Dear TexMetals customers:
I am writing to provide you with an update on precious metals inventories. We are presently out of stock on many products. I want to begin by quoting an article I posted on July 8th, 2015:
“It is important to understand how and why supply constraints occur during periods of falling prices, and why precious metals premiums consequently spike. Let’s use an extreme example to illustrate the nature of how the physical metals markets move.
a. Let’s assume the spot price of silver is $15 and subsequently falls to $10.
b. Let’s assume the annual average demand for physical silver is $1B.
In this scenario, if the demand in dollar terms remains flat, the manufacturing output would need to increase by 50%. The mint would need to increase minting capacity from 66.67M coins to 100M coins - a huge increase.
Now, if the silver spot price fell by 33% in a condensed time frame, you can be certain that demand would increase precipitously. If we assume demand (in dollar terms) doubles, the mint would need to increase production from 66.67M coins to 200M coins. What if demand triples or quadruples? You get the idea. Over the long term, the US Mint might be able compensate, but certainly not in the short term. No manufacturing operation could. Manufacturing is inelastic with respect to short term scalability.
Then you have the domino effect:
- The US Mint goes on “allocation", limiting supply to authorized purchasers.
- This supply constraint, in the midst of rising demand, forces dealers to raise premiums.
- Rising premiums on US-minted products induces buyers to purchases other sovereign coins, like Canadian Maples, or privately-minted products.
- The increase in demand for these products creates the same manufacturing constraints for these organizations that are affecting the US Mint.
- The problem compounds and lead times extend until demand cools, supplies increase, and the coil unwinds.
These reverberations in the market are Economics 101. The physical precious metals market is minuscule relative to all other asset classes, and small shocks can create major supply shortages.”
Supply constraints began surfacing in July at the US Mint, and subsequently the Canadian Mint encountered severe manufacturing disruptions which greatly limited supply on gold, silver and platinum. The recent tremors in the stock market and decline in precious metals prices have compounded the problems in the supply chain.
As our loyal customers know, if we don’t have a product in stock, we don’t sell it. Given the recent events in the market and the supply chain, we are out of stock on many products. Please refer to the information below for the most recent information about our supplies:
TEXAS ROUNDS AND BARS: This past week we had an issue with a Brinks delivery which delayed a new shipment of Texas Rounds. We will have 20,000 rounds available beginning next Tuesday 9/01, with 20,000 rounds arriving every Tuesday thereafter. At current demand, it is unlikely that we will maintain deep supplies for the next couple of months. We are expecting a limited shipment of 10 oz Texas bars next Tuesday also. Premiums remain normal on these products, and we are hoping to keep these premiums unaffected by supply constraints.
US MINT: Presently, there are no delays on gold coins, and premiums for gold products remain normal. Silver American Eagles are on allocation, and allocated levels were extremely low this past Monday, 8/24. As of this writing, we presently have 50,000+ Silver Eagles left in stock. We expect further supplies out of next week’s allocation, but the volumes are presently unknown. We are attempting to keep premiums as the lowest in the industry, but they nevertheless remain elevated throughout the supply chain.
ROYAL CANADIAN MINT: Supplies for Gold Canadian Maples remain extremely tight, and premiums have elevated by a couple of dollars. Sales of Silver Canadian Maples, Birds of Prey Series coins, and 100 oz bars are suspended and unlikely to become available until late September at the earliest.
PERTH MINT: Presently, there are no delays on gold coins, and premiums remain normal. Supplies on 1 oz gold bars remain tight, but we do expect limited supplies to arrive by 8/31 at the latest. As of this writing, we presently have 15,000+ Silver Spiders in stock, as well as 25,000+ ozs of ½ oz Sister Cities coins. Premiums on both coins remain normal. We expect the new 2016 Silver Kangaroo to arrive by late September, but we do not yet have a firm date on their arrival.
Supplies for Platinum Platypus remain very limited. We are having difficult keeping any in stock. We are hoping to secure another small lot by early next week, 8/31.
AUSTRIAN MINT: We are expecting a shipment of 10,000 Silver Philharmonics due to arrive on Friday 9/04. The premiums remain normal at the present time. Supplies of Gold Philharmonics are presently constrained.
GENERIC 100 oz BARS: We have an order for 250 100-oz Republic Metals Silver Bars (25,000 ozs) due to arrive September 17th. Barring any unforeseen supply changes, we do not expect to have 100 oz bars in stock prior to then.
I hope this offers you a general overview of our present expectations for supply. Please note, this information may change as the industry reacts to these constraints. We will do our best to keep you posted on the latest developments.
As always, thank you very much for your business and your loyalty.
CEO, Texas Precious Metals