07 June 2011

Physical Silver Premiums Strengthen as Retail Demand Remains Buoyant

Premiums on physical silver have strengthened this week as strong retail demand for the white metal continues to soak up available supply of minted Silver products.

The precious metal price comparison website BullionSupermarket.com has seen premiums for its benchmark 1 troy ounce Silver rise to an average of 35.2% over spot at auction, alongside increasing premiums for most other minted products.

Silver Eagles are in particularly short supply at the moment with some dealers in the US now reportedly paying a premium of up to 3% to buy back the silver bullion coins.

Commenting on the prevailing market conditions, Jon Hunt, founder of BullionSupermarket.com was quoted as saying "Silvers perceived cheapness in relation to Gold continues to attract many retail buyers. Particularly new market entrants. Our users Silver searches currently outstrip Gold by about 3 to 1, and completed sales are running at a similar ratio. The debate around Silver shortages or not seems a bit academic in the coin and bar market right now, as there plainly is a shortage of minted products out there".

Golds lofty price tag above $1525 per troy ounce may be beyond the reach of many retail buyers, who appear to prefer the greater bang for the buck provided by Silver at around $38 per troy ounce, even despite its recent volatility.

Retail buying tends to lock up precious metal for a long time. Sales of BullionSupermarket.com Silver via electronic auction over the last 6 months has yet to see any significant amounts sold back into the market. Even significant movements in price are failing to dislodge Silver back into the market.

Strong retail demand has been driving minted silver premiums for some time now. What is perhaps surprising is the inertia present on the supply side in bringing new minted products to market. If premiums remain strong, this is likely to change, and we will likely see new minted products coming to market in volume.


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