What's Going On with Precious Metals?

After the price of precious metals has plunged over the last month, with another big leg down Thursday night, and amid a veritable bull market in bear market calls for commodities, with one pundit after another heralding the merciful end to soaring commodity prices now that it has become clear there are worse paper currencies in the world than the U.S. dollar, reports of shortages of physical gold and silver are mounting.

Plunging prices and mounting shortages.

Does that make any sense?

Late Thursday, bullion dealer Apmex reported the following:

We just received word, the US Mint has suspended sales of the 1 oz Gold American Eagles until further notice and are not accepting new orders from precious metals dealers. This is in addition to the shortage of 1 oz Silver American Eagles.

This comes at a time when many investors around the nation are scrambling to locate silver bullion and US gold coins while prices are attractively low. These low prices seem to be one of the driving factors in this recent shortage, as investor demand has dramatically increased.

No more gold coins from the U.S. government. Why would that be?

There have been reported shortages of physical silver for months now along with delivery delays that vary widely from dealer to dealer.

Conditions have improved from what they were a few months back, but, as of late yesterday, there are no 100 ounce silver bars for sale at California Numismatic Investments (where I have made many purchases over the years) and no Silver Eagles in lots of 500.

A few months back, the "Our Sell Price" column in the table below was a clean sweep of "N/A's" and as discussed here some time ago, at this coin dealer, the price for physical silver has been rising steadily versus the spot market.You'd think that, with the price of gold and silver dropping like a rock, there shouldn't be any problem keeping coin dealers supplied with these metals that, in a modern economy such as the one we have today, are more than a novelty than anything else.

Maybe this has something to do with the increasing number of bank failures, government rescues of mammoth financial institutions, and the general sense that there is something very, very wrong with the financial system.

Comments

[CLH:]

Grasp at straws but it wont help. Dollar up--gold down and inflation moderating. Tough for gold bugs.

2008 Aug 17 06:55 AM

[Jimmy Lathrop:]

CLH - there isn't anything wrong with being bullish on the economy, and I know you feel this site is overly negative but I have to point out the obvious - the only reason the dollar is up is that the euro is getting weak, with the pound dropping faster. Saying the dollar up is like winning an argument in front of Judge Judy - its not like you have to be great, you just need to suck less than the other basket case. The dollar rising is not an indication of the US recovery, its an indication of Europe's contraction. Europe's contraction is not an argument to sell gold if our economy is still in the toilet. When the big money returns to this thinly traded market after Labor Day, things will be taken out of the junior traders hands and back into reality.

2008 Aug 17 08:31 AM

[goldilocks:]

Tim, yes, I agree... something's very, very wrong here...

2008 Aug 17 08:54 AM

[whirlaway:]

"Plunging prices and mounting shortages."

Doesn't that sound like what happens when there's rent control? The government fixes rents at too low a level, and as a direct result, there are very few rentals available as most landlords decide not to rent their homes/apts at unreasonable prices...

2008 Aug 17 10:41 AM

[CaptBob:]

Pretty circumspect Tim but asks the questions that should be asked.

Most of the answer lies in the fact that the dollar is NOT-getting stronger. Just some honest reporting have revealed the true drop in some other fiat currencies.

If the improving dollar value counter the Pound, Euro etc.made you happy just compare it to Zimbabwe--You'll be ecstatic!!!

2008 Aug 17 01:24 PM

[GoldMan:]

Buy Silver and Gold on this Dip. Don't be shaking out of the market, this is the time to accumulate.
www.WholesaleBullion.c...

2008 Aug 17 07:08 PM

[fuzzywzhe:]

Yes, you should be buying at these levels. I entered the market of silver at $14, and sold on a stop loss of $17 after it retracted from $12. I've re-entered at $13.

I should also note, I've sold none of my physical coins holdings, and I likely never will.

2008 Aug 18 03:05 AM