by Gary Christenson, Deviant Investor:
A year ago at this time, it was hard for investors to find available inventory for the most popular silver products – as well as some gold coins. Premiums for the silver American Eagle reached nearly $6.00 per coin. Mints and refiners couldn’t keep up with demand, and long lead times became par for the course across the silver product line.
Today, retail buying of physical silver has slowed considerably. There is lots of inventory in dealer vaults and the number of bullion investors looking to sell is on the rise.
Demand slowed even though nothing has changed the underlying fundamentals of metals markets. The world financial system is even more rickety today than it was in 2007, just before the last crisis. Bullion premiums are at the low end of their range. And prices finally appear to have bottomed and turned up. Yet bullion investors are largely sitting on sidelines.
Let’s take a look at why…
For starters, uncertainty rules the day, and not just in the precious metals. Retail investors aren’t buying the economic recovery story and the record high prices in the stock markets either. Year to date they have pulled roughly $100 billion from U.S. equity exchange traded funds (ETFs). Much of that was diverted into bond funds.
If that statistic makes you wonder just how stock prices manage to keep moving higher, the answer lies in corporate share buy-backs and bank prop trading desks playing with unlimited quantities of near-zero-interest-rate Fed cash.
Uncertainty Has Led to Paralysis
Then there are the questions surrounding this year’s presidential election. Investors aren’t merely uncertain. They are profoundly nervous when it comes to whether “The Donald” or Hillary will win and what that victory might mean. Regardless of which candidate wins, it appears at least half of the country will be very unhappy and gloomy about the national prospects.
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