Precious Metals: Buy Now, or Roll the Dice? - Jeff Nielson

Logo - Sprott Money News from the Archives

January 6, 2016

Buy low. Sell high. Precious metals investors are rational investors . They understand that they are currently converting their wealth into gold and silver at extremely advantageous rates. However, like all rational people, they would prefer to engage in this wealth conversion at the most advantageous rates.

Many of these rational investors may already be judging themselves somewhat harshly in hindsight. With the absolute chokehold that the banking crime syndicate has exerted over these markets since the spring of 2011, prices have continued to drift sideways-to-lower, even after those prices endured the original ruthless take-down.

Such self-recrimination is unwarranted, however. In the spring of 2011, gold and silver were still undervalued as priced in the bankers’ worthless/near-worthless paper currencies . Until that point in time, there had still been some degree of legitimate price movement in our markets, and thus, we made the reasonable assumption that prices would continue to rise.

As the saying goes: that was then, and this is now. Now, many price-battered precious metals holders may be leery of further wealth conversion, even with present prices at multi-year lows. Why “buy low” if you can buy even lower?

This brings us to the central issue of this commentary. As individuals seeking to shelter our wealth in humanity’s oldest and surest “safe havens,” we cannot become fixated on price alone. We must also consider availability.

During the Crash of ’08, the price of gold was taken down by over 30%, and the price of silver was crushed by roughly 60%. It was the ultimate “buying opportunity” in precious metals, with one exception: for smaller investors, there was virtually no silver to be found at those “crash” prices. Only the largest silver bars remained readily available.

However, once again: that was then, and this is now. Now the Next Crash approaches. Now our government’s level of insolvency is multiples worse than it was in 2008. Now our economies have been stripped bare by seven more years of bankers' economic blood-sucking . Now we have “bail-ins,” and all of our paper wealth is at risk.

Now we must not only focus on price, but also pay (at least) as much attention to availability. Already there are warning signs of tight supply in the silver market. Once upon a time, the U.S. Mint obeyed U.S. law and kept the U.S. market “fully supplied,” as required by the law. Now this same mint announces that it has “run out of silver” at least once a year.

These (illegal) supply interruptions come after years of demand being near or at all-time highs for these silver bullion products. Certainly it is impossible for the U.S. Mint to claim it is “surprised” by this high level of demand. Thus, a shortage of silver is the only possible explanation for these increasingly frequent supply interruptions, and the U.S. isn’t the only country experiencing a shortage.

The Royal Canadian Mint recently announced a shortage of its own. Previously, it had engaged in what it called “carefully managing supply,” but what media commentators have simply called “rationing.” There’s no need to ration anything if supply is plentiful. While the flow of silver still seems abundant in the Eastern world, in the West, the “taps” are gradually slowing to a trickle.

Anecdotally, many readers who are still regularly converting their paper into bullion may have already encountered occasional supply interruptions in some of the products for which they are shopping. And this is the current state of the market with gold and silver . They are now more shunned (as an asset class) in the Western world than they have been at any time in at least the last decade.

What will these markets look like when panic and crisis hit in one form or another, and possibly several forms? What will these markets look like when, once again, the words “gold” and “silver” mean more to the masses than just the medals hung around the necks of athletes?

Almost certainly, the banking crime syndicate will take advantage of the chaos (which it will create) and slam gold and silver prices significantly lower than they are at present, despite the fact that prices are already at an extreme low. But will we be able to obtain any silver or gold at such prices?

The fantasy, paper prices that the banksters have imposed on these markets are only to our advantage as long as we are still able to exchange their corrupted paper for real metal at such prices. Once supply dries up, those prices will be significant only as a testament to the massive fraud perpetrated in these markets.

Then there is the additional variable that many readers fail to consider in their financial planning: the “premiums” that we pay when exchanging our paper for metal. With the price of silver at one-third of what it cost back in 2011, already dealer “premiums” of 25% or higher for such exchanges are commonplace.

Here the artificiality of these markets descends to the level of semantics. A “25% premium” to convert paper currencies into silver? Why? Such premiums should amount to nothing more than the transaction costs of the dealer (which are relatively minimal), along with the “mark-up” that represents the dealer’s profit. Again, this has traditionally been a small, single-digit figure.

This base premium can be modified by “market conditions” i.e., supply and demand fundamentals. When gold or silver is deemed especially plentiful, the premium shrinks to an even narrower margin for dealers. When supply tightens, that premium rises. However, the soaring “premium” to convert our paper to silver has remained consistently high, even when there have been no visible supply pressures in the market.


The term “premium” no longer applies to a price that has disconnected from supply and demand fundamentals, including the less visible fundamentals of the “physical” market. Regular readers will be familiar with the market terminology that has been applied to such a price disconnect - decoupling.

There are, in fact, two means by which we could once again see a legitimate price for gold and/or silver. One is already well known: a formal default in the fraudulent, paper “bullion” markets operated by the banking crime syndicate. A formal default would expose the bankers’ fraud and thus delegitimize the paper prices produced from that fraud.

However, readers have previously been told of a second avenue back toward legitimacy: decoupling. As the absurd paper prices generated by the Big Banks become more and more detached from reality, the legitimate element of this market – the “physical” market – simply ceases to function (at such fraudulent prices).

At that point, this dysfunctionality can only manifest itself in one of two ways:

1) Retailers refuse to sell their products at such extremely fraudulent prices.

2) Retailers begin to set their own prices for gold and/or silver.

Beginning at the retail end (or even the wholesale end), the physical market simply begins to ignore the fraudulent paper prices of the bankers. The real market decouples from the paper market (and all its frauds), and a real-world price for metal begins to evolve . This evolution is what we are already seeing in the silver market.

These are the circumstances that exist today. A market (the silver market), which is already in tight supply , is expected to get even tighter. A market (the silver market), which has already started to decouple from the paper-fraud market , can be expected to decouple much further as even more extreme price/supply conditions come to exist within it.

Will we benefit if the “official” price for silver is $10/oz (USD) or less, but there is no silver to be found at such prices? No. Will we benefit if that price goes to $10/oz (USD) or less, but the dealer price “plus premium” is $25/oz or higher? No.

Currently, we don’t see similar price pressure or supply pressure in the gold market. However, for a variety of fundamental factors, it is much easier (for the bankers) to hide such pressures in the gold market than in the silver market. What we see today in the silver market we could see tomorrow in the gold market, with no warning.

Many price-battered precious metals investors may currently be sitting on some quantity of capital that they plan to convert into gold and silver, but they are wondering when “the best time” is to do so. This is an easy question to answer: right now.

Product Upselling Spotlight

Don’t miss a golden opportunity.

Now that you’ve gained a deeper understanding about gold, it’s time to browse our selection of gold bars, coins, or exclusive Sprott Gold wafers.

About Sprott Money

Specializing in the sale of bullion, bullion storage and precious metals registered investments, there’s a reason Sprott Money is called “The Most Trusted Name in Precious Metals”.

Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in North America. Learn more about Sprott Money.

Learn More


Roger MacDonald
January 11, 2016 at 8:38 PM
This is essentially the same refrain we've been hearing for five years now, ad nauseam, from the self-interested world of gold and silver marketers (Sprott, Sinclair, Turk, Schiff, and the entire world of King World "News"). The boy in the fable only cried "wolf" three times before he was ignored.