Premiums on Silver have exploded over the past few weeks! Generally speaking, a 10-25%+ range seems to be the norm, with anywhere from two to six weeks delay to take delivery. We have talked about the dichotomy between Silver being panic “Sold” and “Shortages” occurring simultaneously. In a free market, this is an impossibility. Just think forward or around the corner, because if premiums exist today in what has been fundamentally a stagnant market, then what would happen to premiums in a rising market?
If we look at the move back in 1980 when silver traded to $50, what was the backdrop at that timeframe? There was actually more Silver above ground (we still had Manhattan project silver as supply) and the uses were far less than they are today. Also, the amount of Debt, Currency supply “People” with a living standard high enough to buy Silver were much smaller than today.
Debt and Currency supply have risen tenfold since 1980, and citizens with the ability to purchase Physical Silver around the world has at least Doubled, maybe even Tripled? So if there are currently very high premiums for Physical Silver today, is this a function of lower prices? The answer to that question is both Yes and No, and I am not hedging as you will soon see.
Premiums are a function of real Demand being greater than the real Supply. The premium has risen presumably because the gap between supply and demand is widening, and sellers are less willing to let go of product as the price lowers through market manipulation. Now, what would happen to premiums if the same supply demand dynamics were applied, but rather than the price declining it was rising?
In a rising market, buyers will pay a premium out of fear! This fear will arise not only because other assets are crashing around them, but because owners of Fiat Currency won’t want to be stuck with something completely worthless. The other side of the coin, the supply side, will also be a source of fear. “Fear” of metal going “No Offer” (which it will) and having no exit door at all!
It is very likely we will soon see a new currency regimes occurring, and even new currencies to replace old and tired ones. Any new currency MUST have the confidence of the public in order to be accepted. In my mind, the litmus test as to whether a new currency is accepted is whether or not holders of Gold or silver will sell part of their hoard for this Paper Currency on offer.
You may be shocked with the current 25% premiums on Physical Silver today, well then don’t be. You might ask yourself “What is the price of Silver”? Is it COMEX/LBMA pricing or is it whatever you must pay to get it into your hands? You might mistakenly at first quote the Paper Market price. In the near future you will have no question as to what the “price” really is.
This is an exercise in sharks (Goldman) eating sharks. In Physical Silver, there are no more little fish left and even many of the previous sharks are no more. The day where those who hold (Physical Silver) and choose not to sell is very close at hand. OWNERS of Silver will be the ones pricing this Precious Metal. You will have no questions as to what the “price” really is. In fact, the term “Discount” will be applied to Paper, rather than “Premium” to Physical Silver.
Author: Bill Holter