BULLION BARS AND COINS
Internet chatter about a looming shortage of silver should be treated with
a healthy dose of skepticism.
As we've seen recently, this conversation tends to surface whenever one or
more of the world's major mints announce they've sold out of silver bullion
coins because of a spike in demand. The hype causes some buyers to panic and
pay too much.
There have been a number of temporary coin shortages since the global
financial crisis. But the scarcity of coins available for sale on each
occasion did not equate to a shortage of metal in world wholesale markets.
What they actually reflected were constraints in the production capacity
of bullion mints around the world.
The ability to produce new coins quickly is necessarily held in check by
the slowest process in the manufacturing chain - which in coining includes
mining, refining, blanking, minting and distribution.
It's like a baker with only one oven. It doesn't matter how much flour or
how many mixing machines he has, he's only going to be able to produce so
many loaves of bread per day, explains Bron Suchecki on our Research Blog.
One of the major bottlenecks in precious metal coins is the manufacture of
blanks, also known as planchets. It's a surprisingly complex procedure
demanding amongst others things rolling, annealing and surface treatments,
not to mention a lot of weighing and measuring because of the value of the
metal involved.
Because it's problematic for blank makers to speed up
production, you'd probably ask why they don't expand their factories? Or why
mints don't stockpile their blanks? Good questions that Bron answers
comprehensively in Coin Shortage FAQs: telling a real shortage from a capacity
shortage, which, as the title suggests, also provides crucial advice on
how you can tell whether the next purported silver shortage could actually be
a real one!
