May 2013 Silver Bullion Newsletter - Silver Bullion Scarcity Worsens

Dear Subscriber,

The worldwide supply situation for physical silver bullion is still very tight and has deteriorated further since our last newsletter.

In late April, most suppliers and mints would realistically quote about four weeks in terms of delivery times for popular products such as the Canadian Maple Leaf silver coins (which would prompt us to quote about six weeks) and occasionally slightly higher premiums. See the Bloomberg article that featured Silver Bullion, Silver slump seen luring buyers as wait time rises in Singapore

Today most mints have no inventory of silver, are sold out for the foreseeable future and have suspended sales until they fulfil current pre-orders. The situation s made worse as several key mints are temporarily shutting down production for a few weeks due to the scheduled yearly maintenance.

Thus a secondary market has developed as primary suppliers and dealers are trading popular silver bullion items at substantially higher premiums and with spotty availability. Gold bullion on the other hand is easier to procure compared to silver.

In this newsletter I like to share details of the current supply situations, current in-stock bullion quantities and why we got to present our unique storage program in Chile along with Ron Paul, Jim Rogers and Nigel Farage.

Is the world about to run out of silver ?

Not necessarily. The extreme silver tightness is for investment grade Silver Bullion as opposed to silver in general. Mints and refineries simply do not have enough manufacturing capacity to convert raw silver into coins and bars. Silver grains (used by industry) and rough 1,000 oz poured bars are still available.

Keep in mind however that futures exchanges normally hold less than 3% in physical reserves of their net long positions. So if a major investor or bank were allowed to take a large physical delivery we could easily see an all out scarcity or market cornering as occurred in the late 1970s when physical silver was bid up to almost 50 USD (250+ USD in today's currency after adjusting for inflation).

Why do you quote 6 week delivery while dealer XYZ states 2 weeks ?

The delivery timelines we state are such in the event of a ‘worst case scenario’. We normally fulfill orders much earlier than the stated timeframe because we have up to 85,000 oz of company owned incoming bullion at any point in time. Incoming shipments are used to fulfill existing pre-orders before excess inventory is made available as in-stock.

Having said this we take delivery timelines and order execution very seriously. Over the last 4 years we have fulfilled every one of our 11,078+ orders comprising over 1,847,000 oz of bullion and have almost always been within the promised delivery timeline. We would rather underpromise and overdeliver than the other way around.

How do you split inventory between vault storage and local sales ?

We fulfill pre-orders first in the order received.
Remaining inventory is roughly split 50/50 between storage and local availability.

However all storage bullion goes through our offices / depository for parcelization and inspection first and is then transferred to the vaults in bulk shipments. This is the reason that normally local inventory appears as available before storage availability.

Lessons from the Transfer-in Process

Since starting our transfer-in process we received and processed over 150,000 oz of bullion from various clients. It is amazing to see how often customers, who thought their physical bullion is sitting somewhere for them, would find out that their bullion was only kept on the books and that physical bullion is not available after all or that deliveries are greatly delayed. This is particularly true now as timely physical silver sourcing is becoming so difficult. ABM Amro is one of the latest cases of physical delivery suspensions.

In other typical cases a transfer-in customer's maple leafs, purchased in 2009, would end up being transferred as 2013 coins ... a clear indication that the bullion was only acquired when the delivery request was made.

Free storage, unlimited supplies and low prices might sound great at first but in fact you might only have bought an account entry and really are not in ownership of physical bullion. These schemes are ripe in the industry because customers almost never demand to have third party proof of physical storage and it is very profitable not to procure and store physical bullion.

JP morgan and UBS are just two better known companies who had class action lawsuit filed against them for not storing physical silver. Tellingly often their defence is that not-storing physical is an industry practice.

Revolutionizing Storage

It is normally during supply draughts that hard truths are revealed. If you store, or consider storing, bullion with a third party how do you know whether your bullion:

• Actually exists ?
• Was not re-sold multiple times to different individuals ?
• Is genuine ?
• Is safe from western nationalizations ?

Silver Coin Mexican Libertad 2012 - 1oz
2012 Libertad supplies are still available (2013 are mostly sold out) and the coins are now storage enabled. Mexico is the largest worldwide exporter of silver and home of the oldest mint (1535) in the Americas. Historically this mint produced the famous "pieces of eight coins" on which the US and Canadian Dollars are based.

The Libertad coin is also the only bullion coin that is sealed with tamper proof metal seals as opposed to a little plastic strip common to other coins packaging. We get these coins directly from the Mexican Central Bank and they are recognized as IPM tax free in Singapore.

Platinum Coin Platypus - 1 Ounce
Interested in Platinum?
The one ounce Australian Platinum Platypus bullion coins are struck in .9995 pure platinum and have a limited mintage. Each coin has a diameter of 32.60 mm, weight of 31.12 grams, and is presented in an acrylic capsule. No more than 30,000 of the coins will be released. We will add these coins as a platinum storage option soon.

• Silver Maple Leafs - In the secondary markets (bullion not sold directly from the mint) silver Maple Leaf premiums have almost doubled and we have been quoted September as a likely date for new mint deliveries. Our current in-stock maples are the remainder of a 30,000 oz shipment we locked in a month ago and is likely to sell out soon. We will resume Maple Leaf pre-orders once we have reliable delivery timelines earlier than 6 weeks.
   
• Silver American Eagles - American Silver Eagle coins are also in very heavy demand and the situation is similar to the Maple Leaf coins. The production bottleneck is a lack of silver blanks which are used to make the coins and sourced from outside the mint.
   
• Johnson Matthey 100 oz Poured Silver Bars - These bars used to have better availability but most 100 oz JM inventories have now been sold by the refinery and they are harder to obtain. Furthermore the refinery that makes these bars is also due to temporarily shut down for maintenance in the early summer. We have another 25,000+ oz of these bars incoming over the next few weeks of which a good portion is unsold and will be available as in-stock.
   
• .9999 Royal Canadian Mint 100 oz Silver Bars - New RCM bar supply is very tight and the refinery will also soon have scheduled maintenance shutdowns. We have temporary pre-order availability on these however as we have secured an incoming shipment.
   
• Libertad Coins - As of early May the mint still had 200,000 x 2012 coins available which are expected to run out by the end of the month. We already have 17,000 Libertad coins incoming and can still take larger pre-orders on these coins. Unfortunately proof Libertad coins are sold out.
   
• Gold Bullion - Gold Maple Leaf supply is much better than Silver. We had over 1,000 oz incoming over the last week and have cleared, or are clearing, all pre-orders. 180 oz are in-stock locally and another 160 oz are currently being parcelized for in-stock vault storage. New orders are quite reliable as well.

• Perth Mint Silver Coins and Bars - Koala 1 oz and 1 KG availability is still quite good while 10 oz coins have been discontinued temporarily. 2013 Kookaburra 1 oz coins have reached their 500,000 production limit and are sold out. 100 oz and 1 KG bars are becoming much harder to get as the production line is temporarily converted to gold bar production. As a side note, I just came back from a Perth Mint visit where I had the priviledge of seeing the entire production process first hand. Perth Mint has some top notch processes... two tumbs up.
   
• Perth Mint Gold Coins and Bars - Gold Kangaroo coins and 100 gram bars are a bit harder to get but overall gold is much easier to obtain compared to silver
   
• Platinum - Perth Mint Platypus Coins are available for local pickup.
   

If you plan to import bullion into Singapore make sure you understand what type of bullion is classified as Singapore IPM Tax Free and what type is not, so that you are not burdened with unnecessary import taxes. See IPM Criteria & Tax Free Bullion for details.

See more products and prices at www.silverbullion.com.sg.

Information provided here should not be considered as advice or as an offer or enticement to buy, sell or trade. The contents of this publication, including any opinions and analysis, are strictly intended for educational use. Opinions expressed in bylined articles are those of the individual author and do not necessarily reflect the views of Silver Bullion Pte Ltd.

Silver Bullion Pte Ltd. makes no warranties, whether expressed or implied, as to the accuracy of the information provided or for eventual results obtained by using the information. In no case shall Silver Bullion Pte Ltd. be liable for direct, indirect, or incidental damages resulting from the use of the information.

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