Silver dealers are rushing to find supplies for retail buyers

(Reuters) – A frenzy for silver retail investments driven by social media has caused dealers from the United States to Singapore to look for bars and coins to meet demand.

Silver prices extended their rally on Monday to an eight-year high, after small investors returned calls on social media last week to buy the metal to push prices up. Small investors do not have direct access to the wholesale market for silver, but have instead bought bars and coins.

“There are huge shortages. We will be completely sold out if it continues like this – the first time since our company opened in Singapore seven years ago, ”said David Mitchell, CEO at Indigo Precious Metals.

Some customers sold gold to buy silver, said Gregor Gregersen, founder of Silver Bullion Pte Ltd, another dealer in Singapore.

“There is a clear shortage in the development of popular silver coins (especially North American coins),” he said. “However, for now, we can still buy 1,000 oz good delivery bars at nearly the same premiums.”

US precious metals broker Apmex warned of delays in processing silver transactions due to rising volumes.

Other US dealers, including JM Bullion and SD Bullion, warned customers of shipping delays of five to 10 days. Everett Millman of Gainesville Coins in Florida said they expected shipping delays, perhaps until maybe mid-March, for some products like Silver Eagles and Silver Maples.

While a rapid spike in demand has reduced inventories, metal is around the corner and delays should ease once metal can be shipped where it is needed, dealers and industry experts said.

Kevin Rich, global gold market advisor for Perth Mint in Australia, said that while coin and bar traders may see supply constraints and therefore charge higher premiums for these products, the Mint does not expect such problems.

There is enough air traffic to allow supply to move, he said, unlike last year when the lack of cargo capacity disrupted gold markets.

“In the short term, as it takes a long time for shipping to run out, stocks may run out, but the total supply is more than adequate,” said Peter Fung, head of trade at Wing Fung Precious Metals in Hong Kong.

About 1 billion ounces of silver are produced and consumed each year, and supply has been in surplus for much of the past decade, advisers Metals Focus said.

“There are no signs of wider physical pressure on silver yet and we would not expect any at this stage,” said Frederic Panizzutti, general manager at dealer MKS.

Hushed purchases were more in China and India, the largest Asian consumers of physical precious metal.

Chinese investors got into the futures market and mining company stocks, but dealers said the rush shouldn’t translate into physical constraints just yet.

Indian buyers generally prefer gold as an investment.

“Contrary to what is happening in other parts of the world, in India silver is seen more as a consumption than an investment,” said the head of the precious metals division of a Mumbai-based silver importing bank.

According to Metals Focus data, India and China typically account for a quarter to a third of the global demand for retail silver investment products such as bars and coins.