From what I'm seeing from the trade desk seat, it's a little bit of A, a little bit of B - volumes have gone up four or fivefold, cleaning out most wholesale outlets of on-hand inventory, and production can't keep up with replenishing stock and keeping up with ongoing demand. Eagles are a classic example - hearing rumours of maxed out blank production from a major supplier, plus demand overwhelming the mint's ability to strike coins with what feedstock they can get, which leads to the current allocation arrangements. We're getting notified daily of premium hikes on Eagles - wholesale prices are up almost $3/oz this year. We're retailing XAG Buffaloes for less than we're buying Eagles.
The problem with default of unallocated will be at the end of a massive parabolic blow off.....the big bullion dealers are the buyer as far as I can see because you are able to trade at anytime so it is impossible for them to offset a sell with a buy unless they have someone hedging on the futures to balance the trade. When prices are low it makes no difference if they don't have the physical to back the unallocated immediately because buyers far outstrip sellers. As with all markets, once the parabolic rise is finished, massive selling will occur. Liken it if you will to houses in a street. They start in the hundreds of thousands of dollars and rise to millions. What most people don't realise is that very few houses actually traded for the millions but when the prices start to collapse, a lot of people will recognise this and try get out way above what they ever payed. This cannot happen because they are restricted by what someone else is willing to pay. If the bullion dealer is your guaranteed buyer on a collapsing price then you had better pray that they are offsetting your sell with a buy on the futures or you will probably receive a lot less than you expected. Fortunately we are at the opposite end at the moment and probably have a few years to go before we look to sell our unallocated
I don't think I can - If you can't see the problem of purchasing metal in an unallocated account, and you are content that the metal does not exist. Seeing you have been around here awhile, google is your friend. Ask a well researched or sincere question and you can expect someone to assist. It's not like you joined yesterday.
Thats not what I said....take, for example, ABC bullion...they clearly state that all unallocated bullion is backed up with real silver....conspiracy theories aside, it is highly improbable that they are going to blatantly lie about this on the website and risk a long time in jail just to suck in silver junkies..... What I am trying to illustrate is that if a difference exists between unallocated purchased and the unallocated stored at periods of high demand, it will not matter if it takes several weeks for the shortfall to be made up by the bullion company. Demand is far outstripping supply at the moment but as I said earlier...after a parabolic blow-off....supply outstrips demand. There is a risk in everything we do but at the moment the risk is minimal of a bullion company default simply due to supply and demand.
why are you so sure? very many entities clearly state one thing but when the time comes everything reverses ... Madoff and MFGlobal just a few of the kind, who were wiped out ... many more are ahead P.S. year ago I found facilities with banks here in Japan that would buy PM for clients or safe clients' PM ... At the time I was not aware about any tricks those guys could play. They claimed that after I make the phone call I can take either my gold or fiat in form I've submitted. Then I've started to delve in the information and found that it might take up to 20 days to give back what's mine. Since that time I decided to buy gold on my own.
I used ABC Bullion as an example because I have dealt with them and they are a good and honest company that always delivered. It has, however, what I perceive to be a flaw in its buy back policy which I would like clarified i.e. are all buys and sells hedged forward with opposite trade to guarantee price. I would not hesitate to deal further with them for the time being while prices are down. In fact I have unallocated with them at the moment. I will, however, be very careful as prices rise to ensure as best I can that what I believe will happen will not happen to me. If someone from ABC reads this, please reply to clarify and if you believe what I have written to be possible, please do something about it
before I can reply, the price actually up 1.17 at 23.99 there are still investors buying some 90 million ounces last year
tolly, Your ABC example is really good. This is what I found from ABC documents about storage / unallocated : "All our storage includes full Metal Replacement insurance (from Lloyds of London) at no extra cost. Replacement insurance makes sure that you get back your valued investment in full in the unlikely event of anything happening to your metal while in storage. Unallocated metal has not been made into a bar or coin, therefore it trades as close to the spot price as possible for a private investor. Your investment is still backed by physical metal - we still buy every gram on your behalf - but you simply save costs such as barring, storage and transport because unallocated metal never leaves storage. If you decide that you would like your unallocated metal to be turned into a coin or a bar (i.e. have it 'barred' into allocated metal) it is quick and easy to arrange with us for a small 'barring fee'. " GP, Aurora, Kawa and other experienced members will have a more qualified opinion about what's gonna happen with unallocated in crisis. It seems that if they can't deliver, ABC will give you fiat. I assume they are always perfectly hedged and covered by paper. But question is what happens to their sources of physical bullion (Australia and States) ? Where is the backup for un-nallocated held ? I think they can have a problem if price drops also, not just rises. Assume price drops to $19 and panic erupts how can they get delivery even from Perth ? Can you 'bar' your unallocated and take delivery during crises ? What is premium going to be ? Great stuff tolly, very interesting to ponder.
FP like your ponder cap, can I borrow ? I'm not trying to state the obvious but since '70 we haven't had such a psychotic conditions. Sinclar says that Central Banks are a bit surprised by a public reaction to a takedown. Not too many people can rely on experience here. Therefore we need your cap FP.
Thanks Bimaco.... I understand your point and I am not completely confident that the bottom is in. I would not be suprised if gold $1500 can not be regained soon then we will have to face $1100-$1200 gold so a rough guess...$16 silver.. So yes your scenario will come into play...massive purchasing and extremely long delivery times...to be expected.. This will actually benefit the bullion company immensely in the sense that they will make good profits if they are able to hedge consistently lower than the buy price. e.g. even if total purchases in a day are 5 million ounces, they will benefit from further falls in the silver price and can buy on the futures at a lower price and pocket the difference. They also have protection through the clearing house also. Even in the highly improbable event that silver cannot be obtained you will still get your money back but don't forget such massive purchases will raise the price and buying will return to normal volumes and delivery will eventually happen. This is the wet dream of bullion companies. Massive purchases on collapsing price.....serious profit to be made. Now reverse the process and instead of being a possible $9 drop lets go to the blow off.. Silver in the last 6 months streaks to $250 U.S. per ounce( $150 Aus at the time). Nobody selling causes the spike high....( this is always the case and is the cause of the spike ) All players are in....ie anybody and everybody that want silver are up to thier armpits in it....we now have a shortage of buyers A single day drop of $20- $40 stirs the weakest hands which are many Now we have massive selling on collapsing price...the complete opposite of what we had at the start. You dump your 100kg at what you think is $100 Aus per ounce back to the bullion company who is the guaranteed buyer....if they have not immediately forward sold your 100kg on collapsing price then you are both f..... If the bullion company can even find a buyer above $50 you will be lucky. So now you have the bullion company with a $50 per ounce shortfall on your 100kg....equals about $150,000 out of the bullion companies coffers. Multiply this by thousands of customers and you will see that you will not see any money. Final result is the opposite to the start ...at the start you will get your money back and be disappointed you did not get your silver as I have already explained but in the end you will get your silver back and be disappointed you didn't get your money.
tolly, Now I'm afraid I can see your scenario in front of me fully. Like I had a RedBull. Actually after blow-off price will scream down even faster. I just mentioned bottom as we are almost there so my focus is more on that. But you are right on both accounts. About un-alloc. What if you never get your metal because we switch to some kind of PM backed banking (not exact gold standard) ? Keeping your "worthless" fiat would be a disaster, right ? FP, I thought so. Thanks for your kind offer, but I'm not good with visuals and palms. Stopped that long time ago, but it's still cute.
