Friday, July 12, 2013

Gold Coins Shortage: Does It Mean Tight Supply?


Yes, if it's gold coins you're after. But not if it's gold bullion in other forms...
 
OVER the last few years, during the great investment demand for precious metals, we have seen sporadic shortages in silver and gold coins, writes Miguel Perez-Santalla at BullionVault.
 
Many people have written about these shortages as a harbinger of things to come in precious metals more widely. One of the fads is to decry supply issues in silver and now recently gold.
However, the truth of the matter is less dramatic, if not quite so simple.
 
In most cases, supply issues with silver or gold coins are caused by abnormal or let's say surprising increases in demand from bullion coin buyers. Simply put, coins don't come out of thin air. They need to be manufactured. This all takes time and money. No one wants to tie up their money in a product that is not going to sell. That exposes gold and silver buyers to "just in time" inventory gaps if it's coins they want to buy.
 
Imagine you are selling a low-cost product with a high margin. It is much more likely that you will have enough inventories for almost all eventualities. Look at a typical retail product – how about lip balm? I don't really know the costs but I can guess. Some of the more premium brands sell individually for $10 each and more, but many quality brands sell for $1.00 or so.
 
I have never seen a retailer that sells this product run out. Though it is possible, most likely that chance is very remote because I believe their profit margin is probably around 100% or more. This typically is called the Keystone markup. My guess is that the retailer pays lower than $.50 for each one of these $1.00 lip balms. So their profit of 50 cents or more covers any carrying charges that may be represented from holding the inventory.




MAKE SURE YOU GET PHYSICAL SILVER IN YOUR OWN POSSESSION. Don't Buy SLV, or Futures or Pooled Accounts or any other BS paper silver product .Remember anything on paper is worth the paper it is written on. Go Long Stay long the bull market have even started yet

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