Silver traders struggle to find supplies for buyers

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Over the past few days, a retail silver investment frenzy has emerged. Powered by social media, led by American Reddit, it has left investment coin and bullion dealers struggling to meet the high demand that has exploded in both the United States and Canada.

The silver prices fell on Tuesday. A wave of purchases by smaller investors, mainly in mining stocks and exchange-traded funds, vanished from increased margins in futures contracts on the Chicago Mercantile Exchange.

The purchase, inspired by the recent rush of retail investors into very short stocks like US video game retailer GameStop, pushed prices to a nearly eight-year high.

Retail investors cannot directly access the wholesale market for silver, so they have physically bought bars and coins.

Reuters has surveyed minting and distribution entities obtaining the following results.

The UK’s Royal Mint said it saw steady demand for its silver products, including bullion and investment coins, increased 14 times over the weekend.

US bullion trader Apmex warned on Monday of delays in processing silver transactions due to rising volumes.

Other US distributors, including JM Bullion and SD Bullion, warned customers of five to 10-day shipping delays.

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While a rapid increase in demand has reduced supplies, delays should lessen once it can be shipped where needed, dealers and industry experts said.

Is silver supply going to be constrained?

Kevin Rich, World Gold Market Advisor to Australian Perth Mint, stated that while coin and bullion dealers may see some supply constraints and therefore charge higher premiums for these products, they do not anticipate any such problems. There is enough airline traffic to ensure that supply can move, unlike last year when lack of cargo capacity disrupted gold markets, he added.

Peter Fung, chief operating officer of Hong Kong-based Wing Fung Precious Metals, stated that in the short term, stocks might run out as shipping is slow.

About 1 billion ounces of silver are produced and consumed each year. For most of the last decade, supply has been in surplus, according to Metals Focus.

There is still no sign of a broader physical compression in silver, and we would not expect any at this stage, said Frederic Panizzutti, managing director of distributor MKS.

There were more quiet purchases in China and India, the leading Asian consumers of physical bullion.

Chinese investors crowded into the futures market and shares of mining companies. However, traders said the rush had not translated into physical limitations yet.

Contrary to other parts of the world, silver is seen more like a consumer product than an investment product in India.

According to data from Metals Focus, India and China typically account for between a quarter and a third of global demand for silver retail investment products such as bullion and coins.

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