“Silver Squeeze” Supply Update Alex Daley, president of GoldSilver.com
FEB 1, 2021
As many predicted with the social media chatter of a "silver squeeze", this weekend saw unusually high demand for precious metals, especially physical silver, causing many sites including ours to run low on stock or temporarily stop taking orders.
A few of our most popular products are now back online, with more being added throughout the day.
Orders placed over the weekend will be honored, as we deal exclusively in allocated physical metals from our network of mints, refiners and wholesalers.
As always, orders for allocated storage remain liquid at all times – they are in transit and you may sell them at any time.
However, for delivery orders, shipping times may be longer than originally estimated at order time. We are working with our supplier network to determine exact timing, faced with a backlog many times what our vaults are prepared to fulfill each week. We are expecting deliveries to take a few weeks to clear out, and will update customers as we go. (If you wish to redirect a delayed delivery order to storage just contact customer support to request the change.)
This rush on physical silver came at a time when the industry was already experiencing tight supply: a year of significantly higher than previous volumes which stretched many mints to their limits, the US Mint providing very limited allocations of its most popular product pending a redesign, and stocks of generally stretched thin as holders are simply not selling.
In fact, over the weekend we saw over 50 times the number of buys as sells. This is exacerbated because bid/ask spreads widen quickly in physical metals markets when supply thins out. Ask premiums rise rapidly with demand. Yet future mint allocations, which are often at pre-contracted premiums, slow the speed at which bid premiums rise and eventually pull asks back down toward them. We saw this last Spring and are seeing it again now.
This spike in demand quickly drove up spot prices, as well, jumping nearly 20% in the past week, much of that since Friday. There are many good fundamental reasons for silver prices to be higher than they have been, as Jeff Clark has often outlined.
However, moves this fast in premiums and spot prices can often reverse as quickly, so we encourage all of our customers to exercise good judgment and disciplined trading in volatile markets.