Silver traders scramble to find supplies for retail buyers

(Reuters) – A small investment frenzy in silver fueled by social media has prompted US traders to search Singapore for bars and coins to meet demand.

Silver prices extended their rally on Monday to a high of eight years as small investors asked on social media last week to buy the metal to raise prices. Retail investors did not have direct access to the wholesale silver market, but rather bought bars and coins. [GOL/]

‘There are big shortages. We will be completely in stock if this is the case – the first time since our company opened in Singapore seven years ago, “said David Mitchell, managing director of Indigo Precious Metals.

Some customers sold gold to buy silver, said Gregor Gregersen, founder of Silver Bullion Pte Ltd, another trader in Singapore.

“There is a clear shortage of popular silver coins (especially North American coins),” he said. “However, we can still get 1000 delivery delivery rods at almost the same premiums.”

US gold broker Apmex has warned of delays in processing silver transactions due to rising volumes.

Other U.S. retailers, including JM Bullion and SD Bullion, have warned customers of delays of five to ten days. Everett Millman at Gainesville Coins in Florida said they expect shipping delays, perhaps until perhaps mid-March, for some products such as Silver Eagles and Silver Maples.

While a rapid increase in demand has sharpened supplies, there is enough metal and delays will be reduced once metal can be shipped where it is needed, traders and industry experts said.

Kevin Rich, global gold market adviser for the Australian Perth Mint, said that although coin and rod traders may see supply constraints and therefore charge higher premiums on these products, the Mint does not expect such problems.

There is enough airline traffic to ensure supply can move, he said, unlike last year when the lack of cargo capacity disrupted gold markets.

“In the short term, the stock may run out because it takes a long time for shipping, but the total supply is generous,” said Peter Fung, head of trading at Wing Fung Precious Metals in Hong Kong.

About 1 billion ounces of silver are produced and consumed each year, and supply has been in surplus for most of the past decade, Metals Focus consultants said.

“There are still no signs of a broader physical pressure on silver, and we would not expect that at this stage,” said Frederic Panizzutti, managing director of MKS.

There were more muted purchases in China and India, the leading Asian consumers of physical bullying.

Chinese investors have caught up with the futures market and shares in mining companies, but traders said the rush would not yet lead to physical restraints.

Indian buyers prefer gold as an investment.

“Contrary to what is happening in other parts of the world, silver is considered more of a consumption, rather than an investment, in India,” said the head of a silver import bank in Mumbai.

According to Metals Focus, India and China typically account for a quarter to a third of global demand for silver investment products such as rods and coins.