Liquidity Paradox

pmh1nic

In trying to catch up on what is happening in the silver market I came across the term “liquidity paradox”. If I’m understanding it correctly the issue with silver isn’t just refining capacity but cash flow.

At one time a dealer took X ounces of 999 silver to a refinery and they walked out with a check. Then it became a week before a check arrived, then 30 days and now they are being told 90 days.

I imagine there is a point at which dealers are reluctant or refuse to take in more silver because of the slow cash flow in getting paid from refiners, especially if sales are slow and they aren’t taking in enough cash via sales to support buying more. So the problem isn’t enough silver but not enough cash.

derryb

and that is why dealers are reluctant to buy any more junk for the time being. This in turn has led to less if any premium on junk.

Why Are Refiners Not Buying Silver?

"In normal times, refiners purchase silver, process it, and resell the refined metal after a few weeks — financing that gap with short-term silver leases. But now, those lease rates have skyrocketed from under 2% to over 100% in just days. The cost of borrowing silver has become so prohibitive that refineries can no longer profitably process metal, effectively freezing parts of the physical market."

Refined .9+ silver remains unaffected and continues to see prices increase.

softparade

The smelting capacity in the US is suddenly third world. It wasn't a year ago. TIMES CHANGE!
China doesn't have that problem lolz

GET THAT TN FACILITY CRANKING!!! hahaha
Speed it up!

jdimmick

This is becoming a big issue for me. I only have so much cash to buy, Prior to this big run up, I might buy 2k to 4k a day, some days very little, other days maybe 10k-20k . However, I can run sell the jewelry to the smelter , get a check on spot, place in bank in am, and by midnight its clear. Coins sell on ebay get paid weekly, and local shop sales on spot etc. Bullion same maybe 2 days from purchase to repayment, Now lately, its 30k plus per day, lately even way more, last two days 100k plus, now smelter for jewelry is taking minimum 3-5 days for payment, last time I took 60k of that, I had to get half , then a week later could deposit check for the other half. Bullion sales are slower to less than 10% of whats coming in, and the latest place I sell a lot of bullion too, just told me there extending processing time to a min of 3 days, maybe longer. Other place refuses to buy ( lot of different type) period. with prices so high , its very hard to operate at this point per my other thread. I dont have a big company with unlimited funds behind me like some other places, im just small time.

TwoSides2aCoin

When one uses paper as an alternative to real money, eventually there will be a shortage of trees.