It never fails: any time there is a dump in precious metals through their paper representation (GLD, SLV, or futures) typically as a hedge to a rally in the dollar (because last week Japan materially increasing its fiat monetary base was also somehow negative for gold and silver) or to meet margin demands from cross-asset liquidation, demand for physical PMs soars confirming yet again that any connection between paper prices and physical demand no longer exists.
Whether it is China buying every ounce of gold it can find (whether to facilitate Commodity Funding Deals or to meet pure consumer or central bank demand), or US consumer rushing into retail outlets, the surge in physical metal buying is there like clockwork. Such as US Mint silver orders.
As reported on Friday, sales of American Eagle silver coins by the U.S. Mint jumped 40 percent in October to the highest in 21 months, defying a slump in New York futures to the lowest in more than four years.
Sales surged to 5.79 million ounces, the most since January 2013, the month that set an all-time high at 7.5 million, Bloomberg reports. "Today, sales jumped 33 percent in one of the busiest times this year", Tom Jurkowsky, a spokesman at the Washington-based mint, said in an interview. Last month’s total was 4.14 million.
“We saw demand surge over the past two days,” Michael Kramer, the president of New York-based MTB Inc., a dealer authorized to purchase coins directly from the mint, said in a telephone interview. “Business was almost triple than what it has been over the past few months.”
Logically, as a result of the surge in physical demand, silver futures for December delivery dropped 1.9 percent to close at $16.106 an ounce on the Comex in New York. Earlier, the price touched $15.635, the lowest for a most-active contract since Feb. 25, 2010.
Because when it comes to precious metals, thanks to the BIS and the central banks, Paper beats Rock every time.
The flipside, of course, is that continued selling of paper metals provides buyers of physical metals with ever lower entry prices, even if, or rather especially if it means, that quite soon, if not already, most gold miners will be selling gold below production cost as we showed back in 2013.
Needless to say, it would be quite fitting of the New Normal for gold (and silver) miners to suffer a cascade of bankruptcies, ultimately leading to zero physical extraction of precious metals even as the relentless naked shorting of gold and silver paper pushes the price of the metal to triple digits, or lower.