As the country sits on the precipice of COVID-19 exploding around the U.S., there are many worrying signs about the economy. You can’t turn on the local news without hearing about a recession, the market cratering, interest rate cuts, or possible bailouts and “stimulus packages”. What you will see on TV is what’s going on in the precious metals market, particularly with silver. There has been an unprecedented run on certain silver assets in the past few weeks and that is a worrying sign for the entire precious metals market.
Despite silver prices crashing, likely due to investors trading their silver ETFs for cash, within this “selling” trend is an unprecedented “buying” trend, one that concerns All Silver coins.
Silver Coin Demand is Booming While Silver Prices Cratering...What’s Going On?
The federal government has been selling an incredible amount of Silver over the last few days and weeks. With global economic uncertainty being experienced now with the spread of a global pandemic, the demand for precious metals like silver is through the roof.
What does normal demand look like? To get an idea of where the current demand for Silver Eagles is, you can look at February 2020, there were 650,000 Silver Eagles sold by the U.S. Mint. That is on the low end of the usual range which goes from around half a million to a million per month.
As of March 9, 2020, the U.S. Mint had already sold around 1.3 Million Silver Eagles. By March 11, just two days later, the total number of Silver Eagles sold in March jumped to 2.3 Million meaning they sold around 1 Million more Silver Eagles in just 2 days.
So, Who Is Buying Silver?
The answer is NOT the general public, at least not directly. The U.S. Mint does not sell Silver directly to the public, they sell to Authorized Purchasers. These “special” silver buyers are the ones who are then entitled to turn around and sell silver to the public.
There may be others who are buying silver right now as well though, including megabanks like JP Morgan. The bank stopped buying silver for a time after hoarding the metal starting in 2011/ 2012 and causing a major silver boom. That was the last time we saw any demand like this.
Demand and Pricing Dynamics Are Way Off
No matter who is buying all this silver right now, the point is, there is an incredibly huge amount of demand right now for the precious metal. These metals by nature are in limited supply so as the demand skyrockets like it is right now, so should the prices. Right?
The Economics 101 answer to that question is, of course! As demand goes up like it is right now for silver and supply stays constant or even decreases, the prices should follow upwards. With silver right now, that is not happening though.
From this boom two-day period until now, the silver price has actually dropped dramatically.
The price has gone from over $18 in February down to around $16 immediately following the March 9 – 11 rush and has fallen even further, down to around $12 as of writing this article in late March.
This is an incredible manipulation of silver prices that seemingly has come from major financial institutions and has been sanctioned by the federal government.
It comes at a time that the CME is shutting down its trading floor and taking everything behind a computer screen.
Buying Silver Now
It is not a unique theory that now is a great time to diversify your holdings and buy precious metals. The more the stock market goes on wild runs and declines, with interest rates continuing to be artificially manipulated, and with a global recession creeping in, the more sensible it is to hold sound money, that is, gold and silver.
As the government and the financial powers manipulating silver prices keep the metal artificially low, you can take advantage of this as an independent citizen. Now is the time to buy silver for the very reason that real supply and demand--as reflected by “true” prices--can’t be suppressed for too long when the worst of this impending financial crisis hits.
Once this happens, silver will likely rise to the incredible levels that we should be seeing today (minus the price manipulation)!
What is the best way to get silver? Call us at GSI Exchange and feel free to compare us with others.
Government Reclaiming Silver
One worry for precious metals investors, especially in silver is that since the government is selling a huge amount of silver now, they are depleting their stock and, like everyone else, they may look to bulk up soon. While this will most likely be the case, there are two ways they could go about this.
The less likely but possible option is through a recall. Many silver products, like other precious metals and securities, are registered and tracked through CUSIP. In times of global crisis, like during World Wars, the government has recalled securities for its own benefit. This is a possibility but would cause major blowback on the government. Hint: avoid CUSIP-tracked metals if you want to avoid a recall.
The other way is through the aforementioned JP Morgan and their silver hoardings. Their precious metals trading division is currently under federal RICO indictment for “spoofing” JP Morgan customers. If found guilty, the penalty is fines of 3x what the bank holds. This means that JP Morgan, who has 1 Billion ounces of silver currently would have to put 3 Billion ounces back in the government’s coffers. That would go a long way to restocking the Treasury.
The Bottom Line
The global pandemic, COVID-19 has wreaked havoc on the world economy and will surely lead to even tougher times ahead. While you have to think about your health and your family, you also need to keep one eye on your finances and investments. This is why investing in Silver and other precious metals right now is not only important but the most prudent move you can make for your long term future.