Gene Arensberg for Resource Investor says the rise in demand is evident because the paper silver market isn’t reflecting popular demand. The COMEX paper silver market is related to, but different, from the physical one in that it deals exclusively with very large, average 1,000-ounce "good delivery bars," and each futures contract covers the delivery of five of those bars.
The physical market is every coin and bullion shop and a range of other silver products.
The scarcity of the metal is evident now, Arensberg says, because dealers are paying higher than normal premiums, evidence of an immediate need for the metal. This means that current inventories are insufficient to meet the demand at the prevailing spot price. Some dealers are paying premiums as much as $1.85 over the spot price – costs that will be passed on to their silver-buying customers.
The iShares Silver Trust (SLV) has benefited from demand for the metal. Year-to-date, the fund is up 17.7%.
PowerShares DB Base Metals (DBB) is trading higher today, lifted by a strike against Chilean copper miner Codelco, which sent futures for the metal upward. Metals were also stronger because of the weaker dollar and May oil hitting $119.90 a barrel, reports Allen Sykora for Dow Jones Newswires. DBB is up 15.6% year-to-date.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.