By Ray Stern
The global gold and silver shortage has hit local sellers hard in the last few weeks, leaving many without coins or bars of precious metals for the hordes of frenzied buyers preparing for economic Armageddon.
“We have one one-ounce Panda,” says one Phoenix coin seller, referring to China’s official gold coin. Another store says it has a waiting list for gold products, but doesn’t know when they’ll be available.
Richard Smith, CEO and president of Coin and Stamp Gallery, at 4216 W. Dunlap, says that, as of Wednesday morning, he had some American Eagle gold coins, but an order for more from late September remains unfulfilled. Lately, he’s had better luck obtaining South African Krugerrands.
“I could not get American Eagles right now for anything,” Smith says.
The problem is Economics 101: Demand is outstripping supply, especially now with gold prices down from their spring heights of about $1,000 an ounce. The increase in purchases is making those metals tough for people to get their hands on. And some anxious buyers are clearly willing to pay higher than market prices. For instance, silver is going for less than $10 an ounce today. But a check of completed sales on eBay shows that 100-ounce bars of silver have been going for $1,300 to $1,400 or more in the last couple of days.
The high demand has caused even the U.S. Mint to scale back on production on certain coins.
Gold for jewelry hasn't been affected by a lack of supply because it buys a different product -- gold pellets for jewelry-making rather than bulk bullion, says Beth Framje, an assistant manager at Scottsdale's London Gold store. What investors want is nearly pure coins and bars, but shopping for metals is harder work than it was a few weeks ago. At kitco.com, a popular online gold and silver store, a notice informs would-be buyers of a long list of products it doesn't currently stock. The situation at local stores isn't much better.
“It’s the craziest thing I’ve ever seen,” says Kevin Stevens at Arizona Gold Exchange in Phoenix. “Ain’t nobody in this town has a 100-ounce bar [of silver] for sale.”
Stevens says he had been out of gold coins for days until someone “came in off the street” yesterday and sold him 200 one-ounce American Eagle coins. He expects to sell out of these soon, and he doesn’t know when he’ll be able to restock. Representatives of wholesale precious metal company Johnson Matthey told him they could get him more gold coins in February – maybe.
Precious metals are still undervalued, Stevens says, so “savvy buyers are snapping them up.” But it’s not just wise investors cleaning out the inventories – it’s also a lot of average people who worry that the risk of a massive economic meltdown is far from over. (According to a commentary by a Bloomberg.com writer today, the strategy is probably a bad bet against a collapse of paper money unless you've buy large quantities and store it "around the globe.")
“People are afraid. They don’t have a lot of places to park money,” Stevens says. “When people are paranoid, they buy this stuff.”
If they can find the stuff, that is. But once they find it, they need to stash it. Maybe that's one reason why safes are in such demand these days, too.