Silver coin demand outstripping supply

From the GoldMoney Dealing Desk --

Following yesterday’s spike up to nearly $50 per ounce, the silver price has declined and is currently trading around $46, though at one point earlier today the price was below $45. As with gold, increased volatility is to be expected around technically-significant even numbers, especially at $50 – the previous nominal peak from silver’s last epic price spike in 1979-80.

The Chicago Mercantile Exchange Group (CME Group) also announced last night that it is raising the margin requirements on silver futures. As of the end of trading today, speculators will need to pay $12,825 to buy or sell a single full-sized silver contract, up from $11,745. The maintenance margin has been raised from $8,700 to $9,500.

Coupled with silver’s failure to breach $50, this margin hike may have encouraged some traders to sell – though previous margin hikes (this is the third in three months), have done nothing to stop or slow silver’s ascent.

This is because demand for the “poor man’s gold” remains intense. This continues to be best illustrated by the backwardation that is persisting in the silver futures market. As GoldMoney’s James Turk pointed out yesterday in an interview, despite the price setback late last night and into this morning, as long as silver futures remain in backwardation then any price declines will be short-lived. A source in London reported to King World News that Asian demand for silver will soon push the price above $100.

Heavy demand from small investors is resulting in shortages in popular coins such as the American Silver Eagle, and leading to premiums that are well above spot price on silver coins. As ZeroHedge reported yesterday, the American Precious Metals Exchange (APMEX) – one of America’s biggest wholesale precious metals retailers – warned of potential delays into mid-May in delivering Silver Eagles, and is now offering to pay $3 over spot for any Silver Eagle coins in any quantity.

Earlier in the year Dave Madge, director of sales at Canada’s Royal Mint, reported that sourcing silver was becoming “very difficult” owing to the buying frenzy in the metal. It’s likely that the silver price – as well as premiums on some of the most popular coins, such as the Canadian Maple Leaf and the Silver Eagle – will have to go a lot higher before holders are enticed to sell.

Source: Gold Money