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Jason Hommel has made some comments to my blog of 31 August that I think are important.
His questions/statements are in italics
and my replies below.
Yes, but where do you
sit? Where are those 1000 oz. bars that kitco and perth can't seem to be able to find for customers who
want them? Why do Perth/Kitco have a shortage of
1000 oz. silver bars?
It may not be clear from my blog that I work at the Perth Mint. I have
updated my profile to include my LinkedIn profile and “About This
Blog” link to be clear in what capacity I do this blog. I have also
included a picture of my favourite new coin, it is
a Good Fortune coin.
When I say that wholesale bars are available, it means in wholesale
quantities. I cannot speak for Kitco, but I went
upstairs and spoke to the Treasurer and he will do deals for a minimum of 20 tonnes of silver and 1 tonne of
gold. Call Nigel Moffatt on (08) 9421 7403. Price
will be on a deal-by-deal basis.
Depository have 1000 oz and 100 oz silver bars in stock for their clients to
convert to allocate or collect. If you are a Depository client you have their
contact details.
I also walked downstairs and spoke to the manager of our retail shop and they
sell 100 oz bars for silver value + $74 per bar. They don’t really deal
in 1000 oz bars because they are odd weight which doesn’t work well
with their retail computer system and they are bulky, but I assume that most
would rather 100 oz than 1000 oz anyway. Call Cathy or Liselle
on (08) 9421 7428.
(Aside: while you may
define collusion as something illegal, others may define it as anything that
is against free market principles.)
The definition I used came from an online dictionary. See http://en.wikipedia.org/wiki/Collusion for another definition. The key elements are
“secretive” and “fraud”. It does not mean
“against free market principles”.
I would like to trade
bullion in a free market manner, but it seems most everyone else want to
"lock in" a guarantee of some sort or another.
I think it is entirely in keeping with free market principles that person A
and person B have the freedom to enter into any agreement they see fit that
does not hurt anyone else’s rights. There is nothing stopping person R
(for retail buyer) from offering a higher price to A to secure supply of
A’s silver. Anyway, even if A has committed to supply silver to B,
there is nothing stopping B from selling that so acquired silver to R via
auction or at a higher price.
The agreement between A and B may restrict A from supplying to R (which was
all I was trying to explain) but not B from supplying to R. I therefore do
not see any fraud being perpetrated against R or any restriction of the free
market. In the end, the silver ends up in someone’s hands and they are
free to auction it off to the highest bidder as you have recommended.
It's been my experience
that people in the industry, the coin dealers, over-value their own direct
personal experience, and have trouble seeing the big picture. They see the
public selling silver to them, and thus, from their view, there is a
"glut" … where public buying increased ten
fold, and they've been turning away customers, and trying to buy from
refineries, instead of sell to them, in all of 2008.There is an expression
used to describe such a viewpoint. They can't see the forest because the
trees are in their way.
I suppose I agree with you, but not sure this is a problem. The coin dealers
operate at the end of the precious metal industry value chain so deal in
“trees”, that is their business. You are exactly right, they
either see net buying or net selling and either net buy or net sell from/to
their source of product one step up in the value chain. This is good because
it sends a signal about the volume of demand back to that source. I
don’t know that they need to see the forest to do their job properly.
Bron Suchecki
Goldchat.blogspot.com
Bron Suchecki has worked in the precious metals
markets since 1994, when he joined the Perth Mint as an Administration
Officer in their Sydney retail outlet. In 1998 he moved to Perth to work in
the then fledgling Depository division. He has held a number of roles since then
in the treasury, risk and governance areas of the Mint.
All posts are Bron's personal opinion and not
endorsed by the Perth Mint in any way.
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