June 19, 2024

APMEX Reports Sales Spike on eBay Bullion Center

Last  Wednesday, with New York gold down over $40 per ounce, even long time gold bulls were advising caution before committing to further investment.  Some precious metals dealers reported a flood of panic selling by anxious investors who were unloading physical coin and bar.

With everyone fearful of lower prices, exactly who was buying all that gold and silver from panicked investors?

Michael Haynes, CEO of APMEX, one of the countries largest precious metals dealers, said “As gold and silver prices continue to drop, long-term investors immediately reacted to the market movement. Recognizing that the precious metals were on sale and at a discount relative to the expected future values, buyers of physical bullion increased purchasing at the APMEX Bullion Center on eBay.”

Michael Haynes explained further.

“This was the second largest selling day for the APMEX Bullion Center on eBay since inception about five months ago, beating the next highest selling day by more than 30%. As Gold and Silver prices fell, heavily influenced by the reaction of day traders to the minutes from the recent Federal Reserve Open Market Committee meeting, physical sales of both metals skyrocketed. Buyers of physical Gold and Silver have a moderate to long term view and concluded that with the price movements, the precious metals were on sale and at a discount relative to the expected future values. These investors in physical Gold and Silver apparently see the long term issues faced by the U.S. economy and seek some asset allocation into the non-correlated asset class of precious metals to protect and hedge their investments in paper assets like Stocks and Bonds.”

According to APMEX, the top sellers on the Bullion Center are the 1 oz Silver American Eagle, the 1 oz Gold American Eagle, the 5 gram Statue of Liberty Credit Suisse Gold Bar and the 100 oz Royal Canadian Mint Silver Bar.

Every bull market has corrections which offer long term investors the opportunity to add to positions at bargain prices.  The high volume of gold and silver purchases on the eBay Bullion Center indicates that mainstream buyers remain committed to precious metals as a method of wealth preservation.

APMEX CEO Says No Bullion Shortage

Despite recent volatility, gold and silver prices continue to push to new highs.  After a brief pullback on earlier this week, silver rebounded strong and once again approaches the $50 level. Gold, which has lagged the price gains in silver, recently rose to a fresh all time high and remains solidly above the $1,500 level.

The rapid rise in silver prices has resulted in the Chicago Mercantile Exchange increasing the margin requirements on silver futures for the third time.  The press provided numerous accounts of traders taking huge positions in bearish silver puts.  Silver also faces the psychologically important barrier of $50 per ounce.   During the last great silver bull move of the early 1980’s silver rapidly collapsed from the $50 range and subdued for decades.

Despite the calls for a major correction by silver bears, the metal remains near all time highs and there have been numerous press reports of a physical shortage of silver based on intense investor demand.

Indications of a supply/demand imbalance in the bullion markets can be seen in many areas.   The US Mint has been rationing Silver Eagle bullion coins to its authorized purchasers and earlier this year the Royal Canadian Mint admitted that it was having major problems in sourcing adequate supplies of silver due to high demand.  The spot price of physical silver is trading above the price of futures contracts (known as backwardation) and this is an indication of huge physical demand.  In addition, earlier this week, APMEX, a major precious metals dealer, offered to buy bullion at a generous premium from its customers and cited “incredible demand” for gold and silver bullion products.

Although APMEX says there is no supply/demand imbalance, they recently increased their buy price for some US Mint bullion products. In particular, they are offering $3 over spot silver for one ounce American Silver Eagles. This is higher than the company’s cost of acquisition directly from the United States Mint, which sells the coins at $2 over spot to authorized purchasers.

In order to get a better assessment of the precious metal markets and supply/demand situation in bullion products, Gold and Silver Blog interviewed Michael Haynes, the CEO of American Precious Metals Exchange (APMEX).

When asked about the high prices APMEX is offering for Silver Eagles, Haynes said, “APMEX had not made a general offer to the customer base in quite some time and it seemed logical to remind the customers that APMEX has a need to buy. With respect to prices on Silver Eagles, you rightly describe that APMEX is offering more than the Mint sell price and you also rightly observe that the Mint is allocating product. As previously discussed, APMEX supplements its buying needs from the secondary market. Therefore, APMEX is buying at the bid offered to the customers and as mentioned above, APMEX would rather buy from its customers than a commercial dealer”.

Thus, despite the challenges experienced in other sectors of the market, from APMEX’s perspective they are able to obtain adequate supplies to meet customer demand.   Michael Haynes noted that APMEX is “currently able to buy the products needed to maintain adequate inventories for customers”.

Michael Haynes also provided insights into current customer buying trends.  According to Mr. Haynes, “average order sizes are increasing slightly, but that may be attributed to higher prices of the underlying product.  Recently, the purchases have shifted slightly toward silver”.  There has been no dramatic changes in customer buying patterns related to product size or premium according to Mr. Haynes.

Addressing  the appreciation in precious metals prices, Mr. Haynes noted that “APMEX sales seem to rise in either a rising market or a declining market.  The customers that purchase under those different scenarios are different, in that new customers tend to purchase on increases and mature customers tend to purchase on pullbacks”.

APMEX has apparently met the challenges of meeting surging customer demand for physical bullion products and, in addition, maintains a liquid market for those investors who chose to sell.  Mr. Haynes calls APMEX “one of the great business stories of the internet age”. APMEX was founded by Scott Thomas who has built the company into one of the largest dealers in coins and precious metals based on “a great passion to satisfy customers”.   Mr. Haynes stated that one of his goals is to “reach more of the population with the opportunity to own precious metals”.

Physical Silver Shortage Worsens Due To Mint Rationing and Surging Investment Demand

The inability of the US Mint to meet public demand for gold and silver bullion products was discussed at a recent House Financial Services Subcommittee hearing.  Testimony by industry experts revealed that the US Mint was losing an estimated one-third of potential bullion sales because they cannot meet demand.

For the past several weeks the US Mint sales figures for Silver Eagle bullion coins have been essentially flat. The US Mint sells its bullion products in bulk to authorized purchasers (AP’s).  The AP’s resell the bullion coins to dealers who then sell the products to the public.  The US Mint has been rationing the 2011 Silver Eagle bullion coins to AP’s, leaving one to conclude that the flat sales of Silver Eagles have been the result of Mint production constraints or supply shortages, rather than flat or reduced market demand.

On past occasions, the US Mint has cited the lack of adequate supplies of silver planchets as the cause for the continuing rationing of silver bullion coin sales. Earlier this year, the Royal Canadian Mint admitted that they were having significant problems in sourcing silver since huge demand was outpacing silver supply.

Combine rationing and surging demand and the obvious result is a severe shortage of  physical gold and silver bullion products.  Confirming this situation, American Precious Metals Exchange (APMEX), announced yesterday that they were seeking to purchase US Mint bullion products from their customers in order to meet “recent incredible demand for gold and silver bullion products”.

APMEX, one of the country’s largest precious metals dealers, offered to purchase American Gold Eagles and American Silver Eagles at generous premiums over spot prices in order to secure inventory.  Despite the increase in the price of gold and silver, public demand obviously remains incredibly strong.

The American public has been provided with plenty of evidence that out of control deficit spending and money printing policies by the Federal Reserve are destroying the value of the paper dollar and they are acting accordingly (see Why There Is No Upside Limit To Gold and Silver Prices).  A loss of confidence in paper money is fueling the rise in gold and silver prices as people seek to protect their wealth.  Any pullbacks in precious metal prices should be viewed as another major buying opportunity.