US Mint runs out of silver

The US Mint has run out of physical silver as demand from investors show no sign of diminishing. In Canada the Mint has had to resort to silver rationing.

It doesn’t make sense does it? How can demand for physical silver be high while the silver price is falling?

The answer is “paper silver”. This is where silver is traded on the Silver Futures market but no actual silver ever changes hands. The paper silver markets are absolutely huge whilst the physical market is tiny – but they are both priced using pretty much the same index based on the silver spot price. Consequently, short sellers of paper silver drive the price down even though physical demand remains extremely strong.

The solution is that the physical price will eventually attract a premium over and above the spot price. To some extent this does exist already but not in the proportion you would reasonably expect.

The Silver Price is at 5 Year Low.

The good news for people like me, who are still in the silver “acquisition phase”, is that physical silver is cheap – very cheap in fact. It currently sits at a five year price low. Silver could treble in price and it would still only be at the same price it was in 2009.

Back in 1998 I had exactly the same message to say about gold. At the time, gold was selling for less than £200 an ounce – and no one was interested. It took a couple of years for me to get a position big enough to make a difference and then I sat back and watched as gold went to over £1,000 an ounce. Many of my readers wouldn’t get in until the price had already rocketed and they felt “safe” – by then it was a bit late to see the same gains as I was enjoying. Fortune favours the brave.

In my newsletter I tell people to buy low and sell high. They nod their heads. They say “Yeah, yeah – that’s obvious!” Doing it is a different matter altogether.

The reality is, to “buy low” you have to be buy a product that is hated by everyone else. You have to be prepared to buy product that has fallen in price and that no one else wants. You have to buy when everyone else is selling. That’s a hard thing to do for most investors. They would rather buy silver when everyone else is buying silver – it just “feels” better.

That’s not the only problem.

Even when you have decided that you are prepared to go against the flow, most people don’t have a huge amount of money sotting around looking for a home. Even when you have decided to buy silver it will take  amy months to build up your position as and when funds become available. I don’t think a year is an unreasonable period of time to build a worthwhile silver position.

Buy silver while it’s in the bargain bucket – not after the price has already doubled.

In my opinion the time to start, if you haven’t already done so, is right now. At best, opportunities like this only come around once or twice in your lifetime.

I started buying physical silver in the summer and I buy the same value of silver every month. If the price falls I simply get more silver for my money. I’m praying the price stays low until I am “all in”. As you probably know from the newsletter, I buy my silver at a whopping 20% discount. That means I could sell it immediately at a profit if I wanted to.