After my previous update on silver this morning, I heard from a subscriber who added a boat load more due diligence on top of mine. The conclusion is the same from two different people in different regions of the country.
Regarding the stories about retail buying in China and other global precious “asset grabs”, that could well be the case. But I think the speculation is being driven in the paper and futures markets. The same markets silver bugs once decried for negative manipulation of the silver price.
My view is that if silver were at a normal and healthy price right now, driven by global physical demand, US dealers would not be so hesitant to stock it on their shelves. I just keep hearing what one dealer said to me: “everybody’s selling”.
Corrections happen in bull markets. They are necessary and healthy. If “everyone’s selling”, does one really want to be buying? Even the paper? As a side note, the “everyone’s selling” guy happens to be one who thinks silver has been greatly undervalued vs. gold and sees this launch as rightful to that. But he has two eyes that see sellers, not buyers in the physical bullion world.
I am not calling “correction” at this moment, for obvious reasons. But I am bearish on a risk/reward basis over the coming weeks/months.
FYI, supporting your note from today:
Yesterday I dropped by a small coin retailer in Madison, and asked what he would pay for a 100 oz. Silver bar.
“20% below spot.”
I spoke with two others, each a pretty big dealer, often wholesaling for small coin shops.
One said that his primary refiner is “not taking any more silver.” Backed up, weeks worth to process.
Another said her refiner is buying only .999 bars, and will agree to a price in real time, but will not pay her for “several weeks,” until her shipment is handled – and they have a three week backlog.
That refiner locks in a price to her, and hedges it off in futures or other markets.
She is paying about 10% under spot.
Her market is better for silver eagles, which she will not ship to refiner, but will have as inventory. She is getting some retail buyers, lots of sellers too.
The Madison shop said they are very busy, “mostly sellers.”
The other guy, in another state, said he is seeing mostly sellers.
It is a weird market. Definitely not driven by old-fashioned retail buying in the U.S.
I read there is heavy retail buying in China, with spot market often above international prices in recent days.
And… the little guy speculation in the U.S. is apparently concentrated in SLV, which has been seeing insane volume. And they hold their silver in 1,000 ounce bars.
The refiners do not want silverware and one does not even want 90% coins, because those take longer to process into 1,000 ounce bars.
