Texas Precious Metals, supply letter of 4/22/2013

[68Camaro]

http://texmetals.us2.list-manage.com/tr ... bd7ca9e930

Dear TexMetals Customers:

As you all know, it has been a remarkable (and historic) week in the metals market, with metals prices falling precipitously. In the past two weeks, we have sold over 350,000 ozs of silver and 11,000 ozs of gold, which (as you can tell from our website) has placed an enormous strain on inventory levels, not to mention our loyal staff. As of today, we are completely sold out of silver. The purpose of this letter is to update you on inventory levels and the state of the physical market from our vantage point.

First of all, as our faithful customers know, we are the only bullion dealer in the country that promises to ship orders no later than three (3) business days from receipt of payment*. Our motto is: "If we don't have it, we don't sell it." Or, as one of our traders likes to put it: "we sell metal, not promises." Our business philosophy is strict and logistically quite difficult given the high security of bullion transport and packaging. We firmly believe in the importance of expedited order processing because of the high level of trust our customers place in our company. We are an anomaly in the industry, and we are proud of it.

Before I comment on the state of the market, I want to extend a tremendous debt of gratitude to our vault and shipping staff, who continue to pull 18-hour days (working through the weekends) to meet our commitments to customers. Given the sheer volume of orders, most orders are now shipping on day #3 from payment date, but we are extremely proud to report that, as a company, there have been no logistical disruptions of any major significance. Way to go staff!

The physical silver market is, in a word, ugly. There is no telling at this point when mint inventories will return to normal, but you can be sure it will not happen within the next 8 weeks. Most dealers, at this point, are selling their current customer demand forward, meaning they are selling product they do not presently have, expecting to pull from future mint allocations. Consequently, future allocations will face pressure from today's demand. It is not my intent here to comment on the business practices of other companies, but I will say that no one can possibly predict future allocations at the time. The US mint, for example, releases its allocations weekly, and until then, dealers have no insight into allocation levels. Last week, we turned away business in excess of 100,000 ozs of silver because of stock depletion. However, we stand by the notion that it is better to lose a sale than lose a customer by delaying delivery two months (or more).

Here is what we know about future inventories:

US MINT: Like most government institutions, the US Mint is highly unreliable. This week, we will take delivery of only 13,000 silver eagles. These coins will post for sale on Tuesday, April 23rd, at 8am CST, and ship as early as Friday**. On the week of April 29th, we will offer a minimum of 21,000 silver eagles, which will also post for sale on the Tuesday of the week. Subsequently, based on corporate agreements, minimum weekly allocations will not dip below 20,000 coins. Unfortunately, due to the extreme supply/demand constraints imposed on our business by the shortage of product, we will be offering eagles in monster box form (500 coins) only until allocations exceed demand. Coin premiums will be higher than normal, but our aim is to keep these premiums as far below market rate as possible.

On gold, there is some tightness in the Gold Buffalo series, but as of the writing of this message, Eagles are in fair supply.

CANADIAN MINT: As mentioned in an earlier posting, the Canadian Mint has been under pressure to meet demand because of the small eagles allocations and because of the minting disruption caused by the Wildlife Series last month. It will be weeks before the mint catches up to demand. We will receive, at a minimum, 10,000 silver maples weekly until allocations return to normal. Depending on logistics concerns, these will post either Tuesday or Wednesday on a first come, first serve basis. Like the eagles, we will be offering maples in monster box form only until allocations exceed demand.

We have large orders in place now for 100 oz RCM bars (1-2 weeks out).

On gold, the Canadian Mint is behind on its production of gold maples, but we expect to have more in stock Thursday or Friday of this week.

PERTH MINT: The Perth Mint is the only government mint (Australia) that runs its operation like a business. It is one of the primary reasons we promote Perth so heavily. The Perth Mint has swiftly and dramatically increased production to meet demand, and therefore supplies of Perth Mint 1 oz and 10 oz bars, as well as Kangaroos, are in very large supply. We have at least two gold shipments due to arrive this week. If there are any supply constraints, it may appear on fractional gold coins, but it will be only a temporary disruption.

The Perth Mint, unlike the USM and RCM, does not produce a silver monster box. However, we have 15,000 ozs of 10 oz Kookaburra and Kilo Koala coins due to arrive on Tuesday, April 29th.

TEXAS ROUNDS: We sold out of all 50,000 Texas Rounds from our initial mint run in four (4) days. We have another 25,000-30,000 rounds being minted this week, and subsequent runs will continue every other week indefinitely.

MISCELLANEOUS: We have large orders in place with Golden State Mint for buffalo rounds and 1 oz silver bars due to arrive in the next two weeks. The junk silver market for 90% coins is completely depleted, and we are only able to source supply at the present time from customers selling back to us (which are few). We have orders in place for 10 oz NTR bars which we anticipate receiving next week.

We are restocking gold in the next two days, and slowly restocking silver over the course of the next 7-10 days. Be advised that, in some cases, we are selling product faster than we can keep it in stock. Please be patient with our staff if we sell out of the product you want. I reiterate: "If we don't have, we don't sell it."

In conclusion, some have asked me the question: "How can I take advantage of silver at these low prices if you are out of stock on everything?" My only suggestion would apply to those with some trading experience. One option is to buy SLV or Silver Contracts for a short interval at the price point you want, and then sell that position the moment we have physical supply to sell. In this way, you can lock in your spot and buy yourself time until the physical market offers your product.

I would like to personally thank all of our loyal customers for helping us become the fastest growing bullion dealer in North America.

Sincerely,

Jason Kaspar,
CEO, Texas Precious Metals

*Receipt of payment, not date on which you order.
**Assuming we receive payment in a timely manner.

[beauanderos]

Sounds like the little guys are screwed if they're selling monster boxes first, until they run out of stock.

Aside from that, one heck of an ethically run business

[Robarons]

Aint Nobody got time for that

[jacer333]

Very cool to get a candid letter that clearly explains what the situation is like with physical supply, sure is a breath of fresh air from the majority of companies that just send scrambled signals to keep you on the hook.

[dannan14]

That is an amazing level of detail as well as a strong showing of honesty and integrity. Seems like supply at the 1k toz bar level is tighter than some have claimed.

[beauanderos]

Silver American Eagle planchet suppliers elusive
By Paul Gilkes | 04-22-13
Article first published in May 06, 2013, U.S. Collectibles section of Coin World


Demand for American Eagle silver bullion coins remains feverish as the U.S. Mint strikes coins as fast as it can secure planchets. Secondary market premiums have doubled.
Coins for images courtesy of SilverTowne.com.


The United States Mint has the production capacity to strike between 50 million and 60 million American Eagle silver bullion coins annually to meet demand, but ongoing inability to secure sufficient planchets stifles full use of that capacity.

Deputy U.S. Mint Director Richard A. Peterson told Coin World April 18 that the bureau is struggling with a lack of success in its efforts to find additional planchet suppliers. Currently, the Mint secures finished planchets from Sunshine Mint in Couer d’Alene, Idaho; Vennerbeck Stern-Leach in Lincoln, R.I.; and GSM Metals in Cranston, R.I.

The Mint increased production of the silver bullion coins by 20 percent in January 2013 to meet projected demand, but the increase over January 2012 levels, when 6,107,000 coins were sold, was insufficient, Peterson said.

Quick depletion of its 2013 American Eagle silver bullion coin inventory within the first two weeks of sales forced suspension of sales to the Mint’s 13 authorized purchasers for a week while inventory was slowly replenished, Peterson said. Initial sales began Jan. 7.

When sales resumed in late January, the authorized purchasers were placed on an allocation system that restricts the number of coins any one purchaser may secure. Total orders are limited to the number of coins available in any given week.

Demand reached a record high in January with 7,498,000 American Eagle silver bullion coins sold to authorized purchasers.

The flourishing secondary market for American Eagle silver bullion coins further rose in lockstep with a drop in the spot price of silver April 12 to its lowest level in two years. That slide continued into the week beginning April 15. The London PM spot price closed at $27.40 April 12, and fell to $23.54 on April 15. The London PM fix was $23.51 on April 18.

Shifting production

Peterson said the West Point and San Francisco Mints combined are striking an average of 800,000 American Eagle silver bullion coins weekly. The San Francisco Mint is executing roughly 15 to 20 percent of the overall production.

Peterson said the distribution of production fluctuates depending on other demands at the West Point Mint. More production can be diverted to the San Francisco facility on weeks that the West Point Mint is producing coins for other programs, Peterson said.

Peterson said shipments of some American Eagle silver bullion coins struck at the San Francisco Mint are loaded onto trucks containing numismatic products from the same facility that are bound for the U.S. Mint’s contracted order fulfillment center, Pitney-Bowes Government Solutions, in Plainfield, Ind.

After unloading the numismatic product in Indiana, a truck with the silver American Eagles still on board continues to the West Point Mint for final unloading. The Mint takes this step at no additional shipping cost or premium to the authorized purchaser, Peterson said.

Authorized purchasers pay the spot price of the metal per ounce on a given day plus a $2 premium per coin. An authorized purchaser must pick up the coins at either the West Point or San Francisco Mint and deliver them to its own facilities at its own expense. By delivering some of the San Francisco Mint coins to the West Point Mint, the U.S. Mint helps authorized purchasers east of the Mississippi River to keep their shipping costs down.

Rising premiums

Jim Hausman, owner of The Gold Center, an authorized purchaser in Springfield, Ill., said April 17 that two weeks before, the wholesale premium for silver American Eagles was around $2.25, but that premium had nearly doubled in the weeks since.

Whatever coins he is able to secure sell out quickly, regardless of the premium, Hausman said.

“There’s no cheap silver out there,” he said.

Dave Cooper with Upstate Coin and & Gold Center, Fayetteville, N.Y., said the wholesale market premium per silver American Eagle for 500-coin boxes was roughly $3 on April 10. When the firm offered 20,000 coins wholesale the morning of April 18, the premium had climbed to $4.90. The entire offering sold in five minutes, Cooper said.

“Retailers are willing to pay $4 to $5 over spot and selling them for $6 to $8 over spot,” Cooper said. “And investors and collectors are happy to buy them at those levels.”

The drop in the spot price has raised the premiums on $1,000 face value bags of 90 percent silver coins by 20 to 25 percent, Cooper said, to between $4.50 and $5 per ounce. Each 90 percent silver bag contains 715 ounces of silver.

A spokesman for Dillon Gage, an authorized purchaser in Addison, Texas, said April 18 that demand for American Eagle silver bullion coins has been outstripping production for months, with the firm on allocation from the Mint for the past three months. The spokesman said at the time of Coin World’s telephone call that the wholesale premium was $5 per coin “for eventual delivery” since a specific date could not be guaranteed. The premium at the time an order is placed is locked in for the future delivery, with no adjustments made should the future premium go up or down, the spokesman said. ■