability of western mints to provide enough supply, but Indian demand for gold was unusually strong in July:

There is growing speculation that around 80 tonnes of gold may have been imported into India in July – though this will not be confirmed until the first official estimates are published mid-month.

If confirmed, the number would be nearly double initial market expectations of 40-50 tonnes. In July 2014, official estimates valued gold imports at $1.8 billion – which at the time equated to around 43 tonnes.  – Fastmarkets.com

Furthermore, massive deliveries continue to flow into the Shanghai Gold Exchange, as delivery volume Monday was “an immense” 85.5 tonnes, which followed Friday’s 45.6 tonnes (sourced from John Brimelows “Gold Jottings” report). As JB ominously states: “Something is happening in China.”

When I first started looking at the precious metals markets in 2001 – and all of the related geopolitical and economic issues connected to gold and silver, aka real money – I was intrigued by GATA’s assertion that eventually the demand for physical gold that was required to be delivered to the buyer’s possession would eventually blow up the paper gold/silver manipulation scheme.

While it’s taken a lot longer than any of us could have possibly predicted as I don’t think any of us foresaw that extreme degree of fraud and corruption that has been allowed to completely engulf the western political and financial systems, I believe that we are on the cusp of Bill Murphy’s “commercial signal failure.” This occurs when the bank manipulators are unable to fulfill paper gold and silver delivery obligations and the price of physical gold and silver completely disconnects from the fraudulent paper prices set on the Comex and the LBMA.

15 thoughts on “There’s A Supply Problem In The Silver Market

  1. Dave …. you’ve been throwing around some big numbers regarding the SGE volume lately …. can you provide some hard data other than quotes from Brimelow? …. as I haven’t seen Koos Jesen (or any of the other guru’s) confirm any of these rather large numbers yet.

    1. Ya you can go to the SGE website. They publish the data. I don’t go there everyday because
      we subscribe to Brimelow’s newsletter

      1. BTW – Your doing a great job trying to keep everyone abreast of the situations in Paper Gold/Silver …. which is a rather murky topic at best.

  2. I buy all of my metals at Provident by personal check.

    Around Jul2, I bought 4 1/10th oz gold cards and a 4 measly oz of silver to round out a batch of 40. About 600 bucks.

    The check cleared my bank on the 9th- then Provident said it had to clear theirs which makes no sense to me. At any rate, by Jul 21, I still have heard nothing. No shipment. I write an email. They respond back by telling me they will ship that day or the next which they did. From start to finish the transaction took nearly a month.

    Here’s the problem. The gold price dropped the entire month. It was in Provident’s best interests to simply hang onto bullion as long as they could-they could buy it at a steeply discounted rate in relationship to the price when I ordered it.

    I’m not sure I care for bullshit practices like that. Maybe they think this is our first rodeo. Still wondering if I’m going to do business with them any longer.

  3. “In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.”
    — Rudiger Dornbusch

  4. While I like seeing the price rise on metal, you can’t help but wonder what they are up to in the tick pond. These markets are increasingly schizophrenic, seem’s like we’re back to the rising vapour volume days’ on the Dow. It is amazing how they conjure this stuff with their infinite monopoly on credit.

  5. Dave said,
    “Furthermore, massive deliveries continue to flow into the Shanghai Gold Exchange, as delivery volume Monday was “an immense” 85.5 tonnes, which followed Friday’s 45.6 tonnes (sourced from John Brimelows “Gold Jottings” report). As JB ominously states: “Something is happening in China.””

    First off, I think you are quoting deliveries into SGE.. not deliveries out.. right? This would be like the bars being shifted into Comex deliverable.. maybe? Anyway, I was wondering Dave, considering your quote above, when this “something” that is happening in China might be coincident with their getting snubbed by the IMF regarding SDR inclusion? It would be interesting to look at this data series that you are quoting in that light.. have things shifted into some kind of high gear since China got snubbed? Are they sucking the world dry before they pull the trigger on their revenge? Thanks, 1Kg Lunar Dragon

    1. Not sure about revenge but yes I’m talking about deliveries IN to the SGE. Gold has be move IN to the SGE before it can be withdrawn OUT of the SGE, right? Everyone focuses on withdrawals because “prince” Koos says withdrawals are the metric to track. BUT, Chinese law says that ALL gold purchased in China must FIRST pass through the SGE, which means withdrawals are dependent on deliveries.

  6. I have purchased a substantial amount of metal from Provident and I’ve never had a problem.

    A while back I talked to a local dealer that matched provident’s prices for me on good sized order. He said, “I don’t know how provident prices their metal like they do. All I can figure is that they don’t really care what their spread is and they either hedge or take some losses.”

    Dave, you know this dealer and we have talked about him in our emails. It might be he was on to something. If there is a canary in the coal mine, it seems to be when prices don’t make sense compared to the competition. Look what happened to Tulving. People went there because prices were low, then one day they were exposed.

    I don’t know if Provident is having problems, and I appreciate that they were honest, but it does make me nervous for sure.

  7. The ‘Big Long’ – Goldman Sachs And HSBC Buy 7.1 Tons Of Physical Gold

    Summary

    On August 6, 2015, Goldman Sachs, which has issued very bearish forecasts on long-term gold prices, took delivery of a 3.2-ton purchase of physical gold.
    On August 6, 2015, HSBC which also claims to be bearish, took delivery of a 3.9-ton purchase of physical gold.
    In both cases, the purchases are registered as being for the benefit of the bank’s own house account, rather than the accounts of customers.
    Investors should do as the banks do, not as they say.

    On August 6, 2015, Goldman Sachs (NYSE:GS) and HSBC (NYSE:HSBC) took delivery of a sum total of 7.1 tons of physical gold. No, I have not made any typographical errors. And no, I am not talking about electronic paper claims. I am talking about shiny yellow metal stuff that you can touch and feel.

    The gold bars were not purchased for bank clients. They were purchased for the banks themselves. How do I know this? They are designated by the exchange as being for delivery to the bank’s “house” accounts at COMEX, not to client accounts.

    Goldman Sachs, alone, took 3.2 tons worth of physical gold bars. Yet, even as the firm builds its stockpile, Goldman tells clients not to do it. According to Goldman’s Jeffrey Currie, the long-term outlook for gold is bleak.

    “In longer term, we definitely like playing this market on the short side. We think we are in a structural bear market, not only in gold, but across the commodity complex, as the individual commodity stories are reinforcing to one another, creating a negative feedback loop.”

    In spite of the antics in the paper-gold market, we know the physical market is on fire. Demand will exceed known supplies by at least 1,350 tons in 2015. More in 2016. But, that won’t stop someone from setting up the paper market in order to buy from the physical market very cheaply. This is because the mysterious gold “supplier of last resort” will fill COMEX physical delivery demand, for the moment at least, no matter how high it rises, and no matter how low other supplies may be.

    They bought 3.9 metric tons at COMEX, no doubt at rock bottom prices, and it was just delivered into the bank’s house account. Note that we are NOT talking about paper-gold. Both bought physical gold bars! Apparently, top Goldman and HSBC executives are “gold bugs.” They do not, apparently, believe in the promises made by the gold trust (NYSEARCA:GLD), or at least they are not willing to use the trust’s shares as a substitute for hard metal bars.

    http://seekingalpha.com/article/3421396-the-big-long-goldman-sachs-and-hsbc-buy-7_1-tons-of-physical-gold

  8. BE VERY WARY of provident metals. They must be experiencing some serious financial problems below the surface. I’ve used them for years and never had a problem. last month I sold them back some gold phils. They agreed to pay spot plus $8 for the coins. When they got the coins they refused to honor their commitment and said they would only pay spot. Take it or leave it. Of course I “took” it because They only “stole” $160 from me, while the insurance alone to send the coins a second time would have cost me $200. Only a company in trouble does this to a long time customer. BE CAREFUL My FRIENDS.

    Icarus

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