Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
In the same category

David Ceresne: Watch out when physical market for gold and silver detaches from paper

IMG Auteur
Published : February 05th, 2013
473 words - Reading time : 1 - 1 minutes
( 7 votes, 4.9/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...

By David Ceresne
Saturday, February 2, 2013

Shortages and volatile markets are forcing the precious metal industry into turbulent times.

How is the precious metal industry adapting? Global mints and refiners have increased premiums on all products.

How are investors reacting? Buying is at an all-time high and premiums are no longer the primary concern. In fact, delivery time on products now is the most important factor for buyers. This shift demonstrates the demand for precious metals, whatever the premium may be.

It's simple. Relentless demand and shrinking supply are changing the precious metal landscape. We are witnessing a deviance from paper price to physical price. But why?

To understand the changing landscape, we need to analyze the precious metal supply chain. Looking to global mints can let us know what changes must be made.



To start, where are mints getting their metal? It boils down to three sources.

1) Mining companies. Above-ground and easily mineable metals are a thing of the past. Mining companies must dig deeper than ever to extract precious metals. Changing mining conditions and high input costs are affecting the precious metal supply. As mining conditions change and inflation continues to rise, the extraction of metal through mining appears to become less feasible. Political factors also play a role. Laws, politics, and tax rules can slow down or even stop the extraction of precious metals in key markets.

2) Recycled products. It is estimated that 85-95 per cent of world silver output is now disposed of, primarily through industrial applications. Middle-class people all over Europe are trading in their gold and silver for cash, disposing of everything from jewelry to silverware. In North America the story is the same. But much of that supply has already been depleted as people sell personal items to help pay the bills. This causes a big strain on the physical gold and silver markets. People are also liquidating their retirement accounts and selling assets to buy precious metals. Supply is depleting as demand increases.

3) Global trading floors. Mints and refiners will purchase silver and gold from global trading floors. If you have purchased precious metals before, many of your products may have been melted down from large bars into smaller-denominated coins and bars.

But the next time mints ask for metal to melt, will it be there? With current demand for metals, the answer is no. Then what? If there is no silver or gold to procure, we will head toward a "force majeure" (http://en.wikipedia.org/wiki/Force_majeure).

At this point the paper price will have no relevance to the physical price. As people rush for the door, dealers will undoubtedly sell. But at what price? This will be for the true markets to decide.

-----

David Ceresne is president of Precious Metal House (http://www.preciousmetalhouse.com/), a coin and bullion dealer in Toronto.

* * *



Companies Mentionned : Bullion | Metals X |
Data and Statistics for these countries : Hong Kong | Singapore | Switzerland | United Kingdom | All
Gold and Silver Prices for these countries : Hong Kong | Singapore | Switzerland | United Kingdom | All
<< Previous article
Rate : Average :4.9 (7 votes)
>> Next article
Chris Powell is the secretary of the Gold Anti-Trust Action Committee (GATA) which has been organized to advocate and undertake litigation against illegal collusion to control the price and supply of gold and related financial securities.
WebsiteSubscribe to his services
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Gold Daily and Silver Weekly Cha...
02 Julglasstiger
Jesse, you use the term "could care less" frequently. Is this American speak for "couldn't care less"? Similar I suppose to the ubiquitou...
One more book, Mr. Stockman
02 Juluser4779-1
While it is true that "[Gold standards] were abused, suspended, and ultimately abandoned in favor of a currency that central banks could inflate at...
Panicked Hedge Funds Now Praying...
30 Junovertheedge1
"... and the silly game theory ..." Obviously you have no knowledge of game theory and its applications. Otherwise you wouldn't have used ...
The Gold Standard: Generator & P...
30 Junuser4779
Is it really so bad for Americans that they do not spend their lives labouring on a production line to make mass-produced goods, and have left this...
The Gold Standard: Generator & P...
30 Junsam_site
You state, “To continue selling to the West, China will have to open wide its doors to imports” Here’s the crux of your argument of why Chin...
The euro crisis
30 Junovertheedge1
"There is no immediate benefit from debating why." Debate? That would be like debating whether or not gravity exists. You stated the obvio...
The Ultimate Confirmation
29 Junovertheedge
It would appear that we share the same conclusion. A few sealed cans of kerosene might be handy as well. Thumbs up sir.
The Ultimate Confirmation
29 JunS W.1
My main sentiment here is why swap dollars for gold or silver only to sell at some later date for more dollars when that same paper is continually ...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Tawana Resources(Gems)TAW.AX
Changes to Tawana’s Board of Directors | 71.72 KB
AU$ 0.00+0.00%Trend Power :
Corporate news
McEwen Mining(Cu-Le-Zn)MUX
McEwen Mining Addresses New York Stock Exchange Listing Requirements
US$ 0.96+6.67%Trend Power :
Corporate news
Royal Gold(Ag-Au-Cu)RGLD
Royal Gold Announces Fiscal 2015 Fourth Quarter and Year-End Earnings Call
US$ 62.32+2.08%Trend Power :
Corporate news
International Croesus VenturesICU.V
Global Copper Group Announces Annual General & Special Meeting Voting Results
CA$ 0.69+0.00%Trend Power :
Corporate news
McEwen Mining(Cu-Le-Zn)MUX
4:32 pm McEwen Mining confirms that it has fallen below the NYSE's continued listing requirement related to the price of its common stock
US$ 0.96+6.67%Trend Power :
Corporate news
Sandstorm Gold(Cu-Mo-Au)SSL.V
Sandstorm Gold Provides Asset Update
CA$ 3.97+7.59%Trend Power :
Corporate news
CB GoldCBJ.V
CB Gold Inc. Receives Registration Of The Concession Contracts For Its 100% Owned La Peter, Santa Isabel And Los Delirios Properties In Vetas
CA$ 0.05+0.00%Trend Power :
Corporate news
CB GoldCBJ.V
CB Gold Terminates Previously Announced Private Placement
CA$ 0.05+0.00%Trend Power :
Corporate news
Strategic Min(ag-au-cu)SMC.AX
Result of AGM
AU$ 0.03+7.14%Trend Power :
Corporate news
National Grid TransNG.L
National Grid Drives Innovation Through REV Demonstration Projects
GBX 833.50+1.93%Trend Power :
Corporate news
Comments closed