Physical Gold and Silver Shortage? Here’s the Truth

Posted on September 22, 2022

You can't be faulted for not caring about, or even knowing about, the goings-on within the British royal family. But if you’re planning to buy gold coins, pay attention! Since Queen Elizabeth II is on the obverse of the Canadian maple leaf, the British Britannia and the Australian kangaroo coins, along with the coins of some 53 other nations, as we discussed previously, world mints are scrambling – and so are collectors. Given the changing of the guard, as soon as this year (or more likely 2023) we’ll see all new mintages featuring the new head that wears the crown: HRH King Charles III. Some of the most popular bullion coins in the world are minted in the UK or commonwealth nations. Therefore it follows that no bullion buyer or coin collector will be able to escape court intrigue…

Did Queen Elizabeth II’s passing trigger a shortage of physical bullion?

Some think the bullion squeeze we've seen lately is the result of world mints building up their stockpiles in advance of their new mintages. We’ve seen reports of coin shops running out of stock. From Reuters, we get just a hint of the frenzy: "There's been an incredible upsurge in demand," said Peter Hutchison, heritage coin specialist at Hattons of London. Inbound queries surged 45-fold following the queen's death and have come in from as far as Australia, he said. The British Royal Mint website recently forced visitors to form an orderly queue due to “a particularly high volume of traffic.” As you’d expect, premiums over spot surging. But how much of this is really due to the upcoming changes in mintage, and how much due to general global appetite for buying bullion? The British monarchy wasn’t on our mind at all back in March, when the U.S. Mint ceased production of Morgan and Peace silver dollars for the rest of the year. Now, this was a big deal. Collectors and investors were seriously pissed off. For such a monumental announcement, the U.S. Mint's tone came off as dismissive -- they're having some issues filling in the blanks. Quite literally, in this case, as every vendor they went to was out of stock. U.S. Mint isn’t a refiner, like Perth Mint and Royal Canadian Mint. Rather than turning ore into coins themselves, U.S. Mint relies on an international network of refiners to do the dirty work and provide them with blanks or planchets – essentially, coins that haven’t yet been stamped and minted. That arrangement works fine – except when it doesn’t. When everyone wants to buy bullion, well, this is the kind of thing that happens.

The current shortage of physical gold and silver bullion

Not everyone is convinced that the flow of gold and silver bullion has much to do with British celebrity culture, though. In the first seven months of the year, India imported 5,100 tons of silver – with a jaw-dropping total of 8,200 tons projected by the end of the year. These numbers are astoundingly high considering how little reporting we’ve seen on it. King World News spoke to a British gold industry expert who had plenty to say about what's going on in the market. Unsurprisingly, unrelated to the monarchy. Very much related to the U.S. dollar and manipulation of the paper market. Are we reaching the start of the paper market actually benefiting bullion? Alasdair Macleod shared his views after over 40 years of experience in the markets. For starters, the general consensus in India is that these bullion purchases are the start of a trend which will continue for as long as silver prices remain this low. Macleod calls them nonsensically low, and indeed, virtually any attempt to get a fair silver price gives us a much higher figure. What gives? Macleod has little doubt that all of this is happening as big players try to cover their contracts and positions by squeezing the markets and pushing the price down. Distrust in the financial system hasn't been this high in a long time. So when people see gold and silver prices falling, just above $1,600 and $20, they buy as much as they can. Seems like everyone from governments to everyday American investors are following the same playbook. Macleod states that everyday folks like you and me are skeptical of the guaranteed health of the financial system. And we get excited about lower bullion prices. We vote with our wallets, emptying retailers' inventories across the globe. It's definitely a situation to watch, and one that can't be attributed to the changing of a few obverses.