by Keith Weiner
We are hearing rumors this week of a shortage of the big silver bars, the thousand-ouncers.
No, we don’t refer to bullion banks saying this. Nor big dealers, who are happy to sell us as many of these as we can buy. Nor our peeps in high places (we don’t claim to have any such peeps).
We refer to the usual suspects. We talk about abundance and scarcity of the metals in nearly every one of these reports, in terms of the spread between spot and futures prices. Some people assume that their local dealer’s markup on Eagles represents spot. Sometimes the price of Eagles may seem a decent proxy for spot, but it is not. Eagles are produced in a supply chain that is inflexible. If demand rises above a threshold, it will first pull the Eagles out of the distribution channel. And then it will drive up the premium on Eagles. This may be a shortage of Eagles, but not necessarily a shortage of silver.