Thursday, September 04, 2008

Demand the silver you want! Or make your own!

I have to say I’m rather dismayed at the market as such. The way I see it between growing nation debt, teetering banks, the imploding housing market, growing unemployment and the destruction of the U.S. hegemony there is no way the U.S. Dollar should be growing in strength.

An even greater injustice is the prices in the metals market where it is more and more apparent that physical silver and small sizes of physical gold are quickly disappearing from a massive rebirth in interest for metals investing. Yet prices reflect the paper fantasy rather than the physical reality of the metals market.

Talk here and other sites have been sparked interest in the ideas of a silver buyers cooperative(s)/buyers club or the creation of small artisan companies to acquire bulk silver in the form of trade bars(1000 oz) or silver shot (pellets of silver used in jewellery and industry) and convert this silver into the sizes investors actually want, ranging from 10 to 100 oz bars, (while many investors like rounds, the labour and equipment is much more intense and expensive to create uniform blanks and strike them with a 60 tonne press as opposed to casting a small bar)

These approaches are certainly a possibility but it’s going to take some work and some luck to find people interested in such ventures and those with the physical skills (foundry or metal working experience) or and organizational/legal skills to make this work. Of course there is also the need for a business plan that will prove that such conversions to small bars can be done within the current markets range of premiums between large and small silver.

Since I have nothing else to do between my full time job, 2 blogs, 2 hours of commuting/day, a family and my expected participation in a upcoming election campaign, I’m willing to act as a point of contact, organizer, sounding board for anyone else who is interested in such a venture. I’d also be willing to advertise for and sell (and buy for my personal stash) any product made buy such an endeavour. Should you or someone you know and can coerce is interested is this contact me. Ideally we could form such venture in both Canada and the U.S. to keep things simple regarding shipping and customs but one can be made to work.

Take the pole on the side bar regarding willingness to participate in such a venture

My second item today is to ask you for your help. Two weeks ago I wrote the Royal Canadian Mint asking them a bunch of questions and made some suggestions and I’ve received sweet F.A. as a response. I’d like others to approach them with similar queries to see if we can get some movement.

Plz don’t cut and paste, write them with your own thoughts and words.

Essentially what I said was

If you’ve been following the metals market of late you would know that there is a serious disconnect between the paper and physical price of metals, especially silver bullion. This disconnect is most obvious when you look at the higher premiums that silver bars are demanding vs. the current spot prices, demand is not being met and this premium is rising.
So, does the Royal Canadian Mint have any stockpile of small silver? (5,10,20,50,100 oz bars)

Will the mint release any such stockpile to meet this growing demand?

Is the mint currently making, considering making or considering increasing production of this type of product?

If not why? The rising demand for physical silver is allowing silver bars to be sold from 4-6 dollars an ounce above the current spot price depending on size of bar. This would seem to be an ideal business model where the mint could turn 1000oz bars or silver shot into highly demanded products at a 30-40% margin.

Since your mandate states
As a profit making Crown corporation, the Mint's mandate is to produce a fair return on investment for its sole shareholder, the Canadian government.

the mint should be embracing this opportunity to make a fast buck selling the public the silver bars there desire.

Send your queries off and lets see if we can get any satisfaction, thanks


CHR said...

As much as your survey will show a demand (folks voting as "willing to buy"), I can't imagine a start-up company being able to jump in and capitalize a business like you are suggesting. I suspect you would not find sufficient demand, beyond an early surge from the faithful.

Somebody would have to bankroll the pipeline of silver on it's way from one size to another; that could get expensive as prices roller coaster around. Look at the price moves, in just the last 3 months; that's enough volatility to kill off even the most passionate entrepreneur, the moment demand waivers.
As far as the mint goes, well, they're the Mint; damn it! Their business is making coins and that is what they do. I understand the case you are making to them but I wonder if they have any demand coming at them, at all.

The silver we are finding and buying at the coin shops is most likely the stuff the owners bought back at $7/oz; they would have loved to sell it in the 'twenty plus' range but in the 'high teens' is good, too. After selling off their stock of 100s of Maples, I doubt they are re-ordering 100s more with today prices, service charges, shipment fees, etc. This is a much riskier market place, especially in the short term.

I don't think the Mint would see much change; they're too far removed from the profit being made on all the old silver lying around, now turning a profit, at the retail level.
I heard of four bars available tomorrow; price expected to be $17 CDN/oz (1/2 kilo, 100oz). These were coming in from held positions and marketed/auctioned through a coin store.


LoW said...

I agree such a plan probably won't happen, 1 person emailed me during the last thread interested in such an idea and NWOresistance sees this as part of a new global economy based on precious metals, so I thought I'd put it forward and see what happens.

I don't know what licensing, forming a business shell, insurance bonding, work space, etc would cost but from what I see a small furnace, scales, molds and safety gear could be put together for 2-3k
See this site
They also have gear for recyling scrap, and other neat stuff.

Ignoring time and labour such a venture should cover its captial cost after only 1000 oz melt, so from that point it does not look that irrational,

Considering the money some people poor into hobbies this looks like a reasonable and possibly profitable past time.

I'm willing to help out with such a venture but I know from my political activites people talk a lot and do little, so this is a call to arms which I suspect will go unanswered and then we can get back to whining about no silver.

Ian said...

I have a couple of RCM 10oz bars so they have been minted at some point. I have no idea their age though (beyond the obvious fact that the silver has been in existance for at least 5 billion years).

Lord of Wealth said...

good to know Ian,
I've only ever had 100s and 1oz golds from RCM

nworesistance said...

Let us collaborate on this LOW. The only way to judge the real world value from this kind of venture is to put up a website and start posting links to it in the silver forums and other places. There truly in a revolution brewing where people are starting to understand that the real value of our currency is approaching the paper it is printed on -> a few cents.

So the natural result is more and more people will get rid of their paper based investments and move towards something of real value. The baby boomer generation should be starting this process of moving their investments before hyperinflation devastates their fiat dollar denominated assets.

I think there is definitely a market for this. The real trick is to find a way to treat silver as a product instead of an "investment" so that we can access silver as jewelery shops and other industries do, with our output not being taxed as capital gains.

Of course we can't have a silver economy without people having silver in their hands and an economic model that makes sense to pay for things with silver. This will all come in due time.

Of course talk is cheap. Let us collaborate and pick a domain name that is simple and effectively communicates these ideas. It can be a one or two evening job to put the content up.

Then we can simply get the info out there on the search engines and try to find partners to help deliver the silver supply to meet the future demand.

nitroglycol said...

I definitely like the idea. Besides 10 and 100 oz bars, though, I think 1 oz bars would be big sellers if the premium were significantly lower than Maples and the like (especially among little folks like me who can only afford to buy in dribs and drabs).

CHR said...

I still think that there isn't much market for making 100oz bars out of 1000oz bars. Smaller sizes, as suggested, down to 1oz bars would considerably open up interest and could keep the venture going beyond a small number of runs to satisfy the 'investor class' interest. Mass appeal (and hence viability) would come from making the small stuff so that the average consumer (who doesn't yet know that they want silver) would be able to get in, once inflation sparks their interest.

I hope that your readers have been out buying, given the state of the spot price! Good luck finding sellers who will price their product based on spot pricing.

I was able to buy up a ~bunch~ of US Junk at a very affordable rate at one of my local coin stores. Mostly half-dollars with no premium asked; bonus!


St_Clair said...

Nice to see this discussion starting. Have been buying what I can find locally, we all suffer from a dearth of Canadian bullion dealers it seems (other than local coin shops, your luck there varying geographically).

Getting this going is not easy, there's a big question about trust, due to the value of precious metals.

Any product made has to be accepted as pure silver, not only by the first buyer but by others they might later trade with.

One ounce rounds, there's quite a variety out there. I think the smaller sized bars, 5 and 10 ounce, would be a better product - lower production cost than rounds, less premium added on finished product. They are also very difficult to find in the market nowadays.

100 ounce bars start getting into so much metal value that the trust issue becomes huge - more difficult to convince someone to buy or accept on trade an unknown brand, imo.

One point mentioned by nworesistance about making a 'product' instead of bullion - that has tax implications. Jewelery items should be taxable, while bullion is not, afaik. Best to stay as bullion, me thinks.

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