After speaking with several distributors yesterday and today regarding the future and current availability of silver I can confidently report that there will not be any newly manufactured silver entering the market for at least a month, likely more. The Royal Canadian Mint has announced that it is suspending production of product for at least the next 2 weeks. The US Mint will possibly issue some sort of guidance on Monday regarding future supply. State-mandated closures of businesses has bound up almost any available supply.

The struggle that physical metals traders face now is different than any we’ve ever seen before. In 2011 we saw product shortages but production challenges then were not as dramatic as they are today because of the Covid-19 coronavirus pandemic, which is stressing supply chains and slowing production creating uncertainty for supply in the future. Every single section of the precious metals supply chain is being affected by the pandemic.

Let’s start at the very beginning: mining and extraction of precious metals from the earth. Mines around the globe are currently facing temporary closure or the possibility of it as the coronavirus sweeps through entire populations and governments impose restrictions on businesses in hopes of stemming the spread of the virus. Already many mines have shut temporarily, which will likely cause far-reaching ripples in the supply chain. https://www.reuters.com/article/us-health-coronavirus-metals-factbox-idUSKBN2163EB

The next link in the supply chain is the refineries that take recyclable material or raw material mined from the earth, filter out the junk and turn it into blanks, shot and ingots that are then sent to the mints. Many refineries have been reporting delays in turn-around due to government restrictions on how many employees are allowed to work. Turn-around time on silver refining has been reported to us as being delayed by as many as 8 weeks.

Once private refineries are able to get new batches of physical silver out to the mints (the next link in the supply chain) the mints are experiencing the same sort of struggles related to restrictions on the workforce and slowing of production.  As soon as the mints are able to push out finished product to the distributors, much of that product will have already been pre-sold.  Current pre-selling shipment estimates are ranging from 4-8 weeks.

Finally, distributors will ship pre-sold product to dealers.  This final link in the supply chain will also see delays due to strained shipping departments and providers who will be struggling with the same staff shortages and government restrictions.

So, where does this leave Monarch?  All of this uncertainty has made me nervous.  I do not trust in the supply chain functioning well enough in the future and I have therefor decided not to engage in pre-ordering product that does not currently exist and is conservatively estimated to be 4-8 weeks out.  I do not feel comfortable locking prices for my customers and then asking them to wait for weeks, even months to receive their product.

Our main goal has always been to sell “live” product, which is product that is in-stock and ready for shipment, and we have been working almost constantly to source it.  The cost of acquiring live product is certainly greater than the cost of pre-ordering something that is not guaranteed to be delivered within a reasonable time.  Live product is unquestionably scarce and live product comes with a premium that reflects current and future supply vs. demand.  The current silver spot price does not reflect physical product reality.

A question I am being asked frequently is, “When will premiums go back to normal and be closer to spot?”  My answer is an unsatisfying, “I do not know,” because I, myself am filled with unanswerable questions as a response:

When the spot price rises and reflects the current, physical reality of silver supply and demand? When the coronavirus is finally controlled and the economy can start functioning at normal levels again? When silver product is produced as quickly as it is demanded?

We have been working day-to-day for the past week and-a-half with not many answers for what the next day will bring.  I never know what live physical supply will look like in the morning. I never know for sure that I will be able to purchase silver to be delivered at a reasonable premium. I never know for sure that the spot price of silver will not drop an alarming amount each day.

Uncertainty is the name of the game now and for the foreseeable future.