From a Feb. 2 2009 interview of financial guru Jim Rogers with Warren Bevan:
Jim Rogers:
“Well I don’t know why anybody would pay that kind of premium. What happened was all the dealers went and bought huge silver supplies back when silver was at $20 and now their stuck and they don’t want to take a loss and so they are telling people they don’t have coins.
I promise you sir if you offer $25 for silver coins you’d get all you wanted. There is no shortage. It’s just that the shortage is because the dealers bought huge inventories that they don’t want to sell at a loss. So I think it’s happening, dealers are just refusing to buy them.
They’re there, I don’t think we are running out of silver coins my god, there are millions and millions of silver coins, it’s the dealers are stuck. And to some extent the same is with gold as well…..”
More evidence in an interview with Jim Rogers that you should be careful paying high prices for silver or gold coins when the spot price is lower. Rogers doesn’t see any silver shortage, only unwillingness to sell by dealers who bought at high prices, who hope for those prices to come around again (which in turn stimulates the newsletters to boost the prices). He thinks that’s partly true of gold as well, though gold acts much more like a currency.
Actual jewelry demand at these levels is flat (and Indian jewelry demand is a major driver of it) – this being the seasonal low of that demand. .ETF inflows have also been relatively smaller compared to the early part of the year.(Correction: Recent news says that ETF flows have reached an all-time high, so I figure the discrepancy is due to the divergence between the absolute numbers – all time high – and the volume – which I recall reading had tapered off…will post further on this).
This doesn’t mean that gold’s fundamentals aren’t good. It just means that you should be careful when and how you buy it so you don’t get eaten alive by market manipulation. Fear is driving a lot of the buying right now. Not inflationary fears per se but panic over the economy and the market…and that sentiment can turn sharply. Rogers feels that energy and commodities are better places to buy now since the prices are down. I can’t say I disagree.
* Another interesting point in the interview is the mention of drug money laundered through government banks – which, as I’ve said before, is really where the banking story is.