Sales of Physical Gold and Silver Are Collapsing Across the Entire Industry.


From Simon Black, Sovereign Man:

I serve on the Board of Directors of a large Singapore-based company that’s in the gold and silver business.

And, last night during our quarterly conference call, the management team gave me a lot of intriguing information.

Sales of physical gold and silver are collapsing across the entire industry.

At the US Mint, for example, sales of US Eagle gold coins fell by 67% between February 2016 versus February 2017.

And sales of US Eagle silver coins are down 75% over the same period.

The World Gold Council’s data also shows a substantial decline in physical precious metal demand in 2016, particularly with bars, coins, and jewelry.

Suppliers and refiners in the precious metals business are echoing these numbers, lamenting that sales are extremely slow and margins are falling.

For our Singapore company, this decline is irrelevant.

They have their own proprietary, state-of-the-art storage facility and a number of cutting-edge service like bullion-backed peer-to-peer loans, so business is great.

But I would expect that a number of other bullion dealers will probably go bust if this downturn lasts much longer.

The one conundrum is that this trend does NOT correlate with the price of gold.

In US dollar terms, the gold price is up 16% since the beginning of 2016.

So it would be reasonable to conclude that sales of physical bars and coins are up as well.

But they’re not.

The reason is because there’s a HUGE difference between physical gold and “paper” gold.

When people talk about the gold price, they’re really quoting the price of gold contracts at exchanges around the world in London, Shanghai, Chicago, etc.

Traders aren’t actually buying and selling physical gold.

These gold contracts are merely paper financial instruments, like stocks and bonds, that traders use for speculation.

When some conflict breaks out in Africa, the knee-jerk reaction is for traders to buy gold contracts.

And when central bankers announce that the economy is totally awesome, traders dutifully dump their gold contracts.

But they’re really just buying and selling highly leveraged paper assets. Nothing physical changes hands.

It’s the same with gold ETFs; these are merely financial instruments to gamble on the paper price of gold.

Investors who truly understand the benefits of owning gold, and don’t simply want to speculate on the price, buy physical bars and coins from a dealer.

And quite often there’s a massive difference in fundamentals between the demand for physical coins and the paper price.

During the 2008 financial meltdown, the paper price of gold and silver plunged.

Speculators and traders were hit by margin calls and forced to sell their contracts.

But demand for physical coins was incredibly strong; savvy investors were looking for a safe haven.

There was a total disconnect between the paper price and physical demand.

That’s now happening again, but in reverse. The paper price is rising, but physical demand is falling.

Management told me last night that they’ve been invited to speak at several investment conferences attended by family offices and high net worth individuals.

But they told me that there’s very little interest in owning physical precious metals among these wealthy investors.

Everyone seems to want to dump all of their money in US stocks or real estate, expecting that they’ll easily make 20% despite both markets being at all-time highs.

This strikes me as total madness. Few people ever prospered buying what was popular and expensive.

There seems to be no fear in the market… no regard for sense or safety.

And my contrarian instincts tell me that this complacency is a great reason to own physical gold and silver right now.

Remember that gold is primarily a form of savings.

You could hold your savings in a bank account, denominated in paper currency like dollars or euros or renminbi.

Or you could hold savings in physical cash. You could even own government bonds.

Each of these is a form of savings.

But so is gold and silver. (And cryptocurrency, for that matter.)

The difference is that gold and silver cannot be conjured out of thin air by a central bank.

And unlike cash, or money in a bank, precious metals actually keep pace with inflation over time.

I remember having a conversation once with a famous investor who told me that he didn’t know what was going to happen in the future…

… and THAT’S why he owned gold– for the “I don’t knows.”

Will there be a trade war with China in the next few years? A shooting war? A major debt crisis? Another terrorist attack? “I don’t know.”

Gold and silver are fantastic insurance policies against the “I don’t knows” due to the metals’ 5,000 year history of value and marketability.

There’s no need to go overboard and keep 100% of your net worth in precious metals.

But given the obvious risks on the horizon that we discuss regularly, and these bizarre demand trends, it’s a great time to consider adding to your physical precious metals savings. 

  1. So we should take this news as bullish for metals prices going forward then right? When physical demand was at all-time highs a few years ago the price was collapsing in the face of that. So the inverse should happen now right?

    These markets are totally manipulated so trying to apply logic to the price moves will leave you frustrated. The prices of gold and silver will go where the bankers want them to go. Period.

    • Yes, good point.  Demand for physical remains high as stocks are depleted.  China, India, Russia, Turkey and 4 or 5 other countries buying loads of gold bars.

  2. For our Singapore company, this decline is irrelevant.
    They have their own proprietary, state-of-the-art storage facility and a number of cutting-edge service like bullion-backed peer-to-peer loans, so business is great.

    So which is it exactly??? Business is good or bad? Are we really supposed to believe the garbage written in this article?? Warning: following articles/recommendations on this website is hazardous to you financial health!!! Plain and simple…

    -Organ Grinder

    -Swing a ding

    -Blo blow my pony

    -Slick Willy

  3. How convenient,no one is buying physical Gold and Silver,very interesting and what a load of BS,a few points,

    1/The West has been drained of physical for years by the East,ie,China,Russia,India and the Arab world.

    2/As there is little physical supply left you would not wish to mint physical products you cannot replace / supply or sell without destroying the fiat toilet paper and every other financial market in your economy.

    3/Central Banks cannot buy enough.

    4/The physical Silver supply is not maintaing the level of demand and has not done for years.The above ground stockpile of physical Silver is long gone.

    5/Remember Belarus,50% devaluation overnight,got physical lost nothing

    6/|The British pound has lost 19% since the Briotish people dared to vote for Brexit.Forget the official reasons,the main reason is to scare other countries from voting out.Got Physical Gold and Silver you have lost virtually nothing.

    7/I see less and less physical for sale in the West.

    8/Paper promises have always been cheap,physical is not and they are loosing control of the markets.

    9/The last pushdown is desperation and shows that very soon something very big and bad this way comes.

    If your currency looses 100% – Venezuela,50 – Belarus,19% UK,etc, does this not tell the average thinking person that paper currency is not a store of wealth and cannot be allowed to be in a debt based fractional reserve banking system where ” Growth ” is really an increase in debt,otherwise known as inflation.The debts are now unpayable and system collapse is a mathematical certainty.Since 1970 in the US cash has been trash,look at a graph for inflation,since 1970 it just goes straight up.

    • Excellent chart and very good point concerning gold and silver vs. paper currency over time.  No, fiat paper is NOT a store of wealth or value.  This is why so many on this and other PM-friendly web sites do not regard fiat paper as money.  It IS a medium of exchange and that is pretty much all that it is.  Real money is much more than that and its ability to purchase the same amount of goods and services over time is legendary.  Despite this, a great many do not get it.  They do not get it because they are reactive and not proactive.  They will not do something different until what they are already doing harms them in some way.  They will know it when it arrives but they will never see it coming… unlike those of us who insist on holding some amount of real money rather that just paper with ink on it.

       

  4. Here is the future a year from now,a naughty Silver Bug got caught with the cash to buy 1 Silver Oz Round on his way to the coin shop before the price went up again within the hour.By this time Janet Yellin has been sacked for babbling incoherently and wailing / crying at press conferences because nobody believes the drivel and fairy stories anymore,she is now running the local coin shop.

    • And people say Silver is too heavy to stack.
      Pro-tip: You can fit 550 oz in a 50 cal. ammo can and take it with you on unfortunate canoe trips.

      1. Wow! Hard to believe someone actually paid that man to guard that pile of trash/confetti. The states money wouldve been better off just burning it right there and then and set that man to a REAL task. (Like social order)

      Gold is the money of Kings

      Silver is the money of Merchants

      Copper is the money of Peasants

      Fiat is the money of Slaves!

      (Never gets old!)

  5. It’s refreshing to get an honest, valid article which alludes to the  fundamental factor dictating prices – supply and demand. Investors have many choices seemingly more appealing than than PM’s right now so of course this effects demand. In the silver market there has been a surplus which is unlikely to be eradicated until 2020 and despite constant assertions of tightness in the gold market, there is still plenty available. Investor sentiment could turn rapidly with so many potential black swans and the stock market in a blow off top phase so it’s still undoubtedly wise to be invested in PM’s. The fundamental factor driving price IS supply and demand so despite the myriad of articles and experts telling you otherwise, it’s good to remind ourselves of that simple fact.

    • So you hear an article from someone, who “knows someone” inside that says PMs are tanking AND THATS THE ONE you find “refreshing” & “believable”?

      Man- when stocks fall hard, I HOPE your in them.

      This article has LESS validity than the Jackass- but believe what you wish.

    • @Shamus001 – You miss my point; this site is full of self-proclaimed experts offering many and varied reasons why PM prices aren’t higher. Whether it’s the half-baked ideas of  (lost his mind) Willie, Holter’s theory of a dystopian future that’s right around the next corner, Clif High who is appropriately named, Bo Polny who we all know about, or the deranged and religious nutters like Marshall Swing. On the other hand it could just be supply and demand! Take your pick and believe what you want…!!

  6. Simon Black’s Plan B is flip flopping on recommendations. One day he promotes buying faraway real estate. The next day he promotes buying farmland in South America. Worldwide real estate prices have been slumping since his recommendations.

    Why not go overboard on gold and silver if you’re stocked up on alcohol? The bear attacks will feel like nothing after the new golden era starts. However, 10% in gold and silver is the conservative choice.

    Doug Casey has taught this b$ artist well. What kind of person does business with Simon Black and his dorky and lispy voice?

    • Who doeth busineth with Thimon Black.  
      DorKth with lithsps.  
      Doug Cathey and Jeff Berwithch.  
      To mention a few dumb aththeths

      Thuffering Thucktasthth!

    • I have met my stacking goal for silver but not for gold.  Hope to achieve that sometime this year.  Once there, I will only buy on good dips and also special items that really appeal to me as items I want to collect.

      If Jim Rogers is correct, a major downturn in both gold and silver is coming and that will be a great opportunity to get a good deal on more gold and silver for less fiat.  I hope that he’s right about that.

  7. “Everyone seems to want to dump all of their money in US stocks or real estate, expecting that they’ll easily make 20% despite both markets being at all-time highs.”

    The conventional wisdom in the market is to buy low and sell high.  Unfortunately, not all markets cooperate with this approach.  Sometimes we have to buy high and then sell even higher.  This seems more typical of late.

     

    “This strikes me as total madness.”

    Of course it is madness.  Do you expect sanity in a manipulated market?  The trick, however, is to find ways to make money even in an insane market.  Those who can do that WILL prosper.

     

    “Few people ever prospered buying what was popular and expensive.”

    The word of the day is “momentum“.  Getting in front of a stock that has this in its favor is an excellent way to get run over, while getting behind such stocks is an excellent way to get richer, if not rich.

    I heard people saying that when Amazon was at 1/2 its current share price.  They missed out on a LARGE gain by avoiding that stock and others that have behaved in a similar manner.  Those who bought Facebook at under $20 a share have realized a substantial gain because they recognized a momentum stock when they saw one.  Many others did not.

     

    “There seems to be no fear in the market… no regard for sense or safety.”

    There is no money to be made via playing it “safe”.  Those who want safety tend to hold cash, buy US Gov bonds, or buy bank CDs.  None of those pay squat.  So much for safety.

    As to “sense”, well, we left that behind when the Fed and the US Gov started toying with the markets to get the results that they thought best.  All of their tinkering, however, has not produced a real free market with solid and substantial increases in market growth.  It HAS produced a heavily manipulated and controlled market that is wildly inflated, however.  When a market doubles in price while company earnings have not, it is wise to suspect that a game is afoot.

     

    • @Ed_B Great response! Id like to add an old business midel for investment:

      When purchaseing a business that is NOT in high deman, one typically can acquire it for 5 years net profits on the books. ( meaning it will take 5 years based on past performance to get a return on investment before seeing any profits)

      When purchasing a business in high demand, such businesses can sell for up to 10 years profits.

      When Amazon stocks are valued at 70x income, this means it would take 70 years at past performance before it earned enough to match investment!

      WHO IN THEIR RIGHT MIND would sink $ into a GROSSLY overvalued NON PERFORMER like that? And the market is chalk FULL of stocks like this JUST BEGGING to crash to sound numbers!

    • @Shamus001

       

      “Great response! Id like to add an old business midel for investment:”

      Thanks, Shamus.  We live in some crazy times and only by being a little crazy ourselves can we hope to understand just what the heck is going on.

       
      “When purchaseing a business that is NOT in high deman, one typically can acquire it for 5 years net profits on the books. ( meaning it will take 5 years based on past performance to get a return on investment before seeing any profits)
      When purchasing a business in high demand, such businesses can sell for up to 10 years profits.”
      That sounds about right but much depends upon just what kind of business we are talking here.  Old school B&M businesses probably followed this model closely.  Newer high-tech businesses, not so much.

      “When Amazon stocks are valued at 70x income, this means it would take 70 years at past performance before it earned enough to match investment!
      WHO IN THEIR RIGHT MIND would sink $ into a GROSSLY overvalued NON PERFORMER like that? And the market is chalk FULL of stocks like this JUST BEGGING to crash to sound numbers!”
      Who indeed?  Probably only those who want to own a piece of a company that is setting up to dominate retail for the foreseeable future.  Sure, it has a high multiple today but if it realizes its potential, the share price will move MUCH higher and the P/E will fall considerably because the price paid for those shares will remain static while the earnings and therefore the share price will increase rapidly.
      I remember how scandalized people were when they were asked to pay $100 for a 1-oz. gold coin back in the mid-1970s.  Those who did and kept them are pretty happy these days.  Of course, selling some when gold hit $850 an oz. in 1980 worked pretty well too.
      Amazon today reminds me a lot of Microsoft in the 1980s and early 1990s.  It was not by accident that MS created 3 billionaires and over 3,000 multi-millionaires via the growth power of its shares.
      Secretaries at the small company that became AOL did the same thing, reaping millions of dollars from the shares they received in lieu of a decent salary and benefits.  Sometimes it really pays to make a big bet.  Sometimes it doesn’t.  But being in the right place at the right time can work wonders for one’s financial future.  A lot of people benefited from the Reagan bull market of 1982-2000 but only if they were invested in the rapidly growing US stock market or in a good real estate market.  In both cases, it was the act of ownership that was rewarded.

    • @Ed_B  Damn good information there Ed!

      I just can’t help but think Microsoft “produced” things which lept it’s growth potential, whereas Amazon simply takes things from point A and moves them to point B.

      I suppose Ebay comes to mind for the same reasons… it grew to be HUGE, so you may be on to something there.  Amazon (solely speaking about Amazon, not the other overrated underperformers out there) might – MIGHT become the Microsoft for online sales…. like an Online Macy’s of the 90’s.

    • @Shamus001

       

      “Damn good information there Ed!”

      Thank you, sir!  🙂

       
      “I just can’t help but think Microsoft “produced” things which lept it’s growth potential, whereas Amazon simply takes things from point A and moves them to point B.”
      That they do.  But they do it better than anyone else on Earth.  Being the best at something usually allows them to reap some of the best rewards too.

      “I suppose Ebay comes to mind for the same reasons… it grew to be HUGE, so you may be on to something there.”
      I was thinking of eBay in this.  They came out of nowhere and became a multi-billion dollar business.  Heck, I even bought a car on eBay once.  Still have it, although it will be up for sale shortly once the weather improves a bit.

      “Amazon (solely speaking about Amazon, not the other overrated underperformers out there) might – MIGHT become the Microsoft for online sales…. like an Online Macy’s of the 90’s.”
      They just might.  They have a terrific management team in place, know where they are and where they want to go, so should be able to get their at some point.  There’s terrific value in any company that does even just 1 thing really well.  Amazon certainly does that.
      Unlike Sears which tried to reverse this.  At one time, Sears was a mega marketer.  They were THE men’s store in the USA.  Specializing in all kinds of tools and work clothes for men, they were tremendously successful.  They did one thing and they did it superbly.  Not satisfied with that, however, they branched out into many things that they now do in a mediocre fashion… and their business has suffered from that move.  In fact, it is not difficult to imagine Sears going the way of their one-time arch rival, Montgomery Wards… which is to say KAPUT!  “Stick to your knitting“, as many a grandma has said.  Doing what you know best works almost every time.

  8. Sure, until the Treasury/BIS loses control, the price is whatever they say it is. But, one, in some chaos scenarios they lose control. And, two, there are scenarios they want higher prices (profit/Trump related, etc.). And, three, when demand peeks it’s time to sell, when demand ebbs, it’s time to buy. That’s hard to ascertain but it is the strongest principle of trading.

  9. Another low information article without hard numbers.  The CB’s and ETF’s could be seeing a shortage whilst a surplus shows in the smaller retail bullion markets.

    We never get to learn about the retail bullion market segment in any detail, it would be interesting to know how much churn vs. new supply and yearly sales.  I suspect that 2016 was a very good year for retail bullion and possible December 2016 was a good time for stocking up.

    I think retail bullion in the West is so small that currently it has little effect on the overall supply and demand of PM’s on the macro scale.  However there is probably a slow drip into safe stacker hands that cumulatively adds up to a significant holding but the only way that might into play is real PM appreciation against other hard assets.

  10. I can testify to what the writer says bec I live in Singapore and each time I go to the bullion shops, can see it is empty and deserted. I’m also one of those stickers hard hit by the fallout in prices of pm, like many others here. We have all been holding those physical Bgt in the 2012 highs when silver was in the forties and gold was 1900! Essentially, all of us gold bugs have not recovered!!!

  11. The fact that higher prices for gold lower physical demand, and lower prices for gold raise physical demand is indeed proof of a manipulated market. Only retards and/or liars would argue otherwise.

     

    Either that, or the LAW of supply and demand is not a LAW, it’s a ‘theory’.

  12. Where’s there difference between physical and paper gold pricing? In Russia and India, maybe?

    In silver, I see it happening a little bit in Europe, but it’s the difference between anonymous and online physical buy.

    • The bottom isn’t in yet.  Wait to SD goes dark or they stop their none sense then it will be time.  Under $1000 is coming in next major crash just like in 2008

  13. @cmg

    Sure I see $1000 with a crash maybe 700 but Good luck buying it close to that.It wont be available without a significant premium.Tell me who other than moronic sheeple would sell at those prices(physical market) unless we are talking pure paper gold or silver and we have margin calls on those caught on the wrong side re:unconnected momentum players.

    • I work nights, and stack what little I can, but all one has to do is watch the trading as it crosses time zones to see the defined pattern, and 24/5 controlled markets. You can also predict a move by Kitko’s graph and how small or large the increments are denominated, sometimes $2 or $5, and $10. Go back to bed if it’s $2, if it’s $5, watch it, and $10 keep your trigger finger ready! Last night between 12am and 2am the silver market closed with Australia and China at the wheel for 1 hour EST.  Whatever the risk or inconvenience physical is the safe bet, no matter what the paper price. Physical for physical barter and goods.  For the record, I’m just a saver, who wants to keep his savings, let the big guys worry about all this stuff!

  14. GOLD WILL CRASH?

    Then why did Modhi remove high value currency notes because there WAS SO MUCH DEMAND FOR GOLD?

    Total BULLSHIT

    Gert a Mortgage on your house thats about to go DOWN in vale and BUY YELLOWCAKE!

    You can have your cake and be able to EAT to0!

     

  15. Lots of thoughtful and interesting comments. My take is very simple and it works fine for me. Everyone’s situation is different. I’m 68 years old, retired and living a comfortable life. I have precious metals because ever since Nixon ‘temporarily’ suspended the gold standard, I have observed the value of the currency depreciate every year. Prior to 1971 a person could purchase a car for around $3,000.00 and after the Nixon decision, I observed the rapid rise in the price of cars and pretty well everything else. This was no coincidence, as the currency lost value because it wasn’t backed by gold anymore and it took more paper to purchase what a person wanted to make. That is why a car or truck today costs $30,000.00 plus. The precious metals I have are for my ‘I don’t knows’. I don’t want to be destitute in my old age when not if the financial system collapses. I will be ready to barter if need be.

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