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Guess who is running low on Silver! - Page 3
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Thread: Guess who is running low on Silver!

  1. #21
    Join Date
    Apr 2008
    Posts
    597

    Default Local Phenomenon?

    ...I traveled to an "hour away" city today to take care of some other business. While I was in this other city, I stopped to shop at three small dealers I have done business with at times, over the years. In my city, there are only two coin shops. One shop has always had very little silver, but my main source, the other dealer, has always had a substantial supply of silver, up to 1000 oz. As of a week ago, Monday, my main supplier, who has become a good friend over the years, had sold everything but a few $1000 face bags of junk silver. Concurring with 'JesterJay', I have discovered that there still are sellers out there, and I have been able to purchase some 1 - 10oz. items immediately after they were sold. However, in discussions with my friend about his renewal of supply, it seems that there is actually a "parallel market" developing. For example, dealers who have previously supplied my friend, have increased their premiums for purchases, and extended their time periods for delivery...creating a situation which requires him to raise his traditional fees over spot. Rather than reconstruct a years-old financial relationship with his customers, and possibly losing some of them in this very small market, my friend has restricted his current trade to Junk Silver coin, which remains within its traditional parameters, and typically sells whatever bullion he can accumulate, the day he purchases it in small amounts from individual customers.

    My journey today was very interesting. I discovered one supplier who was in the same exact situation as my friend, and another supplier who had raised their fee from 50 cents over spot to $1.00 over spot, but who had only one 100 oz. bar, five 10 oz. bars, and a few assorted rounds left. The third dealer had raised their fee to $1.60 over spot, but stated that he could supply 100 to 1000 oz. bars within 48 hours, and had three 100 oz. bars on-hand, but only a few (maybe 20-30) A-Mark rounds apparent. I had already purchased the 150 oz. I had previously found at $1.00 over $17.21, but negotiated a "potential" reduction to $1.30 over spot for purchase of 1000 oz. or more.

    The end result of my day was that I had achieved my goal for purchases, which I had budgeted, but at a premium of $82.50 over my usual fee. I was also subject to a 3% higher tax rate than where I live. My discovery of the availability of 1000 oz. ingots possibly reflects one person's willingness to part with them, but only at a premium. I think there is plenty of silver available, right at the moment, but that the "traditional" market is bent, and in some places, totally broken. Further, one oz. purchases are still gaining momentum, even as the "apparent" supply is becoming non-existent. A dollar to two dollars over spot may not be too significant to someone buying only a few ounces, but by the 100's and 1000's of ounces, those dollars more closely reflect the "parallel" or "shadow" market that seems to be developing. I've really never seen anything like this...as individual dealers run out of inventory, the few remaining ones appear to be setting the price points. I figure my education today was worth the extra $s spent, and I am waiting to see the next rabbit out of the hat. Down here in the real world...spot price is starting to be meaningless.

    I have always trusted silver far more than dollars, hence, my savings just happens to be something I can carry, as opposed to a mag-strip on a plastic card. I don't fancy any "dooms-day" scenarios, as there is the reality of needing a street-level market in which to trade silver, if that comes to pass. I do, however, see the age-old forces of supply and demand, where silver is concerned...and even though there is an incredibly small proportion of people who are aware of this commodity's value, there is enough demand to push this actual price over the "stated" price. Further, I think that most of the contributors to this forum represent the few of us (the population in general) who see silver for what it truly is...a vehicle for stored value. The key here is "stored". Since the beginning of time, silver has simply been one of the symbols of value, like diamonds, or gold, or even livestock. The futures market views silver much differently. On paper, players with vast amounts of capital likely cannot resist trying to control the SLV variable, on the chance that they will outsmart the other guy. Ironically, when it is all said and done...paper will not pay someone to dig a grave to bury you.

    I have seen gleeful laughter expressed in this forum over the prediction of a fall in silver, implying that this person had bailed out on their holdings before some of us suckers fell with it. I think I just smiled at that one, because while this person was making his millions, I was celebrating life, and surfing with my son. Today, I realized that I really never sell silver, I just buy a little when it falls into my reach. I also realized today that there may be a time when I won't be able to find any silver, for any price...not because the index says so, but because there just isn't anybody willing to sell. What then? Kitco can say that it's five cents an ounce today, but who will take my nickel?

    God bless everyone...and thanx for the insight.

  2. #22
    Join Date
    Mar 2008
    Location
    Australia
    Posts
    643

    Default Dealer Margins in Australia

    I guess its a matter of what you are used to. I'm new to silver since February and was investigating purchasing my first bullion this morning and received a very rude shock when the dealer advised he would charge 12.5% over the Perth Mint Spot price on both purchase and sale. I haven't had a chance to shop around further today, but he said that he had none in stock and this represented about a 2% margin on top of the Perth Mint's delivery costs to him.

    I just can't figure out how buying physical silver makes any sense with those added costs. Any Aussie out there know if this is the standard in Australia?

    What are the cheapest sources of bullion in Australia?

  3. #23
    Join Date
    Mar 2008
    Posts
    42

    Default

    Hi Gino,
    Interesting post as I too live in Perth. Can I ask you who the dealer was that you went to?
    Its hard to get bullion anywhere in Australia at the moment but I did hear there was a place in Melbourne that had 100 ounce bars, except they don't deliver to Perth!
    But this is what I thought would happen - that there would be two parallel markets for silver paper and bullion. A 12.5% loading is significant already - perhaps one day it will reach 50%.

  4. #24
    Join Date
    Mar 2008
    Location
    Australia
    Posts
    643

    Default

    Hi Elixer, I'm in Newcastle . . . east coast. This guy was one of the few dealers here. He said a couple of other interesting things:
    1) Delivery from Perth Mint was 1 week;
    2) There has been an increase in public demand;
    3) 1kg bars are the most economical way to buy, while maintaining ease of resale - all coin/bullion dealers will buy 1kg, demand deminishes above that;
    4) Dealers were not buying during the March price spike because it was transitory and they didn't want to get burned (his opinion).

    But do you know what fair value in buying bullion from a dealer is? Seriously, at 12.5% on-cost, the metal has to double in value before there's any money in it.

  5. #25
    Join Date
    Mar 2008
    Posts
    42

    Default

    I'd be amazed if you can get delivery from Perth within a week - they have been quoting everybody else 6-8 weeks, which is pretty vague in itself. They don't seem to actually mint silver themselves, I get the impression they just buy in from a production house somewhere, maybe even over east.
    I don't know what fair value would be from a dealer - maybe someone else could enlighten us?

  6. #26
    Join Date
    Mar 2008
    Location
    Australia
    Posts
    643

    Default t'ain't so bad

    Well, I can't be sure without the experience of placing an order, but I have earlier in the week discussed availability and lead times with the Perth Mint, and they were consistent with the local dealer's comments.

    Regarding fair value for dealer margins, for 1kg silver bars, the Australian Bullion Company in Sydney offer a 4.08% margin over the spot bid price (their sell) and then 2.51% under the spot ask price (their buy).

    Apparently one can purchase over the counter, no added freight or insurance costs, but I am unsure of their current level of stock. I will be talking to them on Monday.

    Sorry if this is off-topic, I just wanted to correct any impression I might have created of bullion dealers over-charging in Australia. Seems like I may just have a very helpful rogue here locally. Looks like I have an additional reason to go to Sydney next time.

  7. #27
    Join Date
    Mar 2008
    Posts
    32

    Default

    The following was posted by Money Morning - part of the daily Reckoning org.
    "Silver Shortage – Not Yet

    We mentioned the possibility of a silver shortage in an earlier edition of Money Morning. Internet rumours had it that silver investors who in possession of depository certificates at the Perth Mint weren’t being redeemed for physical silver. Was there any there? Or was silver in short supply?

    Nigel Moffatt, Treasurer at the mint, was kind enough to call us yesterday, to clarify the issue.

    We won’t go into the details, but the mint basically holds a lot of its silver in London, where it can be insured. It only holds a certain amount of silver in Perth, which isn’t enough to cover outgoings if every deposit-holder claims their metal at the same time.

    Long story short…it was the rumour of a shortage itself that caused a lot of demand for deposits at the one time. The Perth Mint couldn’t redeem all the silver at once, because it's expensive to move silver from London to Australia. The mint does, in fact, have enough supply to cover orders for deposit redemption. Precious metals investors may breathe a sigh of relief.

    Good investing,
    Al Robinson"

    Interesting claim. Is the holding in London paper or physical?

  8. #28
    Join Date
    Mar 2008
    Location
    Australia
    Posts
    643

    Default

    That is interesting and a bit worrying. It would only take some new legislation in the UK to halt exports of PM, in a financial crisis, say. Mmmmm . . . food for thought.

    Regarding the "shortage" I was talking to the Australian Bullion Company this morning (& placed my first order for bullion!) and they said:
    1) They don't have any 1kg bars in stock;
    2) Delivery on orders was 2 to 3 weeks for minting;
    3) "Everybody wants Silver at the moment"
    4) Q. Why? A. "There are internet claims of a shortage"; and
    5) We have a neat certificate program to get around the need for you to take receipt . . . interested? (my intonation)

    Seems like it might really be a big confidence game where all the players a banking on nobody calling their bluff.

    I'm starting to understand Hommel's efforts a little more clearly, Christian fanaticism aside.

  9. #29
    Join Date
    Mar 2008
    Posts
    32

    Default

    Another question which was raised recently is relevant if all their silver is not in the Mint is this: Whose silver do you look at when you go to inspect "your" silver? How many times have those bars been shown to their "owners"?

  10. #30
    Join Date
    Mar 2008
    Location
    Australia
    Posts
    643

    Default

    If they over-subscribed their silver certificates that would simply be fraud and I doubt we have come to that.

    All of my enquiries, have confirmed they are serious about their obligations of covering certificate commitments, but on review of my correspondence, they never did explicitly state that they physically warehoused all the PM required to cover those commitments in Perth.

    No, what is concerning to me, is that they may be reliant on the promise of a third-party to meet their commitments and that certificate holders (like me) may be unwittingly exposed to risks associated with the trading in commodity futures.

    Needless to say I am seeking validation at the moment.

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