by John Galt
April 15, 2013 05:00 EDT
There is a growing problem as the United States lurches towards its ultimate goal as a good world citizen and participant in the new world order of economic and political unity under a globalist banking system overseen by a select group of unelected political appointees. The problem is almost identical to the growing firearms and ammunition shortage in the U.S. where prices are putting many weapons and types of ammunition, when it can be found, out of the price range for many middle and lower class families; that problem being the affordability of gold and silver as dealers begin to feel a problem with margin compression and supply.
What is margin compression and how does this impact the local Mom and Pop coin dealer? Let’s review the events of the last 5 years using the following chart of silver for example:
The chart looks like silver has assumed room temperature and is heading towards a massive bottom formation and crash, possibly retesting the $15 level. There is no guarantee that this will not happen but it is this author’s opinion that looking to the long term and ignoring the “paper” or futures price of gold and silver could be the key for the average person to survive the coming commodities firestorm about to hit.
The price dip on Friday puts the market back almost 3 years to prices unseen since 2010. The $25 support level should hold but could possibly break as deflationary pressures influence not just commodities but also equities in the weeks ahead. This will not last beyond August of this year and at that point in time, if not sooner, physical precious metals prices could become untenable or beyond the reach of the average middle class American as the supply crisis finally forces reality to meet minimum purchase requirements. The following chart of silver over the last 10 years from Kitco.com helps to explain why:
Despite several large moves above and below the uptrend lines, including last Friday’s central bankster sell off designed to pressure commodity prices, the uptrend by and large remains intact with long term support at $20 safely at hand and long term upward resistance still around $40 per ounce. The paper price for silver, as displayed in the charts might seem like a bargain for the average person if they can find it locally or on the internet. There are several caveats however when purchasing small quantities of silver versus block purchases of mint boxes and rolls:
1. Is the silver real? With the sudden price acceleration since 2008 and the financial crisis, there has been an opportunity recognized by the Chinese (see: Bogus 1889-S Morgan dollar, Coinworld Nov. 29, 2012) to flood the markets with phoney silver coinage, including Morgans, Peace Dollars, and yes, Silver American Eagles (see: Fake American Eagle silver coins surface, Coinworld, Feb. 4, 2012). In addition to the flood of proverbial paper silver which is created by illegal naked shorts in the futures markets, the inability or should I say presumed ability of the various futures exchanges to delivery on every ounce of silver sold is a doubt highlighted by analysts for years and as recent as the February contract of this year. The ability to flood markets or saturate a legitimate monetary unit with unfulfillable phoney paper promises or counterfeit real coinage acts to suppress the price, especially when the G-8 global banking cabal has an interest in preserving the United States Dollar as the reserve currency; for the moment.
2. Is the price realistic? While many dealers at the local level used to charge $1, $2, or even $3 premiums over the “paper” quotes for silver dollars, the premiums are increasing on individual coins and bullion. So while this morning’s silver price might be around $25 per ounce, eBay prices and your local coin dealers are going to quote a price reflective of their original purchase price as the sample page from last night on eBay illustrates:
The spread of prices from $31.28 (APMEX) up to well over $37 indicates massive price instability and soon will exclude the financial ability of the average middle class family to buy .999 silver or even junk silver (90%) on the secondary market. This will come to a crashing end as the physical shortages soon overtake the ability of the paper pushers to maintain false prices to distort the actual supply and demand.
3. Are the delivery times realistic? While so many dealers actually have the silver on hand or a reliable supplier, there are many that play the margins and the recent crash in prices from above $30 per ounce to just below $25 per ounce has crushed many of the less than reliable dealers in a margin squeeze. Imagine being told upon ordering that it would take seven to ten days only to not hear from the dealer until the silver prices complete a round trip from the short term lows to the recent prices of the last two years. For example, a dealer sold silver for $32 per ounce to a customer, had a purchase price arranged at $29 from the wholesaler only to have the customer back out leaving the dealer holding the bag at a paper loss after he took delivery of the physical metal. This margin squeeze is causing some dealers to cancel sales and customers to cancel orders to avoid being trapped at the lower price. Thus until price stability in the paper market appears, delivery times will remain distorted; until the physical supply shortage destroys the market and forces dealers to offer only large lot purchases, usually in the $1000 to $10,000 minimum lots with prepayment as a requirement of the sale. When that occurs the “mom and pop” dealers offering the rounds at flea markets will disappear rapidly as well as the corner coin store in the strip mall, unless they specialize in numismatics versus precious metals as their primary business.
Will gold follow the same pattern? In my opinion, gold is already beyond the average purchase price of the middle class unless they have managed their money wisely and the ten year chart of gold from Kitco.com illustrates that the uptrend over the long term is sill intact regardless of the overnight action;
This current “bear phase” has the same appearance of the spring of 2008 and thus I dismiss the move unless support around $1280 is violated with volume to the downside (as warned about in an article from last month: 2 Things You Need to know about the Markets in March 2013). Gold is warning of a great economic disruption while silver is warning of a crash in industrial production and productivity. Heed these warnings now and stock up on as much physical silver and gold as one can afford, even if the prices collapse another 10-20% because once this correction is over, the Federal Reserve will guarantee that all commodities will skyrocket in dollar terms as the desperation to save their insane policies and justify their existence enters into its final phase before the ultimate collapse.