china bank runWe have well documented over the past few months the unprecedented flows of physical gold and silver being drained out of Western vaults and shipped East.
SD reader Ji Hai Shan, an American currently residing in China, has provided a boots-on-the-ground first-hand account which substantiates our recent claims that spiking silver premiums on the Shanghai Gold Exchange indicate a shortage of the physical metal in China.

“3 months ago, when I inquired about buying some more bars, they said that I would have to wait a month.
So, yesterday, I stopped by the shop and was told again that I would have to wait a month. 
The affordable investment grade bars are in shortage.”

Ji Hai Shan’s first-hand account of the developing shortage of investment grade silver in China is below:

 

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I am an American living and working in Hubei Province China. I have been buying silver here in China and have been watching the physical market for investment bars (LBMA stamped on the bars). When I started buying bars here, there were still bars available and more could be obtained within 2 days. Then, about 3 months ago, when I inquired about buying some more bars, they said that I would have to wait a month.

So, yesterday, I stopped by the shop and was told again that I would have to wait a month. Where is all of the investment grade silver going? The reports are saying that so much silver and gold are coming over here to China.

The affordable investment grade bars are in shortage. However, there are supplies of ornately minted coins and bars with various artistic designs on them. However, there are very high premiums on these products. So, due to the long wait, high premiums as well as administrative hurdles involved in getting my Chinese bullion out of here, I’ve just been sending my money home and have been buying silver in the US. What I see is that there are available supplies in the US, I don’t have to wait long to take delivery and on the whole, it seems like I am getting a lot more bang for my buck, buying silver back in the US, (Maple Leafs, Silver Eagles and rounds).

In summary, I’d really like to know where are of the silver is going? What is the physical shortage being caused by? Are the Asians shorting physical back somewhere else? 

I just want to let you know these details based on my boots on the ground findings.

Keep up the good work.

AS Chichura

 

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  1. My new sister in law, an American Chinese live both in US and China, owns 23 houses in China and 4 in Us. I talked to her about the silver investment present to us at the current price is the greatest  gift from God. She doesn’t  own even 1 oz. She is selling her properties in China, don’t know she will buy my idea. It is the culture, Chinese buy and don’t sell. What if 1.5 billions of Chinese buy 1 oz of silver, the price will be? What about average Chinese buy 100 oz? 1000 oz? 10000 oz? these not a big number to them. I stacked away 50,000 oz over the years, and still buying.

    • Every chinese (1,3 billion) buying 100 Oz is about double the amount that has ever been mined globally (60 billion) and about 6 times the amount that’s left above ground.
       
      Think about that for a while.
       

    • The astounding fact about the scarcity of Silver described makes perfect sense when one considers the fact that 1/10 of an oz of Silver represented a day’s labor/wage in the historical context.  Therefore, it is easy to see how the present $19/oz for the price of Silver makes it unthinkably undervalued.  If Silver were still used as money and currency as in the past, it could be argued there’s not enough Silver available at a given time to provide even 1 oz of Silver for every single person on Earth.
       
      At 1/10 oz of Silver per day of labor, having merely 1,000 oz of Silver would represent a lifetime of work, allowing anyone to retire if so desired.

    • At the time When 1/10th of an ounce of silver was a viable Pay for day’s work there was under 1 billion inhabitants on earth. Also the above ground stocks were at least at today’s level.

    • @undeRGRound
       
      That’s no stack.  That’s a HOARD!  lol
       
      1,000 oz. at 1/10 oz. per day is 10,000 days worth or about 27.3 years worth of continuous labor… no vacation, no sick time, and no days off.  Yikes.
       

    • where did you get the stat on 1/10 oz silver for a days work. When the British Empire was in full flow, the average salary for a days labourer was 1 shilling. A shilling was 5.6 grams of sterling so this would be around 5.2 grams of pure silver, not 3.1 grams as suggested.

    • when did she get the homes? Foreigner cannot buy a second home without substantial penalties. I would know because I’m in the market for a duplex apartment looking over the sea and the local government in Shenzhen wants a few million Yuan as a second. Also, which province/city is she in? Unloading them would present a real problem right now as the market has cooled substantially.

  2. First there’s an article about “Silver Shortage”   In fact there are always articles about Silver shortages.
    Along with it goes an advert “BUFFALOS 75c Any Quantity”
    Any Quantity?   No shortage?
    The day you stop advertising Silver will be the day there really is a shortage.

  3. I’m based in Hong Kong and I emptied out the Bank of China silver .999 10 tael bars about 9 months ago. To this day they have no bars. But I can still get bars from Kitco. Mainly the Kitco 500oz and the 100oz denomination bars. Recently the Kitco 100oz bars have vanished and no replacements yet. So settling for the Canadian Mint .9999 silver 100oz bars. Premiums on coins are way too high.
    I’d say even without the general public clamoring for the stuff, we are kind of running dry. Remember, that’s before the late comers and sheep joining the fray. Once they do, the bid price will be very interesting.
    Ah, its good to sit on physical as you don’t have to worry about the stupidity of the paper markets unless you are in a rush to sell. Things are about to change tomorrow. History in the making, Russia/China Holy Grail Natgas/oil deal in Shanghai.

  4. Silver is available at the refiners, but you have to buy them in a huge lumps, we are talking 1-2 tonnes. Coins are not that popular in Hong Kong. Jewelry is the preferred method of buying gold/silver/precious stones for the house wives.
    Major buyers obviously head to the bars.

  5. Excerpt: “The affordable investment grade bars are in shortage.”

    This is telling me that the Chinese government hasn’t yet accumulated anywhere near enough silver yet to calculate conversion ratios from yuan to metallic form. Their silver ‘program’ is only just been set in motion a couple months ago from what I can surmise by Koos Jansen’s recent reports on Shanghai’s ‘river of silver’ flowing from it’s vaults into China.

    So, it would appear … the fuse is lit.
     

    • Good Eye, Pat! 
      If these observations Mr. Fields has tied together are correct, the last stacking days have commenced. 
      Time to use both hands, all available fiat, and back up the doggone pickup truck, cuz it’s Crunch Time!
       

  6. oops!  Nice stack.  Your sister-in-law is bailing out of China at a good time.  From what I’ve read the Chinese housing is in a bubble. So is the US.  From what I’ve also read, there are few safe places to store FIAT from any country. China’s banking system is stretched very thin with ratios worse than Lehman before it’s crash.   We are not quite so bad off but our banking system and that of the UK and Europe are primed for wealth taxes, bail-ins and confiscations. The entire enterprise is run by criminals and politicians on the take.
     If your sister-in-law was wealthy enough to accumulate 27 homes and has decent equity when she cashs out, I’d say she might need a bit of any education on the wisdom of stacking.  That American part of her heritage is not doing her any good. She would be wise to go full on Chinese and grab silver and gold with both hands and sit time.  Sit tight and be right.

  7. TheChosenOne said…”I think that chinese are smart, won’t sell low premium bars if they can sell you fancy expensive coins.
     
    I think the chinese are stupid, won’t sell real coins when they can sell you their mass-produced fakes.
    They will eventually kill the trust that everybody has in their coins.
    I will NEVER trust a panda, or any other chinese coin.

    • sounds like you dunno what the hell you are talking about. China, where is it, how do you get there and why is my iPhone and literally everything in the dame house made there. I wonder why.
      They have a PM exchanges and yes, they don’t sell coins but bars OK. Fakes, yes there are many of them due to the huge number of illegal manufacturing facilities, but that does not denote everything is such there.
      Get your facts right and you might get somewhere.

  8. In the Netherlands, you need to wait 3-4 weeks for a monsterbox of Maples. This has nothing to do with shortage, but with a vendor too broke or cowardly to hold inventory. Or they so a little paper game with people’s prepayments.
    Fact is, others DO keep inventory, and ship on the day of payment receipt. Price can be similar or better.

    Some dealers will prefer to procure PM with customers’ money. Prepayment. Long fine print, no risk for the dealer.
    If the local culture is such, you can make money that way, never have to hold an ounce of inventory to sell tonnes.
    Others may like to offer customers the service of  seeing the coins and bar before buying. This requires an inventory, and taking price action risk. This could lead to tax problems. Especially when inventory appreciates quickly end of year.
    As long as SD Bullion offers such low premiums on anything, I am not alarmed.

    • If premium remains at a percentage of buy/sell price, it would not be lost if one bought @ $20 + $3 premium (15%) and sold at a $100 + $10 premium (10%)  it would actually be a gain on the premium :D  Best Case scenario, of course. 
       
      I bought most of my Eagles at $18.00 and $1.99 premium, but I can now sell (atm) @ $19.35 + $2.25 premium, and it is a win-win scenario, were I so inclined to sell. It is selling to a dealer…   :D

    • That gain is in fiat. And don’t we regard PM as an inflation hedge? In any case, you can’t buy back more silver in your example, so you make a purchase power loss.
      Premium are expressed in dollars rather than percentage for a reason. Minting and supply chain costs are actually less volatile than silver’s price itself.
      You could sell those ASE’s and buy back Buffalos which are a bargain of late. Have more Buffalos in hand than you had money for at the time of buying the eagles? Or get Maples. For the many reasons I ranted on at SD earlier :-)

  9. I’ma gonna have to roll out my 
    DOMESTIC LIQUIDITY THEORY again, no one can refute it, yet no one has publicly embraced it either…
    I believe they keep the PM markets “juiced” here in the USA because if “We the People” reject 
    the U$Dollar, it comes tumbling down even faster than if the entire world rejected it at once…
    We DO HAVE THE “POWER”!

    • Getting “We the People” to do much of anything in unison is a lot like herding cats.  Yes, MUCH could be accomplished if only we all pulled in the same direction at the same time.  Unfortunately, that is something at which we are not very good.  So, the bottom line is that while this IS possible, it is also pretty unlikely.  :-/
       

  10. So, let me get this straight, one guy in China, visiting one shop in China, failed to secure an LBMA approved bar in that shop, and then this means a shortage of silver, worldwide?
     
    One swallow does not make a summer.
     
    Hook him up with me somebody, I could get him all the LBMA approved bars to his hearts content, shipped worldwide. Just contact Umicore, Metalor, Heraeus etc direct, pay them, and whadayaknow!
     
    This article is stupid, I don’t even know why I am bothering to respond to it.
     
    I been stacking all sorts of silver product, I have found that the 1 kilo bars give the best returns on salability to cost.
     
    As for bullion coins, meh, if you must, I only do numismatics (real old monetary coins, not stupid bullion nonsense) , firstly they are a cheap source for small denomination silver, secondly, they have a double whammy of rarity that coins dwebs love.
     
    I have recently been acquiring old Mexican coins (900 and 720). Awesome designs, big coins, good quality silver, for what can best be described as, what! that cheap?
     
    1940′s silver 5 pesos are awesome coins, 29 grams silver  content (1 troy oz = 31.1g), for around £15, the premium is still there, but you buying an old coin, with numismatic appeal, and none of that new mint double speak.
     
     

  11. It would however make sense to a certain degree to prioritize available bullion toward (retail bullion) mints world-wide to keep any PM shortage as long away from retail investors as possible.
    Industry and institutional physical demand will need to spread out the supply thinner and accept waiting times, while the bestseller ASE’s and Maples are brought to the lowest premiums in years. As if no-one is buying. Surplus in supply.

  12. OOps
     
    If you have really stacked away 50000oz of silver my  congrats to you not for your investing prowess  but for your stupidity in advertising it to the world.
    I am not a tin foil hatter but you are naive to think these websites are not monitored  by various(fascist) agencies and at some point in time your lack of discretion in regards to your physical silver holdings may very well   come back to bite you in the ass.
     
     
    :

  13. The prospects for the historical norm for 1/10th oz of silver being as a day’s pay slim. The original reference in most of such speculation is than a Roman Denarius was the day’s pay for a solder or equivalent role. This is assumed to be like a dime, 1/10 measure. But when you research the Denarius, turns out it is not a 10th but a seventh of a Roman (averdupois) ounce. The closest you could come to that amount of pay in silver coins common today would be TWO pre-1965 US dimes, not one, or 1/10th oz (t). A dime being 1/14th of an oz (t) of silver, it is close but not exact, due to the divergence of Troy and Roman oz measure.

    • We must not conveniently overlook the fact that industrialization of the mining industry (we are talking 20 centuries here) had managed to outpace ore grade deterioration. So the $24 or so it costs to mine an ounce of silver is just about 3 hours of minimum wage in the West.
      That said, in a country where platinum miners currently live more like the Roman slaves, South Africa, the way is just over $2/day. So exactly 1/10oz. These people work and eat rice or something, that’s about all that can be done without external aid.
      Please correct if I lost some zeros in translation.
      Will the western world ever see purchase power lost to that degree? Perhaps hyperinflation across all currencies could make it happen. Then, what options are there to use as currency? Real estate backed swaps?

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