Similarities of the 2008 and 2020 Silver Market

Discussion in 'General Precious Metals Discussion' started by Aurora et luna, May 16, 2020.

  1. Aurora et luna

    Aurora et luna Well-Known Member Silver Stacker

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    I don't think a lot of new stackers would have heard of Jason Hommel, however back in 2008 he was a well known silver influencer!
    Today's silver and gold shortages reminds me of that period when I was just starting to get really serious about stacking precious metals.
    There are some similar examples that occurred in 2008 that is also happening today;
    * Retailer's cupboards are bare! They don't have a shortage of buyers however they can't source enough supplies to meet demand!
    * Some refineries are refusing to take orders as they can't cope with the demand.
    * There are months long delays in delivery
    * Huge increases in pre-order premiums from refineries or if you want to take instant deliveries expect to pay higher than retail prices.
    * Paper prices going down while physical prices going up
    * Dealers who can't source stock or fill orders still maintaining an artificial buy back price by refusing to meet the spot price. Luckily there are a few dealers who are bucking the trend!
    * Buyers are becoming less discriminating with 50% pre-decimals and junk silver fetching premiums.

    If the stars are not aligned for owners of physical gold and silver, I don't know what is!
    I think we are probably at the end of the second month of a major shortage in precious metals, with months left to go before demand is fully satisfied. In 2008, it took about 6 months for supply to meet demand; this time I think it will probably be longer!
    So if you are lucky enough to own a physical stack, don't be in too much of a rush to sell as I think higher profits are just round the corner.

    http://news.silverseek.com/GoldIsMoney/1221055311.php
    What's the Price of Silver?


    By: Jason Hommel, Silver Stock Report



    -- Posted 10 September, 2008 | | Discuss This Article - Comments: Source: SilverSeek.com


    (Would you like paper or metal?)
    Silver Stock Report
    When it comes time to talk about silver, most people first ask, "What's the price?" I can no longer say.

    My programmer summarizes the situation:
    "I just got off the phone with Jason.

    1. Industrial users are seeing longer lead times, and higher prepayments
    2. Retail bullion is tightening and always 1 week of inventory away from default
    3. Huge paper silver defaults imminent (Kitco, Perth, Barclays, etc all reporting major problems)
    4. If prices go up, investment demand will skyrocket
    5. If prices stay low, defaults are imminent
    6. If prices shoot up and down, businesses will break from volatility
    7. The system has no where to run, it is at it's final cliff (after 37 years, from 1971.)."

    The Mints are swamped, and operating at maximum capacity, or not at all, so the shortages will not end anytime soon.

    A: Sunshine mint, who make blanks for U.S. Mint's Silver Eagles, says all new orders have an estimated lead time of 5 months, out to February.
    B: NWT Mint, has lead times of 4-6 months.
    C: Johnson Matthey refinery stopped taking orders for 100 oz. bars, as we know.
    D: Perth Mint remains a joke, claiming to have $880 million in gold and silver in "working inventory"; but more than half is leased out to their 40% owned AGR Matthey, which is closing offices during a time of record demand from the public. I mentioned that to the mint master of the Sunshine, and he laughed, and was flabbergasted, knowing what he could do with that.

    Even if the mints are at maximum capacity, the market is demanding far more than they can produce. So, product shortages will continue for months, even if there is no 1000 oz. bar shortage (but I think there is a shortage of 1000 oz. bars.) Further, they are not raising prices, nor will they allocate product to higher bidders.

    The Paper silver price is going down faster than the physical silver price.

    So, people who own paper silver are losing more money than people who own real silver.

    Premiums for physical are growing, and will likely continue to go up for the next 6 months, or perhaps indefinitely.

    Dealers who have hedged in paper, are falling behind, and do not want to bid higher for real metal. They are hoping that premiums, the price paid over spot for physical silver, will come down. It probably will not.

    That's the biggest reason why many dealers "can't find silver"; because they are unwilling to pay the growing premiums.

    If they don't pay it, they won't have any silver for their business, and they will be out of business. So, at some point, they will "get it" and pay for it.

    If you don't pay it, you won't have any silver to preserve your capital, and you will be out of capital.

    Most people don't want to watch their paper go all the way to zero, so at some point, most people who own paper money or paper silver will "get it" and pay for it.

    Examples of real silver selling for more than paper silver:


    Example 1

    My programmer, Shelby Moore, notes:

    I bought Maples from apmex for $14.40 ($1.49 over spot) on that first big drop from $15 to below $13.

    Today in same quantities (500+) Maples at apmex are $14.31 ($2.79 over spot).

    Yet paper silver owners have lost -11% of their value since then. My net worth in Maples has not declined at all in the same time.

    Example 2

    I've repeatedly warned my readers about the Perth Mint, because they have had far too many complaints about not being able to deliver allocated silver in a timely manner over the years. This means they are either scraping the bottom of the barrel, or are technically bankrupt, but insolvency to silver investors is rarely something that causes a foreclosure or bankruptcy. It just causes physical prices to rise more than paper.

    One of my readers reports that premiums for physical silver from the Perth Mint are out of control. It can cost 30-40% more for physical, and that's the "penalty" or "premium" for exchanging a Perth Mint silver certificate for real silver. It was reported this week to me by one of my readers that Perth was charging over $200 Australian for a 10 oz. silver bar, which is $20/oz.

    Has anyone been able to cash in their Perth Mint certificates for cash? Or are you trapped?


    Example 3

    As late as 1964, a US silver certificate paper dollar and a silver dollar were the same price.

    Today, as everyone knows, a silver dollar is worth about ten times more than a paper dollar.

    So, in the past bull market for silver, real silver became more valuable than paper silver.

    The same thing is happening today, and just like then, most holders of paper silver are in denial and don't understand.

    What is paper silver? Anything where the metal is not in your hot little hands. If the metal is held by someone else's cold clammy hands, held for you, then it's paper silver, because it's their liability to you.
     
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  2. ozcopper

    ozcopper Administrator Staff Member

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    I used to listen to Jason all the time. He was always a bit out there as a religious fundamentalist. Anyway, he made some good calls on silver and got wealthy. Then he lost tons of money in the GFC. He opened a silver shop that went bust. He also minted his own rounds for a while. He got married, that went bad and by his own admission he became an alcoholic. His silver articles were first rate though.
     
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  3. ozcopper

    ozcopper Administrator Staff Member

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  4. Aurora et luna

    Aurora et luna Well-Known Member Silver Stacker

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    I found an old receipt dated 5/5/18 showing 8 weeks delivery for kilo bars and a Perth Mint receipt in early January 2019 when deliveries were starting to ease.
    The 2018 silver shortage was closer to 9 months before regular supplies resumed.
     
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