Rafi Farber: PM Premiums at all time high, EU calls for Absolute Soviet style controls

As a forward to one of the aspects to this video, we offer a kind of explanation for one remark Rafi makes in this video about silver.

it is generally believed by advocates of precious metals (PM) as either a currency, a basis for currency, or as a way to protect your wealth from inflation and other bad policy moves by government, that the supply of metals such as gold and silver is much lower than is reflected in the price. In other words, if the actual availability of PMs was reflected in the price, the cost would be a multiple of what it is as the public spot price for the metal, and not just some few percent higher.

The explanation for this most often given, is that people buy and sell mostly paper representations of metal to one degree or another, which makes it subject to the same kinds of manipulations via shorts and other derivatives, that we saw with the Hedge Funds and a certain game company, where the price was deliberately tanked in order to make shorts work for the people who made them. Something which should be criminal, but for some reason isn’t depending on who does the crime.

As I understand it, which is abstract at best, metal prices are manipulated in this way but by more and bigger players in order to keep currency strong, or the belief in the currency strong.

The evidence that this is the case, is what is called “the spread”. This means that if you look at the cost of say, silver based on the spot price and compare it to the cost of buying some and having it physically delivered, the difference is at an all time high.

A few years ago, the average spread between the spot and the cost of items you could have delivered  on most products was around $2.50/Oz and maybe a little less in bulk and maybe a little more if it was an odd product you bought such as silver cartridges or a wolf’s head or something. This would be from a dealer like Silver Gold Bull.

As of the time of writing, to buy a few Silver Maple Leaf 1 Oz. rounds/coins the cost is about USD $27.00 per, depending on method of payment while the listed spot price of silver is about USD $18.80 per Oz.

That makes the premium around USD $8.20 per Oz. Which is crazy high. There could be other explanations for this. Demand for silver products, such as bars and rounds or coins could outstrip demand as opposed to the demand for the actual metal, which might be normal or even lower than usual if industrial use of these metals is falling. In that case buying the raw metal could be an indicator.

On Amazon.com Sterling Silver casting grain is around $34.95 USDCasting grain means it is just rough, uneven beads of silver, made to be melted and reshaped as a liquid into whatever product or jewellery you want. It is also .925% silver, or “Sterling” silver and not quite the .999 or in the case of the Canadian mint, .9999 fine silver you get in the rounds, bars and coins. (Sterling is better for jewellery as its harder and more durable and contains around .075% copper and or other metals)

RioGrande however, has it at USD $23.68 if you buy 3 Oz or more. And that is for .999 fine. This means the REAL spread on the actual metal even for more or less retail is only around USD $5.70/Oz. This is still crazy high compared to the more normal USD $2.50 or so for actual coins, bars and rounds, but is not the whopping spread it is now and is a better reflection of the actual difference in supply and demand of the metal as opposed to demand for familiar silver products which people are clearly buying in vast amounts for very rational reasons.

All this is an explanation for a remark Rafi makes at the start of this video, that we felt deserved a bit of explanation.

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