TIL when physical silver distributor selling at promotional price

TIL when physical silver distributor selling at a promotional price, chances are the prices of silver will probably went downhill from there.
I bought 25 1 oz Canadian maple leaves 2 weeks ago when the promotional price is at 19.40/oz. Now the price is lower. *headshot*




PS: Sorry if this thread isn't suppose to be at this subforum. (please move this to some other place if not suitable, thanks)

 

Seems like you're in the right place to me.

I've heard this theory before - that an indicator prices have peaked is distributors offering promo prices. I guess they sometimes end up overstocked because if demand is less than expected it both means they need to clear stock, and price is going to go down due to lack of demand.

 

Yup. The right place, just that I need to remember this lesson in the future.

Or else I'm gonna pay more. Hurts like hell considering I'm just an average guy earning a normal salary.

 

They don't know anything special, if they did then they be rich from shorting etc and not selling PM's at low margins.
Likely it's just that sales are slowing because prices have gone up, and they need a sale to promote sales and get cash flow going again. Silver just naturally cycles most times anyway so it's just that happening.
Look at the last 6 months, odds are that silver will likely correct again and go back down a fair bit:

 

Two weeks later? It's usually the next day for most people :lol:

 

I'm not saying they know anything, I'm saying they have the same root cause. Overstocking and a spot price drop are both symptoms of a drop in demand, so they might be correlated.

 

With the margins in the PM industry over all, being in the supply chain for blanks would be like playing corporate Russian roulette. The margins dictate "Just in Time" delivery but no one in the chain have the fat to cope holding more silver than they need, hence it is my view looking from the outside, they is a lot of inefficiencies.

If possible PM industry is worse than the perennial low margin Personal computer industry, who at least know the prices will be good for 1/2 year before prices started to drop.

However with PM, technically a cog in the chain could go broke with simple bad timing, imagine buying at spot today as a blank manufacturer to deliver to mint next month millions of blanks but during the time spot goes down 20%. Potentially wiping out any profit before they even on-sold it.

Someone reported that it is crazy/criminal for US mint to be buying its blanks and to have shortage of blanks is inexcusable and heads should roll.
But in my way of thinking this, is US Mint performing good corporate governance because they wont be the poor sap who have increased production to millions a week, with new facilities and wages for employees costing tens or even hundred millions.

In 2015 ASE averaged over 4million minted every month, some months US Mint ran out of blanks so could not keep up with demand.
In 2016 Jan 5.8million sold, Feb to May 2016 sold about 4million a month. But in June, July and August sales slowed to June 2.8m, July 1.3m and likely to be a million in August.

So chances are US mint will order less blanks to manage the stockpile, I bet someone in downstream supply chain and is praying its not them. And buying less hoping to pass the grenade further down the chain. Becuase it will be like WTF when US Mint decreases its order to minimise the mountain of blanks stockpiled.

If the blank manufacturer ordered 12million ounce of silver for manufacturing for 3 months supply and US mint order 1m blank a months for three months. As the saying goes "someone just got done for"

 

My understanding is that they hedge physical holdings with paper futures.

A basic example - buy silver one month at $20 and immediately short that quantity of silver via futures to sell at $20. Next month price drops to $18 and they sell the physical at $18 but they have offset the price drop via the futures contract which they sell/close out with $2 profit.

 

That helps, but cost of the new factory and outgoings stays the same, the only thing is wages but unless they were making it in a thrid world country, it is not easy to say to staff dont come to work for next two weeks.