Don't Confuse the COMEX Spot Prices with Retail Reality--Bullion Coin Supplies are Tight!

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I was recently chided by one of my readers for being "dead wrong" about the direction in the spot price of silver. I had to laugh about that. The COMEX spot price of both silver and gold have indeed been pushed down in recent weeks. But this is an artifice. This has been attributed to some massive and well-orchestrated short selling in the futures market. The spot market typically echoes moves in the futures market. This short selling has distorted the COMEX spot price significantly. This distortion has become so pronounced that at this point the official COMEX prices do not reflect reality.

I am getting reports from SurvivalBlog readers throughout the US, Canada, several nations in Europe, Argentina, Taiwan, and Japan that the consumer level supply of silver bullion coins--both 1 ounce .999 fine trade dollar "rounds" and circulated national mint coinage--is so tight that dealers are now paying as much as 60 cents per ounce over spot and selling for as much as $11 per ounce over spot! That is twice the spot price. This is amazing news when you consider that traditionally dealers have paid just below spot, when they buy coins. Here are just a couple of those reports. First, from reader O.E.:

"...I read with wonder the letter from the gentleman asking if you are going to apologize for recommending silver. Has he tried to buy any physical silver recently? We are seeing fairly widespread shortages of retail investment silver. What we have now is a two tier price system. One that harks back to more sinister times. You have the "spot" or official price, at which it is nearly impossible to find silver at, then you have the "physical" or market price which if you look on eBay, or the few bullion dealers who get stock is in a range of $15-$20 per ounce! Its a shame that eBay is one of the few remaining examples of a more or less free market. These major bullion dealers are now paying over spot to buy metals from individuals. Ditto for gold, gold is going for well over $1,000 per ounce in the "physical" market! So I recommend that people read between the lines and not believe everything "they" [in the mainstream media] say is so. It is my belief that market manipulators are using metals prices in a way that will flush out the weaker holders..."

The next report comes from reader Jonathan X.,:

"I noticed a swift change end of July into August - When the Dollar found this freakish footing. The Dollar had been trading to the Euro around $1.55-$1.59. But then almost overnight strengthened 10% and it was back to $1.40-$1.45. (Making US Exports more expensive and less attractive).

What changed was that suddenly I could sell a single 1 oz round for a $0.35 profit [over spot] for a single round. Since I started tracking the market I would take $0.60 loss to sell a single 1 oz round. (Which is where the dealer makes most of his profit.) But suddenly the law of supply and demand got throw out the window. The [COMEX spot] silver price dropped but they were selling at first for $1.25 over spot, then $1.50 over spot, and now $2.00 over spot and still paying a premium [at the purchase end].
I called several dealers the other day, but I found just one dealer who had any actual Silver [physically] on hand. He said that he had only about 50 generic 1 oz rounds. These are just Holiday silver rounds stamped .999, with Christmas tress and Santas. He wanted $6 over spot.

Physical silver is hard to find - dealers are selling on order cash up front and [you can expect to wait] 4-6 weeks for delivery."

It is noteworthy that he mentioned "Holiday" coin issues. These are one ounce ingots and rounds that are minted for use as Christmas gifts. These have heretofore been treated with such utter disdain by coin dealers that when buying them on the secondary market they pay only the scrap price of silver for them --not nearly the coin or ingot price. (The latter has always been much closer to spot.) Presently, Canadian Maple Leaf and American Eagle silver 1 ounce coins are selling for as much as $12 over the "official" spot price of silver. Talk about market price distortion!

The bottom line: Do not believe the mass media propaganda that has been generated by current spot prices of silver and gold. In relation to the consumer bullion market, the COMEX spot price fixes are illusory. Silver and gold are presently both bargains if you can find anyone willing to sell their coins. I predict that the retail bullion prices of precious metals will be sharply higher in the next few months and then even higher still when the full inflationary impact of the Mother of All Bailouts (MOAB) is felt in the macro marketplace. Buy every bit of silver and gold that you can lay your hands on if they are being sold anywhere near the artificially low "official" spot prices. Silver dipped to under $9.60 per ounce on Thursday. Buy! (Again, if you can find any.)

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This page contains a single entry by Jim Rawles published on October 17, 2008 9:24 PM.

Odds 'n Sods: was the previous entry in this blog.

Letter Re: Cemeteries as G.O.O.D. Overnight Bivouacs? is the next entry in this blog.

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