Physical Gold Demand Getting Crazy

ProofCollection

We all know how tight the PM supplies are getting, but it's really getting tight when the media is reporting on it.

It's a gold rush to Grand Rapids-area coin shops



Precious Metal’s Bailout Bonus

Wealthy investors drain supplies of gold by hoarding bullion bars

Wary UK savers queue to buy gold

Market turmoil sends investors scrambling for gold

HonoluluDude

Too bad this demand isn't being reflected in the futures market.

roadrunner

All gold has to do is reflect pricing in the physical market which is now set on Main Street....not Wall Street.

Demand will increase and the paper to physical price will only increase from here. It may not approach the 50-80% premium we now see in silver, but it will increase. Even with today's push down to $828, the buying up of gold is higher than ever, and in shortage. Obviously something is not right. Miners such as Barrick have hedges that will force them to sell gold for as low as $350/oz. Now that's smart considering they have $2 BILL in gold hedges on the books.

roadrunner

ProofCollection

The margin certainly cannot continue to grow and eventually must correct itself.

Deadhorse

<< <i>The margin certainly cannot continue to grow and eventually must correct itself. >>





Why?

The spot price of gold is like the canary in the mineshaft.

If the regular citizens see gold shooting upward, they will look at this economy with a lot more concern.

Why, they might even freak out somewhat. That will still happen but after the election.

That's why it has been manipulated as it has.

Same thing with silver and we now have a paper and a physical price. The disconnect is obvious.

The poiiticians can fool most of the people as we have seen, but they can't fool wiser investors.

ProofCollection

Why?

Because eventually the paper gets converted into real material.

I know a majority of futures contracts don't result in physical delivery, but some of them do, and eventually someone's going to have to deliver $840 gold to a contract holder vs. selling it for $1000 on the street. Right?

Deadhorse

<< <i>Why?

Because eventually the paper gets converted into real material.

I know a majority of futures contracts don't result in physical delivery, but some of them do, and eventually someone's going to have to deliver $840 gold to a contract holder vs. selling it for $1000 on the street. Right? >>




Eventually, that makes sense.

However, it will buckle if not collapse many of those having to deliver.

I can see a lot going wrong with paper. It's happened before.

How the spot price reflects all this remains to be seen.

It's in the politician's interest to keep it hammered low and cut down on any headlines.

OPA

<< <i>We all know how tight the PM supplies are getting, but it's really getting tight when the media is reporting on it.

It's a gold rush to Grand Rapids-area coin shops



Precious Metal’s Bailout Bonus

Wealthy investors drain supplies of gold by hoarding bullion bars

Wary UK savers queue to buy gold

Market turmoil sends investors scrambling for gold >>



When the media starts "hawking" PM's .... it's time to sell & watch.

ProofCollection

I'd think that there has to be some natural market mechanism for adjusting spot and market prices...

I guess when the market is overwhelmed with speculators, the price can lose its basis in reality. Clearly though, hedgers (producers) are not going to participate in the futures markets if the price does not reflect reality.

I would think that somehow, this disconnect could not continue with this great of deviation for more than a few months. I guess we will see. Until then, I plan to be mostly bullish on Gold Futures as well as the physical metal itself.

BBN

In my area it's sort of just sitting there. I went to my local B&M Tuesday and he had some generic circ old gold and a constitution and 1984 olympic piece. Went back in Thursday and all were still there. In fact I was the first one to inquire about the gold beween these two dates. So I left Thursday with an 1880 half eagle for $10 under spot and an XF 1910s Indian head Eagle for $450

tincup

Interesting post on Kitco gold forum, by a member from Iceland. Their economy is crashed.....

One of their 3 banks has become nationalized. The currency this year alone has lost 50% so far. There are runs on the banks, and people are hoarding foreign currencies; banks are rationing euros and dollars. Some have run out.

An oil company exec has stated there are not enough dollars to purchase and import more oil; reserves will last a month if no hoarding takes place.

The same situation is happening with food; possibly not enough money to purchase and import more; people are hoarding food.

The individual making the post was fortunate enough to have been able to purchase a good amount of gold; and thus was able to rescue/preserve some of his funds.




------------It's definitely ugly out there.

cohodk

<< <i>

<< <i>The margin certainly cannot continue to grow and eventually must correct itself. >>





Why?

The spot price of gold is like the canary in the mineshaft.

If the regular citizens see gold shooting upward, they will look at this economy with a lot more concern.

Why, they might even freak out somewhat. That will still happen but after the election.

That's why it has been manipulated as it has.

Same thing with silver and we now have a paper and a physical price. The disconnect is obvious.

The poiiticians can fool most of the people as we have seen, but they can't fool wiser investors. >>




I still dont see the disconnect. I can buy 1000 oz for 49c over spot. If I am trying to buy silver to protect my wealth, why would I bother with 1 oz ASE?

Tulving has at least 200,000 oz available

Cnitas

Why can't you buy 1000 oz for spot? I thought that was the whole concept of the 'spot' price.
The price for product paid and ownership transferred on the 'spot'.

BlackBeard

<< <i>I still dont see the disconnect. I can buy 1000 oz for 49c over spot. If I am trying to buy silver to protect my wealth, why would I bother with 1 oz ASE? >>



I depends upon the purpose of the investment. If you are investing in case of a collapse of paper currency, then bartering with a 1,000oz bar is going to be difficult. For extreme situations smaller denominations are useful. Survivalists recommend a bag or 90% to barter with. Ounces would also be useful in such an unlikely situation.

Overdate

Are any private mints currently making 1-ounce silver rounds?

It seems to me that there would be some profit potential in buying 1000-ounce bars at less than $1 over spot, converting them to silver rounds, and then selling the silver rounds at $2 or $3 over spot.

57loaded

<< <i>Are any private mints currently making 1-ounce silver rounds?

It seems to me that there would be some profit potential in buying 1000-ounce bars at less than $1 over spot, converting them to silver rounds, and then selling the silver rounds at $2 or $3 over spot. >>



well if it's that easy.....
today's market maybe but you ususally don't find these going for premium over spot in other times to justify the cost.

bluelobster

<< <i>

<< <i>We all know how tight the PM supplies are getting, but it's really getting tight when the media is reporting on it.

It's a gold rush to Grand Rapids-area coin shops



Precious Metal’s Bailout Bonus

Wealthy investors drain supplies of gold by hoarding bullion bars

Wary UK savers queue to buy gold

Market turmoil sends investors scrambling for gold >>



When the media starts "hawking" PM's .... it's time to sell & watch. >>





I know it seems counter intuitive to many, but history has almost always proven that when the masses pour into a asset, housing, gold, stocks tulips whatever, it has usually been time to sell or at the least not buy. Retail sentiment is unfortumately a contrary indicator. There will be a time for metals again, once the severe deflationary contraction that's now taking place loses momentum, but I would be very careful about rationalizing the paying of big premiums for metals. Fear and greed are always the big market movers, and while fear of financial armegeddon is motivating many retail PM purchases.....it does not mean that that is wise or prudent to follow that emotion.

57loaded

i would find it very difficult to argue that the high point of early this year for PM is over.

your logic is rock solid sound, i just don't think it has really caught on to the masses, yet....or quite possibly they can't afford to, unless it rises so much so fast in the future that flippers are back in style and people will cash whatever lines of credit or credit cards to buy and flip gold....then you will know.

i remember back when CISCO stock was red hot....one friend of mine said his brother maxxed out a few credit cards to buy some...at around $80, i dunno if was going to or near a split...it never saw the light of day after that....your argument was spot on....

does one know what % of US population owns gold? besides dental work....


some info on tulip bulb mania

roadrunner

Tulip exerpt:

The effects of this mosaic virus were tulip petals with beautiful “flames” of color. This unique effect furthermore increased the value of the already rare and highly exclusive tulip bulb.

This sounds eerily similar to the toning craze on otherwise very common generic coins. I wonder if artificial colors were ever added to any of those bulbs for an extra 20-50% price "pop?"

A silver dealer today would probably ensure that their site never indicates that stock is empty. Contrarily, best to show stock they don't have, as long as they can get it from my competitors. Somewhat similar to the principles used on SLV.

roadrunner

ProofCollection

<< <i>I know it seems counter intuitive to many, but history has almost always proven that when the masses pour into a asset, housing, gold, stocks tulips whatever, it has usually been time to sell or at the least not buy. Retail sentiment is unfortumately a contrary indicator. There will be a time for metals again, once the severe deflationary contraction that's now taking place loses momentum, but I would be very careful about rationalizing the paying of big premiums for metals. Fear and greed are always the big market movers, and while fear of financial armegeddon is motivating many retail PM purchases.....it does not mean that that is wise or prudent to follow that emotion. >>



Generally, you're right. But this is just a few newspapers... I haven't seen it on the local nightly news. And even then, the trend will last a while. The serious part of the housing boom lasted a solid 18-24 months, and this period is when the most rapid price appreciation ocurred. We still haven't reached the part where "ordinary" people are talking about PM's at coocktail parties or in daily conversation.

To date, I think it's safe to say that gold's appreciation so far is due to the fall in value of the dollar. From about 1.3x on the dollar indext to approx 0.7-0.8 today. We haven't even seen any "crazy" appreciation yet. There will be $100+ dollar days.

The PM boom is just getting started, IMO. Too early to get out.

illini420

<< <i>

I know a majority of futures contracts don't result in physical delivery, but some of them do, and eventually someone's going to have to deliver $840 gold to a contract holder vs. selling it for $1000 on the street. Right? >>



Seems to make sense to me, but haven't seen it in practice lately. I guess everyone's just trying to make a profit and their basis may be higher than current spot.

7over8

the word on the 1000 oz bars is that there are few wholesalers that want to hold a single bar that large....

additionally, to have it delivered for trading, it must be re-assayed.......a cost to the holder...... not a huge cost, but nevertheless it adds to the premium..

ProofCollection

From nwtmint.com:



<< <i>One thousand ounce silver bullion bars offer silver bullion investors silver at the lowest markups over spot. 1,000-oz silver bars are products from refineries typically poured as a bulk product for shipment. After production, each silver bar is weighed and stamped with the weight, purity and refiner hallmark. 1,000-oz silver bars normally weigh between 930 ounces and 1080 ounces, approximately 70 pounds.

1,000-oz silver bars are ideal when large purchases are being stored in precious metals depositories. Silver bullion investors wanting to take delivery of their .999 fine silver should go with 100-oz silver bars or 1-oz silver rounds, both of which are easier to handle and store. 1,000-oz bars may also require assay when the customer decides to sell. >>

tincup

Yes, the 1,000 ounce bars are just too big to be moving around. Great for a depository..... but then you do not have the physical possession. Just a log entry that you own it.

Once you take possession, they you have the hassle of assay when you sell... plus the problem of shipping, etc.

roadrunner

In these trying economic times where every facet of industry is linked in some way to bank credit worthiness, I certainly don't want to fork over a huge amount of money for an off brand 1000 oz lump of silver and hope it shows up. And even if it does, whose to say what's on the inside of the bar? Since 1000 oz bars change hands too infrequently, wouldn't those be the first ones to be screwed with? It could be years until the next owner decides to part with it. Smaller bars have a higher trading velocity. And does an assay include a core sample into the very center of multiple points of the bar?

As far as waiting for weeks for your 100oz bars to show up, you are resting your hopes on the credit worthiness of the supplier and everyone in his chain of credit/liquidity. Much better to buy and carry home the same day. Coin dealers play this same game during bull markets and get caught on the downdraft. Why should we expect PM dealers to be exempt from fallout?

roadrunner

MoneyLA

two words of caution when buying precious metals, especially in ths current overheated market:

first, the PM market is a pure example of the "greater fool theory." you need a greater fool to pay you more than you paid for the gold you own.

second, the PREMIUM that is added to the price of PM is actually part of the "greatest fool theory." premiums are the first aritficial part of a price to move -- up or down. premiums can move even without the base price changing. hence, premiums represent the "greatest fool theory."

I am not saying PM investing is bad. In fact, those of you who know me and watched me on TV or read my web sites know that I was a long time bull on gold going back about four years ago, and I sold my gold at about $945 several months ago.

tincup

<< <i>two words of caution when buying precious metals, especially in ths current overheated market:

first, the PM market is a pure example of the "greater fool theory." you need a greater fool to pay you more than you paid for the gold you own.

second, the PREMIUM that is added to the price of PM is actually part of the "greatest fool theory." premiums are the first aritficial part of a price to move -- up or down. premiums can move even without the base price changing. hence, premiums represent the "greatest fool theory."

I am not saying PM investing is bad. In fact, those of you who know me and watched me on TV or read my web sites know that I was a long time bull on gold going back about four years ago, and I sold my gold at about $945 several months ago. >>




So Alan..... what do you have your money or investments in? If it is foolish to be purchasing gold or silver now, just where should one turn to?

MoneyLA

in my latest web report I said that gold is in a trading range of 800 to 950 an ounce, but I said that if gold breaks out above 1000 and holds there it will signal a new bull run for gold.

Ive avoided stocks for the last four years, thankfully.

cash is king.

roadrunner

two words of caution when buying precious metals, especially in ths current overheated market: first, the PM market is a pure example of the "greater fool theory." you need a greater fool to pay you more than you paid for the gold you own.

second, the PREMIUM that is added to the price of PM is actually part of the "greatest fool theory." premiums are the first aritficial part of a price to move -- up or down. premiums can move even without the base price changing. hence, premiums represent the "greatest fool theory."

And we can certainly apply the same theory to those holders of fiat money since 1971....the greatest fools ever known. If one thinks the premium paid for gold coin is foolish, how does one even begin to explain the premiums we pay for rare coins with slight differences in: holders, older plastic, full heads-FB-FBL-etc, cameo, coloration, and the worst of all, 1 pt gradations in MS/PF coins from 60-70. It all smacks of tulipology when you get right down to it. But it all comes down to what humans place a value on. And over 5,000 years, gold and honest money in general, has kept people from becoming the next greater fool. Are we foolish for going to the hardware store and buying a single washer or gasket rather than buying them more cheaply buy the dozen or by the hundred? Why not buy a case or truckload of cigarettes every time we reload?

Speaking of fools. The Brits have been lining up outside the 2 biggest bullion houses in London ever since Lehman went down. People have been turned away. The run on bullion has been most impressive. Some have come away with as much as L500,000. Maybe those Brits aren't so foolish after all.

Let's not forget LAMoney's very vocal and gutsy call of getting out from under gold at $950. Kudos. In that call he felt that a return at $800 or just under would make sense. If for some reason we don't buy back in at $750-$950 before gold hits the next upleg, what has been accomplished by selling at $950 other than getting rid of your gold protection and paying taxes earlier? In order to make money in selling, you either have to buy back in lower or never come back (ie the market is history). I'd like to hear more stories of those who dumped physical bullion in the $930-$1030 range, and then reloaded at sub-$810 prices. Should gold fall further toward it's lowest long term uptrend line of $550, then even buying at $750 will make one look foolish. But gold has a way of making everyone look foolish just when you think you can make sense of it.

roadrunner

fc

why would a premium above spot being considered the greatest fool
theory? it takes people, equipment, and etc to shape that lump up
silver into a pretty round or bar.

when spot changes... their premium stays the same for the item.

not rocket science here folks when buying brand new items from a minter or even second hand.

If the minimum order is 500 ounces from sunshine mint and you only
want 25 ounces a middleman will not work for free!

unsually large premiums are a different story.