Ranting Andy: Alert! Alert! APMEX (and Likely Nearly All Mints) Out of Silver

RANTING ANDY – Well, it looks like I was right about the mining stocks getting hit in front of the Fed announcement, as clearly Benny and Co. leaked to their colleagues at JP Morgan and Goldman Sachs that they were going to announce an unending money-printing spree today, necessitating a suppression of mining stocks so as to not have them at all-time highs when the announcement was made.

But that’s not surprising at all.  What is, however, is just how SOLD OUT the entire silver industry has become, nearly overnight in fact!

In the past week, with FAKE, PAPER silver hovering in the mid-$40s, REAL, PHYSICAL silver was selling in the low-mid $50s.  On Sunday night, PAPER SILVER rocketed up to nearly $50/oz on news the Chinese are planning to sell up to two-thirds of their dollar reserves, before the inevitable pre-COMEX Options expiration (Tuesday), pre-Fed announcement (Wednesday) smash that took paper silver down below $45 in less than 24 hours.  As usual, nearly the entire drop occurred immediately upon opening of the COMEX at 8:20 am EST, by the way.

However, the funny thing is that PHYSICAL silver prices barely budged during YESTERDAY’s downdraft, and major bullion dealers such as APMEX were showing delivery delays out until May 13th, or three weeks into the future.  In fact, on Monday night APMEX sent a bombshell email to its customers, offering to buy ALL SILVER (AND GOLD) EAGLES at significant premiums to spot, no matter what the age or condition of the coins!  This has to be a first for a major bullion dealer, certainly since the late 1970s, by my estimate.

After Tuesday’s silver smash was completed, it was time for today’s Fed print-a-thon announcement.  As expected, Benny decided that inflation is not an issue, and that he’d choose it over deflation once again, which can’t be unexpected given that Wall Street, the only business that benefits from inflation, has bought him, Obama, Bush, and essentially all politicians ten times over.

Immediately afterwards, silver and gold rocketed to new all-time closing highs (at $48.00 and $1,530, respectively), prompting me to wonder just how much physical metal will be purchased tonight by desperate buyers worried about the collapsing dollar and an imminent silver shortage.

Which led me to take a look at APMEX’s website tonight (Wednesday) under the Silver Eagle section.  And WOW, look at what I saw (details below)!

Not only have premiums blown out to the highest I’ve ever seen (spot + $5.49 to $8.64), but projected delivery dates exploded out to May 27th from May 13th just two days ago!  Combine this info with what we learned from Monday night’s emergency APMEX email, and it becomes quite obvious that they don’t have the inventory, and frankly are HOPING that prices stabilize or fall by late May, a FULL MONTH AWAY, so they can secure metal to fill the orders.  Find it to be a coincidence that they picked a date EXACTLY one month away? 

All orders today constitute a significant delivery risk, primarily to APMEX (and presumably other dealers) and secondarily to YOU, the customer.  BTW, for those people that called me “retarded” for buying on eBay, I hope you realize that on eBay, you can make sure the seller has the product ON HAND, READY TO DELIVER, which may not have been an issue in the past, but sure is now!

Moreover, notice the “Just Listed” sign on the bottom left, representing APMEX’s standing offer to buy any and all available silver eagles for spot + $3.00.  But guess what, they’re not going to get many takers.

But that’s just the half of it!  Clearly APMEX has SOME inventory on hand (but not much), and are DESPERATE to make large enough profits on it to cover the potential losses from sourcing silver for the “May 27th” orders they are taking today.

This is apparent in the case of “Monster Boxes”, or sealed boxes containing 500 silver eagles.  APMEX is out of 2011 and 2010 monster boxes, but do have some inventory of 2009s, although how much is the big question (I doubt it’s much).

Anyhow, they will send these out immediately to current buyers.  But look at the price!  Whether you pay by check/wire or with a credit card, you are paying roughly $33,000 for such a box, or a whopping $66/coin!  Yes, you heard me correctly.  $66, or spot plus $18, which translate to a premium of 38%!

Given the obvious physical shortage of metal at current prices, today’s confirmation that U.S. monetary policy will remain loose ad infinitum, and the technical breakouts of both gold and silver to new all-time closing highs TODAY, I believe debate about when silver will hit $50 is rather silly.

The bigger question is whether silver hits $100/oz later this year, or if investors will have to wait until 2012.  Not to mention, when will the gold/silver ratio fall below 15:1, and will it in fact reach single digits, which I firmly believe it will!

Finally, I wanted to point out that historically, APMEX has been a fine company, which I have had numerous satisfactory dealings with.  However, I strongly disapprove of any mint selling inventory they don’t have, particularly in such scary times, when investors are desperate to protect their wealth from the savage forces of Central Bank led hyperinflation.  I am not saying they are doing it, as I cannot PROVE this to be the case, but I strongly suspect it and fear that, in the case of a silver meltup in the coming weeks, they may not be able to deliver on their “May 27th” promises.  Not to mention, if they (and other mints) are indeed filling orders at the current prices, unless they are somehow “hedged”, they could be opening themselves up to catastrophic losses, potentially even the same “force majeur” type of losses that silver longs on the COMEX may be facing if there is a default.

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