Silver spot is down but no change in premiums

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pastmaster2011

New Member
Could someone explain why the silver spot price is around 14.57 an ounce but an ounce of silver is with some online dealers upwards of 25.00 dollars an ounce. I have always tried to watch how much over I spend usually no more than 3.00 dollars, so when I seen that silver was dropping I thought it would be a good time to pick up extra ounces, but not at 8 or 10.00 dollars over spot. I called my online dealer and the girl I talked to said it was due to high demand and that even at 8.00 dollars over spot was a great deal. Can someone explain this to me
 
I think the answer lies in the fact that the non-physical market plays have altered the dynamics of the stated spot price of silver. There are too many unconfirmed instances of market plays by big banks for me to mention them. I do know if there were a pure approach to this, they would allow the physical spot price of silver to be different from the virtual one. When supply and demand are truly at play, there are no physical shortages. The price would increase until supply and demand are equal. For us small time investors (at least that's me), the opportunity is that dealers have to artificially keep their price lower than the true market price even with $10 premiums. Some are choosing to just not sell it right now as you and I are seeing. I will just keep buying until I cannot buy.
 
The spot price represents a promise to deliver an ounce of silver either presently or at a future date. Millions (almost a billion) ounces of silver can trade on a single day without a single silver round exchanged. Those contracts to buy or sell silver rarely end up with anyone taking delivery of physical silver. I think the retail price for immediate possession of the metal matters to me the most and while it's heavily influenced by spot prices, supply and demand matter too.
 
Mine closures and refiners closing down globally are playing a big part coupled with unprecedented demand by investors.

The paper GSR is around 112:1 , the physical GSR (using today's prices for in stock bullion grade 1 oz options at KJC) is 80:1

That is a very significant difference.

Its even lower if I calculated it using products from Perth Mint for both sides of the calc. So not only is the actual GSR way off the premiums are as well.

Interesting times for buying/selling.
 
Once the crash becomes obvious to the public it's already too late.
Gotta be in position early with such a limited supply of physical around.
 
It's an amazing business to me - like few other businesses (maybe wholesale oil market similar), coin and bullion retailers face the risk of wild decline in the value of their inventory overnight. They become bookies taking a position on the outcome of a bet just to be in the position of being able to deliver product on order.
 
Sawman said:
It's an amazing business to me - like few other businesses (maybe wholesale oil market similar), coin and bullion retailers face the risk of wild decline in the value of their inventory overnight. They become bookies taking a position on the outcome of a bet just to be in the position of being able to deliver product on order.
Click to expand...

Actually ... Any bullion dealer worth his salt has zero exposure to fluctuations in the value of their inventory.

They will only sell when they can replace at the same price. Hence sometimes the sold out sign may come out, not because there is no inventory as such, but because there is no capacity to replace inventory that is sold.

A good bullion dealer doesn't gamble on price.
 
pastmaster2011 said:
Could someone explain why the silver spot price is around 14.57 an ounce but an ounce of silver is with some online dealers upwards of 25.00 dollars an ounce. I have always tried to watch how much over I spend usually no more than 3.00 dollars, so when I seen that silver was dropping I thought it would be a good time to pick up extra ounces, but not at 8 or 10.00 dollars over spot. I called my online dealer and the girl I talked to said it was due to high demand and that even at 8.00 dollars over spot was a great deal. Can someone explain this to me
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It's supply and demand. There's been a sudden explosion of demand, and now a supply crunch.

It's a terrible time to buy retail physical silver. You'll lose money due to the inflated premiums. I'd go with ETFs and vaulted outfits.

Soon there won't be any retail available since mints keep shutting down, so there might be a brief window when you can flip physical for even higher premiums than today's, maybe.

All major PM dealers are hedged, so they're not exposed to spot price fluctuations too much. The reason for the crazy premiums is the explosion of demand. If they didn't raise premiums they'd run out of inventory even faster than they are.
 
This is an image I made and shared back in 2014. It's sad, but silver is doing a lot worse 6 years later.

It's just "crazy bee pissin' up 'n' down".

We were so sure in 2013 that it will go up. In 2020 we're still "sure". It's just ironically tragic. Yes, I still believe it will hit 100 $ one day! :D
crazy-bee.jpg
 
TreasureHunter said:
This is an image I made and shared back in 2014. It's sad, but silver is doing a lot worse 6 years later.

It's just "crazy bee pissin' up 'n' down".

We were so sure in 2013 that it will go up. In 2020 we're still "sure". It's just ironically tragic. Yes, I still believe it will hit 100 $ one day! :D
crazy-bee.jpg
Click to expand...
I agree, it will hit $100 on the same day gold hits $10k
 
For me, Silver is already $19 an ounce, because this is the cheapest physical silver I can find locally. While at the same time, I can buy 1 ounce gold bar at $1690 so the effective GSR for me is 88. Everyone is too focused on the spot price.
 
Very interesting read on spot prices vs. futures and the current large discrepancy. To me it shows that while precious metal retailers of physical bullion like to quote the spot and futures prices, the "real" market for physical metals can be otherwise and will "pull" prices towards it despite being so much smaller. Many retail buyers are paying well over spot but don't be too impressed - it's not nearly enough to threaten their profits on resale based on the "real" market.

https://seekingalpha.com/article/4336617-crisis-in-confidence-craig-hemke-april-7-2020
 
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