Just over a month ago the #silversqueeze movement was the biggest news to hit the silver market, perhaps since the Hunt Brothers tried to corner it back in the late 1970s, asserts Peter Krauth, editor of Resource Maven's Silver Stock Investor.
It was big but, as I suspected and cautioned at the time, short-lived. Most silver stocks spiked dramatically within days, then retreated to near pre-spike levels.
But the effect on the physical market was entirely different. People stampeded into physical silver and have been overwhelming bullion dealers. And if my Twitter feed is any indication, that continues to this day.
Without a doubt, the #silversqueeze movement has triggered a tsunami of new interest in silver, especially from a younger crowd, and they’ve been relentlessly buying what they can.
Bullion dealers continue to show “Out of Stock” for most of the widely bought silver coins, or warn of longer than normal delays if they are in fact available.
The silver sector is all abuzz. While that’s great for the silver market as a whole, it has caused the physical price of silver to explode. If you haven’t bought any physical silver recently, then you may not have noticed.
But silver bars and coins have seen their premiums go through the roof. The most sold silver coins now carry premiums up to 50% above the spot price, which is more than triple normal levels. And deliveries are now 2-3 weeks, whereas previously they were typically a day or two.
So what’s a buyer of physical silver to do? I have a suggestion that’s not perfect, but it can be a workaround that will get you closer to your goal. You can purchase the Sprott Physical Silver Trust (Toronto: PSLV) (NYSE: PSLV) which is already in our portfolio.
Sprott Physical Silver Trust is a claim on silver through the ownership of trust units, which are convenient exchange-traded shares.
PSLV does offer advantages over some of its competitors. The silver it owns is fully allocated, meaning it cannot be loaned out or claimed by another entity.
Unitholders have the option to redeem their units for physical silver bullion, however the minimum requirements are high. And storage of the metals is at the Royal Canadian Mint, which is a Federal Crown Corporation of the Government of Canada.
But I do want to point out that this is not the same as owning physical silver coins or bars. What’s interesting is that PSLV’s price closely reflects the price of spot silver. It can trade at a premium, or even at a discount to spot silver some times.
Of course the ideal time is to buy when it trades at a discount. But that may not be practical for everyone. In any case, you can decide the amount you’d invest in physical silver, buy an equal amount of PSLV, then sell and convert that to physical silver once premiums are closer to normal.
Meanwhile, silver futures prices at such low levels versus physical (dealer bullion) prices are unsustainable. This gap will undoubtedly close. I think that will happen with futures prices rising to approach physical silver prices, but at considerably higher levels than currently. And it could happen suddenly.
