Thursday, February 24, 2011

Royal Canadian Mint comments on the demand for Silver

Evening Gang. Part 4 is not ready tonight, but what a wild day for those of us who do follow silver. If you click on the image above, it will enlarge for you showing you how silver was raided today.

Why the massive drop?

Is the silver supply issue suddenly all better?

Did we suddenly discover a couple billion ounces laying around somewhere?

Did the U.S. suddenly balance its budget?

Are all of the U.S. states suddenly solvent?

Nope... it was a raid, pure and simple. Designed to drive away the massive open interest of buyers who are still standing for delivery of physical silver in March.

Today was options expiry for Silver and the Cabal launched a massive attack to drive the price down. As you can see in the graph, we went from over $33.20 down to $31.70, a huge drop of $1.50 in a very short period of time.

In any other era, this would have sent Silver cascading lower still and kept it down for months afterward. It is truly a testament to the paradigm shift we are seeing in precious metals that not only did Silver not cascade downward in price, but that it actually rebounded and, as this is written, sits at $32.52.

The Comex is facing a dilemma. And it all has to do with sourcing physical silver (more on this in Part 4 of our series).

How difficult is it to find large amounts of silver?

King World News had a great interview with David Madge, director of bullion sales at the Royal Canadian Mint.

When asked if the RCM is having trouble acquiring silver Madge responded,

  • “Demand right now for silver is through the roof and it shows no signs of slowing at this point. Sourcing silver is becoming very difficult. We are competing with a great many players when it comes to purchasing silver and many of these players are bidding the price higher.”

Madge goes on to say,

  • “Our advantage is that we have had long-term relationships with our suppliers and that has helped us in this situation. We have been able to leverage off of those relationships to get supply, but it still remains a big challenge sourcing material. We’re looking at ways of mitigating our risk regarding supply of silver.

    We are anticipating it to become even more difficult to secure supplies in the future. This is based on what we are seeing firsthand and what our suppliers are telling us. We work closely with these banks to secure silver and they tell us there is a lot of competition.”

When asked what this means for the price of silver and how long this condition is expected to persist Madge stated,

  • “I think you are going to see the premiums go up in order to secure silver. At some point some players will be priced out of the market. I don’t think this is a short-term situation, I think there are a lot of issues going forward and this may be the new norm.”

So here you have the Royal Canadian Mint telling us that they expect it to become even more difficult in the future to secure supplies of silver. As King World notes, this is an extremely important testimonial regarding how tight the silver market is because the information is coming directly from the Royal Canadian Mint itself.

Although I haven't posted Part 4 (The Short Squeeze) yet, we are closing in on the cut off for March delivery for physical silver from the COMEX and open interest for the delivery of physical silver remains massively high.

As mentioned yesterday COMEX silver inventories are at 4 year lows. Total dealer inventory is now 42.16 million ounces and total customer inventory is now at 60.68 million ounces, giving a combined total of 102.847 million ounces.

Today's open interest stands at 28,000 contracts. To give you a sense of how massive that is, 28,000 contracts = 140,000,000 oz's still standing for delivery.

And if the Royal Canadian Mint is having difficulty sourcing additional silver, you know the COMEX is in a desperate position.

Tomorrow should be an interesting day indeed on the silver markets.



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  1. Great in-depth posts on the silver market. Keep up the great work!

  2. Loving the silver posts as off late.

    I really like that you not only give us updates on the housing market but also on the general stock market information.

    I find your silver information very valuable.

    Keep it up.

  3. I agree, the silver posts have been very informative. I've been checking ever 15 minutes for the portion on the short squeeze.