Perth Mint ending unallocated silver program

[Ortofon]

Seems pretty simple to me, and I'd take this as bearish for Silver.

Pool accounts are highly liquid, with a small spread. The premium is as low as you can get outside of futures. Holders of pool accounts can liquidate funds at the first sign of weakness and have a buyer ready and waiting.

On the other hand bullion coins are not nearly as liquid, they have a large buy and sell spread. The premium on Perth bullion is easily 10% higher than spot in a lot of cases, or more. Holders of physical bullion can not liquidate easily and must find a buyer first.

So if you were running a business, which is the obvious path to take to minimize your risk in the face of a massive price drop? Would you want to be the CFO who is obligated to buy back large quantities of certificates and be left holding bullion? Or would you rather convert that bullion into coins, minimize your liabilities, AND making greater profits on the initial sale as an added bonus?


The conspiracy crowd completely dismisses the fact that these guys have a business to run.

[mrgneiss]

Seems pretty simple to me, and I'd take this as bearish for Silver.

Pool accounts are highly liquid, with a small spread. The premium is as low as you can get outside of futures. Holders of pool accounts can liquidate funds at the first sign of weakness and have a buyer ready and waiting.

On the other hand bullion coins are not nearly as liquid, they have a large buy and sell spread. The premium on Perth bullion is easily 10% higher than spot in a lot of cases, or more. Holders of physical bullion can not liquidate easily and must find a buyer first.

So if you were running a business, which is the obvious path to take to minimize your risk in the face of a massive price drop? Would you want to be the CFO who is obligated to buy back large quantities of certificates and be left holding bullion? Or would you rather convert that bullion into coins, minimize your liabilities, AND making greater profits on the initial sale as an added bonus?


The conspiracy crowd completely dismisses the fact that these guys have a business to run.

I agree completely that by having only allocated accounts in the future they are minimizing their risk, and the risk to their customers. Owners of unallocated accounts are unsecured creditors and would be out of luck if the firm ran into financial problems or went bankrupt, whereas allocated account holders should be able to retrieve their metal in such a situation.

[Silverthorn]

I'll go with Ed Steer's explanation - closing the unallocated accounts to new customers is the best way to slow a runaway unfunded liability that wasn't an issue when silver was range bound for 30 years but is now as more and more clients may want to cash out and/or switch to physical or allocated.

You can stick with it but it doesn't make sense to me. Who is going to profit from not having silver backing the accounts? The government? The managers? Why wouldn't the auditors be saying something? Getting kick backs are they? For a small entrance and exit fee and no on going fees they are going to risk having a huge liability? Just doesn't add up at all.

Even in the depths of the 2008 and 2009 supposed shortage they delivered me silver so a lot that was said about the shortage in general and the Perth Mint seemed rubbish to me.

[Bron Suchecki]

I will leave a comment to Ed Steer's article at his website later today.

mrgneiss,

You have a complete misunderstanding of the Perth Mint's unallocated. I would suggest reading this post of mine http://www.perthmintbullion.com/Blog...allocated.aspx

Following the analogy in that post, you can have a huge dam with heaps of water, but how fast it can flow out is determined by the size of the pipe at the bottom of the dam. Same with a Mint - we can (and do) have a huge pile of silver 1000oz bars, but it can only be converted into coins and smaller bars at the rate our machines can process it.

Temporary shortages in certain products reflects on the machine capacity, not the availability of raw silver.

Most unallocated programs are suspect, but the Mint has been very explict on its website that it does not do what Ed thinks, which is keep the cash and not buy the metal. We have no exposure to metal prices. Silver can go up to $100 an ounce and it will not have an impact on us.

This idea of the Mint being exposed to metal prices was raised in this 2008 thread and I dealt with it there https://www.kitcomm.com/showthread.php?t=29595 and summarised here http://goldchat.blogspot.com/2008/12...old-again.html

Please read that and I'm happy to redebate it if you want.

[ILUVPMs]

I rarely get involved in this conspiracy stuff that there is no silver available but ill chime in.
I went to my TD canada trust take delivery of my silver with my paper certs ( which everyone says is bad) and the bank told me it would take 5 days and I could get my bars. Since i had a large amount that couldnt be satisfied with 10 ounce or 100 ounce bars they said i would need to settle with kilos. It just proves the point that there is no shortage going on out there just a bottle neck.
f you listen to that sham radio station king news youll realize that he never gets to the bottom as to why there is a shortage (even though the chump owns the CMI bullion place). he just states that its EITHER A SHORTAGE or A BOTTLE NECK. I find it hard to believe that a person who owns a bullion store of that size and who is affliated with the refineries cant figure it out, or "no one will explicitly tell him.

Sprott too: he's pumping his own business. Of course its going to take you a month to get 20 million dollars worth of silver in bar format...

ED steer and teh rest have their own agenda in my opinion. THey want to pump silver up and make it look like there is a massive shortage and that it is scarce as hell. People will get into a frenzy and think silver is the next best thing to sliced bread and buy it at crazy prices only to realize in the end that they just got scammed on their trade. Remember that HUGE DEAL of the BACKWARDATION AND COMEX BUST IN MARCH??? where is it? byton mentioned that silver couldnt get above 36... well we got to 38 and have been at 37 for a while now... just crazy talk

I wish howard katz was still alive, that man knew this market like the back of his hand. Even he mentioned that a market cannot be manipulated to that extent. He predicted this run last year in early 2010, give me a break to the conspiracies...
Even ARMSTRONG has said the same thing! Capital flows into different areas. For the time being it will be PMS and then something else.... its a trade for the here and the now...

Want to know what silver is doing? Its explosive price move is characteristic of this metal.. go back and look at the last bull market.... Its called price chasing... people chase it because gold is too expensive...
Silver will outperform gold for the next two years since gold outperformed it for the past two years.. its that simple.

[jbsilver]

Following the analogy in that post, you can have a huge dam with heaps of water, but how fast it can flow out is determined by the size of the pipe at the bottom of the dam.

Who builds huge dam with just one pipe ???? Well, either there is shortage of pipes or engineers screw up.
Or maybe profits from selling small drops of water are so small that do not allow purchase of additional pipes.
I have solution !
I think Perth Mint should outsource their production to Canadian Royal Mint and problem would be solved. And if Canadians can't help I am sure that producers of Pandas can.

[Bron Suchecki]

We are working on the pipes, here is a video of a new press the Mint installed a few days ago in fact http://www.youtube.com/watch?v=dzmAT...layer_embedded

[mrgneiss]

I will leave a comment to Ed Steer's article at his website later today.

mrgneiss,

You have a complete misunderstanding of the Perth Mint's unallocated. I would suggest reading this post of mine http://www.perthmintbullion.com/Blog...allocated.aspx

Following the analogy in that post, you can have a huge dam with heaps of water, but how fast it can flow out is determined by the size of the pipe at the bottom of the dam. Same with a Mint - we can (and do) have a huge pile of silver 1000oz bars, but it can only be converted into coins and smaller bars at the rate our machines can process it.

Temporary shortages in certain products reflects on the machine capacity, not the availability of raw silver.

Most unallocated programs are suspect, but the Mint has been very explict on its website that it does not do what Ed thinks, which is keep the cash and not buy the metal. We have no exposure to metal prices. Silver can go up to $100 an ounce and it will not have an impact on us.

This idea of the Mint being exposed to metal prices was raised in this 2008 thread and I dealt with it there https://www.kitcomm.com/showthread.php?t=29595 and summarised here http://goldchat.blogspot.com/2008/12...old-again.html

Please read that and I'm happy to redebate it if you want.

Thanks for your input Bron!

[jbsilver]

We are working on the pipes, here is a video of a new press the Mint installed a few days ago in fact http://www.youtube.com/watch?v=dzmAT...layer_embedded

Good! I was afraid that huge dam would burst from pressure and flood our Australian friends. I start suspecting that JPM opened their own depository in an effort to help Australian avoid such disaster by buying unallocated and locate it in their new vaults.

Personally I prefer if millions of collectors all over the world would save Australia from another flood specially because what Perth Mint is producing is very beautiful... I love lunars kooks kangaroos and koalas so please mint them in affordable sizes as I can't afford kilo coins.

I like Canadian Wolves and Grizzlies too.... so if one additional pipe would not be enough to solve your problem ask for help Canadian Mint or US Mint because they are not so lucky and don't have huge dam with heaps of silver... but please do not... do not... ask JPM for any help...

[lowcommotion]

I will leave a comment to Ed Steer's article at his website later today.

mrgneiss,

You have a complete misunderstanding of the Perth Mint's unallocated. I would suggest reading this post of mine http://www.perthmintbullion.com/Blog...allocated.aspx

Following the analogy in that post, you can have a huge dam with heaps of water, but how fast it can flow out is determined by the size of the pipe at the bottom of the dam. Same with a Mint - we can (and do) have a huge pile of silver 1000oz bars, but it can only be converted into coins and smaller bars at the rate our machines can process it.

Temporary shortages in certain products reflects on the machine capacity, not the availability of raw silver.

Most unallocated programs are suspect, but the Mint has been very explict on its website that it does not do what Ed thinks, which is keep the cash and not buy the metal. We have no exposure to metal prices. Silver can go up to $100 an ounce and it will not have an impact on us.

This idea of the Mint being exposed to metal prices was raised in this 2008 thread and I dealt with it there https://www.kitcomm.com/showthread.php?t=29595 and summarised here http://goldchat.blogspot.com/2008/12...old-again.html

Please read that and I'm happy to redebate it if you want.

Nothing against ED. He is a nice guy and has been right about
the long term bull market in PM's. However I have seen him
behind the counter at my local PM dealer so he may have an
interest in selling the physical.