Thursday, November 19, 2015

Who Moved My Eagles?

American Silver Eagle wholesale premiums are back on the rise.

It's no secret that premiums were hiked by well over $3 USD per coin by wholesalers during the recent spike in physical investment silver demand, which lead to a period of RISFCD (Retail Investment Silver Fabrication Capacity Deficiency, usually pronounced "rizfukt"), and with barely a week or two of normal premiums behind us, a double whammy of Veterans Day and Thanksgiving has struck. As these are public holidays, the US Mint suspends production, constraining supply in those weeks. We've seen an upwards move in wholesale premiums of 50c USD or more this week alone, in anticipation of a shortage next week as the entire country slips off into a tryptophanic coma on the couch while virtually attending Black Friday sales on the iPad. You still get crushed and mobbed, but instead of it being by folk who belong on the pages of People of Walmart, it's by the kids wanting to pinch the iPad to watch Red Hot Nickel Ball videos on YouTube (that's not some boy band craze, it's literally red hot balls of nickel being used to melt random stuff, while the guy who came up with the idea rakes in the advertising dollars. Coz, science.).

Shortly to follow however, is the changeover from 2015 to 2016 dated coins, with the mint needing to spend most of December stockpiling 2016 dated coins for release in January. So soon the mice and the miniature humans will be scurrying down to Eagle Station C, expecting to find their pile of Eagles... and they will be gone. Meanwhile some really big humans will be sitting on a pile of Eagles (and Maples, and Kangaroos, that are suddenly very very expensive) over at Eagle Station N, and the mice won't know what to do, but they're so hungry for Eagles, and they must have them... so they fork over their hard earned fiat, and they get their shiny Eagles. Phew, investment crisis averted.

Then coming January there will be lots of Eagles again, premiums will drop, Eagles will flow (they won't ever stop flowing, Congress passed a law to that effect), and a bunch of mice will have bought some very expensive Eagles again, when all they had to do was read the writing on the wall.

The mathematics of it are horrifying. Say you're normally paying $2.75 over spot for an Eagle - with spot around the $14.50 mark - that's around $17.25 at the moment. Suddenly we're at $17.75, simply because of supply vs demand. On a monster box, that's a $250 jump in price - if you only had budgeted on spending $17.25 per ounce ($8625 for the box), that's 14 less Eagles you can afford, simply because wholesalers have cranked up the premium. Almost a tube less. If we look back to the heady days of September, premiums were are high as $6 - IF you could get the stock - making that $17.25 coin closer to $20.50 - a whopping $1625 higher than normal per box - simply because of premiums, not spot. Now we're talking 80 less Eagles in your box for the same budget - you've lost almost 20% of your buying power. Who in their right mind would accept a box with only 420 Eagles in it when it should come with 500, just because things look a little panicky on the premiums? Mice who weren't ready for the Eagles to move.

If the mice could have read that writing on the wall, they would probably have found it also said something along the lines of "The Quicker You Let Go Of Old Eagles, The Sooner You Can Enjoy New Eagles". Those old 2015 Eagles bought at $6 premiums might start to smell in January.

I love analogies. Now for your viewing pleasure, a red hot nickel ball melting some cheese.

Tuesday, November 10, 2015

Hello world

Hello World. We've met before. I'm terrible with names though.

Five Metals is a little side project from my many endeavours in the precious metals space, and you're just going to have to put up with the British English.

Why Five Metals? Well, the International Organization for Standardization (apparently spelling is something they can't standardise) has deigned to raise three metals to currency unit status with the endowment of official ISO 4217 currency codes, namely gold (XAU), silver (XAG) and platinum (XPT). Trouble is those pesky investors also want to dabble in palladium and rhodium, necessitating the unofficial use of XPD and XRH behind the scenes in various spot feeds and hedging scripts around the world. So get your act together ISO, and make these officially recognised currency units seeing as they round out the fourth and fifth most heavily traded precious metals in the world.

But please don't bother with XCU for copper - the US dollar left that standard in 1982 - and I would need to change my blog name. Hard enough to come up with a good one these days.