The Spot Price of Precious Metals Is Becoming Irrelevant

In light of the recent violent down-and-up action in the precious metals, we invited the executives behind the Hard Assets Alliance (HAA) on to discuss the impacts they're seeing recent developments have on the balance of buying and selling for gold and silver.

The HAA is a large precious metals bullion dealer that gives the retail investor access to an institutional-grade platform for purchasing, storage, and delivery. The platform itself is operated by Global Bullion International (GBI), which counts a number of the country's largest banks and funds among its clients. So today's guests have an exceptionally good finger on the "pulse" of bullion transactions in today's market.

(Full disclosure: The HAA is endorsed by Details on why and the business relationship between our firms can be found here)

In this podcast discussion, Chris asks Ed D'Agostino (General Manager, HAA) and Savneet Singh (President & Co-Founder, GBI) what's remarkable about the recent action in the precious metals.

For starters, demand is off the charts:

Savneet:  It’s tremendous. On Friday and Monday we had the two largest days of selling. We at GBI had some of the biggest days of all time. We had four to five times as many buy orders and sell orders, both in number of trades and in volume. Far more significant buying than selling, and it’s continued throughout the week. Buying has been just tremendous on the gold side. It’s been robust across markets – both in the United States and also in our overseas locations. It’s been consistent across the board.

It’s also representative across all of our dealers. When we surveyed our dealers to get their feelings on what’s happening, it’s been off the charts. Our refiners had two times as many orders as they usually do. Our bullion dealers had, on average, three to five times as many orders as they normally do. Our bullion banks had the same type of positive inflows verses outflows.

Ed:  That’s the same with the Hard Assets Alliance. We’ve seen record inflows of cash deposits over the last two weeks, and purchases have far outnumbered – basically nine-to-one at the Hard Assets Alliance for purchases verses sales of positions. 

Second, the demand we're seeing is from existing customers who are returning to buy in bigger volume as they see the precious metals as being "on sale" right now. This is creating supply strains across the system. If we get to a stage where another 1% or 2% of the population decides to become first-time bullion buyers, supply could become exhausted quickly:

Ed:  I think there’s going to be some serious supply constraints. I agree, we're nowhere near mainstream yet. Once more conventional retail investors wake up to the fact that they need some sort of protection in their portfolio against debasement of currency and inflation the demand is going to surge. 

Savneet:  At this moment, particularly on gold, I just don’t see there being a shortage. Even ETF and closed-end funds are looking for a better way to buy. We’ve never had a problem being able to coordinate extremely large purchases for them. We’ve already hit the capacity on the silver coin side where there’s just not enough out there to satisfy demand. Because that demand is centralized around coins, people will have to wait for what mints want to do – whether it’s the Royal Mint, the U.S. Mint. You are kind of tied to the supply of one producer. Silver bars are a little bit better, but silver is just a much smaller market than gold is. I think you're absolutely being exposed to shortages there.

On the gold side, I think if gold ever became truly mainstream, as Ed was talking about gold's total market value is $5-6 trillion dollars. If 1-2% of the population wanted to buy some at current prices, there’s just not enough of it. So, two things happen: Either you have a gigantic price re-rating, or you don’t have supply. 

Third, the surge in physical buying combined with tightening supply is resulting in the premium paid over spot price for physical bullion to march upwards quickly. For all of recent memory, the price of precious metals has been determined in the paper marketplace (e.g., COMEX; LBMA). That may now be changing. Should the availability of physical bullion start setting the price action, the spot price quoted in the paper market for gold or silver will become an anachronistic irrelevance:

Savneet:  Internationally you traditionally see huge buying after a price selloff. But since the recent huge selloff, you've had more buying than people ever imagined internationally. What was unique about this selloff is that the buying surge occurred in the United States as well.

In the U.S., when we’ve had huge price run-ups, we have lots of buying. It’s not often that within the same day of a huge price decline, we have significant buying. So it was different than other very large days in our company’s history in that you've just had such counterintuitive buying.

Ed:  And such a big disconnect between the spot price and the actual price that you're going to pay for physical, particularly on the silver side. You could make the argument that spot price is becoming irrelevant relative to the physical market because silver is well north of the 20% premium over spot right now. 

Click the play button below to listen to Chris' interview with Ed D’Agostino and Savneet Singh (31m:12s):

This is a companion discussion topic for the original entry at

Can HAA be used for a self directed IRA?


The title of the article is very exciting for precious metals bulls, and its a sweeping claim, so I have this (clearly) irresistable urge to clarify - to try and winnow out just what became irrelevant, for how long it will be irrelevant, and what it means to me going forward.
[Full props btw for not putting the article/podcast behind the paywall so I can contribute]

So, the title is: "The Spot Market Price of Precious Metals has Become Irrelevant".

PM consists of gold, silver, and platinum.

Is the claim then, that the spot market price of all these metals is now irrelevant?  As always I have to do my own homework, so I will check my local coin shop (I'm not affiliated with them, they're just close by) and see what the premiums are:

Gold [Eagles]: 1.014% bid / 1.048% ask

Gold [100 gm]: 0.980% bid / 1.023% ask

Spread 3-4%, premium 2-5%, seems normal - a tad pricey for eagles, but only slightly.  conclusion: spot price still matters for gold

90% silver bag: 1.13% bid / 1.21% ask

maple leaf [25]: 1.08% bid / 1.21% ask

Spread 7-13%, premium 21%, def abnormal.  conclusion: spot price currently doesn't matter for silver, especially in bar form - they were all sold out.

Platinum Maple Leaf: 1.02% bid / 1.06% ask

Spread: 4%, premium 6%,  premiums higher than normal, but conclusion: spot price still matters for platinum

So for 2 of the 3 precious metals at my coin shop, it appears that the spot price still matters.  For the one, silver, there is a clear dislocation.  Since I'm channeling the Mythbusters today, I'm going to say - "Claim: 2/3 Busted."  (Or if you're a glass half full sort of person: Claim 1/3 Proven!)


Ok, since we're clear now that the spot price is irrelevant only for silver, the next question is: has the spot market price become irrelevant for all time and all silver products, or just some products, and just for a limited amount of time?

If we're striving for clarity and true understanding, these are important distinctions.

Certainly my local PM shop doesn't have any COMEX bars - normally they sell for 50 cents over spot, and they're all gone.  But knowing I can go to Eric Sprott's PSLV fund (currently trading at a premium of +0.38% to NAV) drop $240,000 on him (+ $5000 for delivery), and I can have 10 1000 oz bars (83 pounds each!) appear next month at my house, one would assume these bars will return to stock within one month's time and perhaps they'd be less than a buck above spot - perhaps a 2-3% premium.

That being the case, could we conclude that for good delivery bars​ the spot price for silver is still quite  relevant?  I think so.  All I have to do is wait a month, and I'm guaranteed to receive them.  Assuming you can trust Eric Sprott.  So it turns out, if you're patient, and you have a spare quarter-million bucks, you can get one form of silver for about 60 cents over spot.  Ok, you need to buy 10 of them, and each of them weighs 83 pounds, but its silver - its the real thing.  Its just not in the form you prefer - or likely the quantity!  And you have to wait.

So really, what we're talking about is form and quantity and timeframe for which spot price has become irrelevant, not the precious metal itself.  So perhaps we should change the title again.  "Spot prices for silver in coin and small bar form available for purchase today have become irrelevant!"  (asterisk but if you are patient, and don't mind getting a mega-costco-sized batch of big heavy bars, its no worries)

So do we imagine someone out there will buy some of these big heavy bars and turn them into little coins and smaller bars that people seemingly must have for 20% over spot?

Last question.  What will the future hold?  Is it possible the demand for small silver bars & coins could result in all that silver being sucked from PSLV (and other sources) in the future?  Of course its possible.  So being responsible people, we need to track this.  I would recommend tracking the…spot price of silver, along with the premium to NAV of the PSLV fund, as well as the premium for the industrial-sized 1000 oz bars at your local (or not-so-local) PM shop.  The free market being what it is, prices on coins and small bars and those industrial-sized bars priced at spot will eventually end up converging.  Either spot price will rise, PSLV premium will rise, or the premium for coins and small bars will drop.

I don't have any special lock on knowing the outcome.  I'm not a PM bear - I'd be simply delighted if there were a COMEX default.  My only suggestion is - watch prices and let the market tell you.  People love stories, but in the end, the price tells the truth.  These days its just a bit more difficult to get the truth, but if you really want it, it's out there.

FD: I am considering buying PSLV, I already own CEF, and mining shares as well.

disconnect between the spot price and the actual buy price of PMs, although the title as I read it is "The Spot Price of Precious Metals Is Becoming Irrelevant", not "…Has Become…" as you restated it. 
Now your "2/3 Busted" claim has itself been busted, for the same reason that - 
If I claim my lawn "is becoming" brown, and only 1/3 of my lawn is brown, it doesn't disprove my claim. I never claimed that my lawn "has become brown", or that my lawn "will become brown this week" (or ever for that matter).
Still, I appreciate the time and effort you spent trying to keep everything clear.

Single Speak -Ah, a funny thing happened on the way to school.  The dog ate my homework!
It turns out I didn't actually restate the title - the title was itself restated upon me!  When I wrote my comment, that's exactly how the title read.  After I posted, the title was changed.  Alas, while they can change their title, I cannot change my comment.  The time for editing my comment has long since passed, so there it stands.
Still and all, I stand by what it says.  Its really only silver whose premiums have blown out, not "precious metals."  But I must admit, the title change did undercut my case.  If I'd done something as careless as mis-quoting the title of the piece, why would you want to read past the first few lines?
Here's a link to the article with the original title, picked up by a different place:
You can either google it for yourself, or believe the output I found when I googled it just now:
Google: "The Spot Price of Precious Metals Has Become Irrelevant."
9 hours ago – In light of the recent violent down-and-up action in the precious metals, we invited the executives behind the Hard Assets Alliance (HAA) on to
The Spot Price of Precious Metals Has Become Irrelevant. Thursday, April 25, 2013 19:56. % of readers think this story is Fact. Add your two cents. 0. (Before It's
10 hours ago – For full description and discussions, visit: In 

In response to Grover, yes, the Hard Assets Alliance offers traditional as well as Roth, SEP, and SIMPLE IRAs.  There is a tab on the upper right corner of our website, "Precious Metal IRA" where you can get more info. Thanks for your interest.
-Ed D'Agostino
Hard Assets Alliance

Many times when I read a Davefairtex post… it reads like this to me;
Blah, Blah, Blah… yeah… well written… good point… hmmmm… I hadn't thought of that but, yeah… good point… yeah… PSLV arb… .yeah… good point… and then… BANG.  The non-sequitur comes.  The psy-ops insert comes.  Here it is from above;

People love stories, but in the end, the price tells the truth.

Really Dave?  So you are telling me that;

*  The (ultralow) price of bonds today is telling me the true level of (especially in the case of 10 - 30 yr debt) risk in buying sovereign debt?

*  The Libor rate was telling the truth all those years about the price of money between banks? 

*  When Trulia told me my house was worth a price of $799K in 2006 (vs. $499K today), that was the truth? 

*  When all this printed money is going into the stock market, the stock market is telling us the truth about the forward arc of organic Corp. profit growth via stock prices?

*  And finally… and the subject of this piece… you are telling me that a price set in a futures market originally designed for use by legitimate hedgers, but now populated by heavily margined speculators, HFT robots, and of course the wolves themselves (The bullion bankers) watching their "chicken coops" and raiding them at will via levels of shorting that would, in any other market, be deemed manipulative, is telling the truth?.  You are telling me that a market that can trade an entire years worth of mine output via futures in one day, while actually delivering only a tiny, tiny fraction of that in physical, is telling the truth about price… or, more to the point, supply vs. demand.  You are telling me that, even though we have Greenspan on record stating, " Central banks stand ready to lease gold in increasing quantities should the price rise."  that the price of Gold is telling us the truth about supply vs demand?  

Really Dave?              


Wish I could give you more than 1 thumbs up…!

Jim…I think you're differentiating between price and value.  In these times, we know the price of everything, but the value of nothing.
The world in which we currently live is massively distorted by artificially determined quantities and prices of currency, as well as constant and overt manipulations by the price setters in lots and lots of markets.

My operating position is that anything that can be manipulated for gain, is being manipulated for gain.  Honestly, how anyone can have any sort of faith in the "markets" after everything that the banks have been revealed to have done is beyond me.

The "markets" are failing because our regulators failed and there's really no hope for any sort of a fix at this point.  Someday the markets are going to have to crash, and crash hard, and then we'll have a shot at picking ourselves up after the reset.

But until then, the QE efforts are nothing more than a wide open, in your face, transfer of wealth from everybody and into the hands of very few.  Printing money creates instant purchasing power and that has to go to someone.  Just check the wealth inequality charts for guidance as to the recipients.  As it has always been, so it shall be again.

Someday, though, the way this all ends is with that reset button being pushed.  Either it is such a punishing deflation that institutions, countries and political careers are destroyed in astonishing quantities, or the general populace finally wakes up and decides to opt out of the failing currency while they still have time and we get punishing 'inflation' (but which is really something different, which is a self-reinforcing loss of preference for paper currency and its electronic representations).

Wish I could see a different set of outcomes, but history is rather clear on the matter, and every recent decision and act of non-enforcement only confirms my view that this time won't be different.

Matt seems to agree with Chris



I am saying that price is no longer a valid indicator of the value of PM's today.  I am certainly not saying that you can't get a 1 oz.Gold coin at todays spot price + a fairly normal premium… as Davefairtex states… the fact is you can.  But is price today telling the same "truth" that it might if you had a more efficient, transparent, well and lawfully regulated market?  Is price telling the same "truth" that it would were not central banks leasing Gold and bullion banks not potentially stripping "supply" from various unallocated sources, ETF's, and even allocated sources (i.e. ABN Amro default).     

[quote=robie robinson]Matt seems to agree with Chris
Full confession- Matt Taibbi articles on the blatant fraud and theft and government complicity always get my blood warmed up.  I read that article this morning before writing my comment…so that 'colorizing' is in my writing.
Everybody should read that article and then we should have a full blown conversation about the implications of living in such a world.  How should one invest given this knowledge?  What sorts of outcomes are more or less likely given the way the system currently operates?  Etc.

[h davis - Weclome to the site. Since your account was just created today, I'll assume you're not familiar yet with our posting rules, which demand a certain level of specificity and civility. You can familiarize yourself with them here.If you do not follow these rules in the future, you will find your posts edited swiftly by our moderators as I have edited yours here. My edits are in italics. – Adam]
Chris, HAA satifies all your questions?
I still have some I would like answers to:
1) I'd like to know why a 1099 is  issued by HAA .  Id like an answer why ss#'s and 1099's are being used,  what purpose does that serve?
2) What's the best way to talk with a knowledgable, live person at the HAA? 
3) Where are HAA's vaults located? 
[I will ask the HAA to respond to these questions here – Adam]

Matt Taibbi continues to be <the only> journalist who covers financial corruption in depth, at least that I hear about regularly.  Regardless if there are a handful of others (Chris Hedges, for instance), this is not done in the MSM (by orders from on high, undoubtedly).  In the future, historians and archaelogists will scratch their heads trying to figure out why a sports reporter in a pop music magazine was the only one who published in depth articles on the issues that brought down modern society. We're doomed.

Hmm, I can see I wasn't clear enough.  Price isn't Universal Truth, nor is it Metaphysical Truth, nor is it even Value.And Jim.  I'd like to make a request.  Could you please make an effort to be kinder to me going forward?  It will help greatly in my efforts to remain a civil participant in dialog with you.  Currently your responses seem to me to be more of a "bashing" nature which brings a disagreeable tone to the dialog.  In my opinion.
So in answer to your question, which I'll boil down: whatever did I mean when I said "price tells the truth."
This concept is a phrase that some traders use to clear their minds from the stories they read every day in the media, from the stories told by the sell-side people in every industry.  I meant it in the context in which I used it, namely, that we will be able to determine the truth of whether or not the PAPER price of silver is becoming more, or less disconnected from the PHYSICAL price by looking at the PRICE ITSELF rather than through stories.  Look at evidence, I'm trying to say, instead of simply listening to a story.
In this case, the price we care about is actually the premium, in this case premiums on PSLV, and physical silver.
The truth really is out there, and price is your best clue - especially the changes in price.  That's why I love discussions about premiums like this.  Its fascinating new detailed information about price, which I know, doesn't lie - at least not in the way I think of things.  Again, context.  Not Universal Truth.  In the case of the futures markets, price tells the truth - there's a crapload of money dropped on the short side, and not as much on the long side.  Wanna get in front of that train?  I sure don't.  Now let's watch prices and see how the next stage unfolds.  So far, my charts say it looks promising - gold more so than silver.   And believe me, I keep an eye on premiums of PSLV and CEF every day, because I believe them a lot more than some guy on King World News talking his book.
I believe that the Fed is a sell-side group selling their products - debt and paper money.  A coin shop is also selling their products - silver and gold coins.  They both employ storytelling.  And what's more, both sides believe their own stories!  So to keep yourself safe from storytellers, trust price (in this case, premiums) to tell you if the spot price of precious metals is becoming more or less relevent.
Sometimes price trends change, because the underlying situations change.  When that happens, don't follow the old story, follow the new price.  It says "something is up."  For instance, there was a story once: "housing prices never drop nationwide in the US."  And then they started to.  Most of us (me!) were following story at that point, not price.  Those following price had a chance to save their asses.  Those following stories are still expecting property values to bounce back soon "because they always do."  Thats what I mean by "price doesn't lie."
Story: "gold is money."  Price: "gold trades like a commodity most of the time."
Story: "America is rapidly becoming self-sufficient with oil."  Price: "Oil trading at $93/barrel would suggest there's no danger of that anytime soon."
Story: "food prices are going up all the time."  Price: "Food prices have tracked sideways for a year now."
I don't have an opinion as to where premiums are going.  If the price premium widens over the next two months, I'll take one set of actions.  If the price narrows, I'll take another.  I'm just curious to see how the experiment works out.  I'd place higher odds on narrowing rather than widening based on price movements I've observed - but I'm definitely keeping an open mind.  I expect at one point in time for things to snap, and I don't want to be caught napping.
Last point.  If you think I'm engaging in psy-ops, or I'm a shill for the Fed, or I'm trying to trick you, or anything - well, I gotta say, I'm a guy on a sofa with a laptop.  It's a macbook pro.  You're just wrong, but of course, if I were working for the Fed, that's exactly what I'd say to convince you so…sigh.  Dialog leads nowhere.  How can one prove one's innocence?  One can't.  Try proving your cell phone (really!) wasn't working when you got that "using a cell phone while driving" ticket.

I just recently got a truckload of data on gold dating back to 1999 - one minute ticks.  I was curious to see if any particular time of day had outsized movements in the price over that time.Turns out, the 15 minute bars immediately prior to London AM and PM fix were quite noticeably "down".  In other words, during that massive bull market from 2000-2013 if you'd bought gold immediately prior to either fix, and sold it at the fix, you'd have lost money over time.  The total per bar was around $-300 to $-400.
Most of the other time bars were up over that same period average +/- $50.
What is price telling us this time?  The dealers collude in some way to hammer the price of gold immediately prior to the fix.  How?  Why?  I have no idea.  No doubt they get some advantage from it.  But that pattern absolutely doesn't lie, at least not to me.

1) I'd like to know why a 1099 is  issued by HAA .  Id like an answer why ss#'s and 1099's are being used,  what purpose does that serve?  
We are an online trading platform.  As such, customers fund their accounts and make purchases through our network of dealers and refiners.  Because customers have funded accounts, we are required to follow "know your customer" regulations.  Just like an online brokerage account, we require certain information in order to open an account and verify your identity.  
2) What's the best way to talk with a knowledgable, live person at the HAA?
3) Where are HAA's vaults located? 
New York, Salt Lake City, London, Zurich, Melbourne, and Singapore      

Yah, it is difficult to know how to proceed in such a world.   Especially considering the debt levels we exist in.  The system is so rigged.I think I am going to go pay off a little more debt.

I will take one of your latest statements and go down the rabbit hole … because in your latest post you are still essentially making the same, in my view subversive, attempt to defend the fidelity and meaningfulness of price data and action.  My point is simple;  price data and action is the matrix - it is a painted picture of a reality that does not for the most part exist were we subject to free, well regulated markets without the crack cocaine of endless printed money.  I am in fact bashing an idea… the idea that Gold is not money.    
For instance, you said;

Story: "gold is money."  Price: "gold trades like a commodity most of the time."
So... you use the term, "Story", with it's somewhat negative connotation in this context, to represent the idea that Gold is money.  Then you go over to the matrix, i.e. the market correlation between Gold and other commodities (which by the way I don't dispute.. if you were running the matrix, you would not want Gold viewed as a risk-off asset, hence you would not want to let its trading correlate to other risk off assets) to make your determination of what you propose is the truth.. because price is truth, right?.  

So I see it like this;

  Story: "gold is money."  Price: "gold trades like a commodity most of the time."

Truth (best I can tell):  Gold has been trading like a commodity in order to fool the investing community into thinking that it is a commodity.  Meanwhile, central banks around the world have been net buyers for several years now… and even those Western banks that are not buying, i.e. Germany, are making some interesting moves in order to "secure" their Gold.  Why do central banks buy only Gold, and not Copper, or Tantalum?  If Gold were a commodity?  I assert that the chart below proves that those who should know money best, central bankers, are telling us that Gold is in fact money - a reserve asset that sits next to dollars, yen, and Euro's on the central bank balance sheet.   

Link for chart:
I am not saying your view is wrong from the standpoint of a person trying to trade successfully in the matrix, right now.  I am though saying that I expect your view to produce very, very bad results as the endgame plays out, and the matrix falls.  But then again, you own lots of Gold and Silver even though you don't think they are money, right?


Thankyou for your response.
I am being civil. 
Im looking  to place six figures offshore somewhere so theres gonna be some HARD  questions, sorry.
I  can read on HAA website which countries are available for storage ,  I want to know  the name of the vault , its address and who runs it?  I was told by HAA that information is not givin to clients.  Why no disclosure ?
So Im using a brokerage account to store my gold offshore? –   (dare you to address that one HAA)
On the HAA website it says  ;  "Like an online brokerage account"   .
So HAA is a brokerage or is  " like one "? 
If HAA goes bancrupt   will my  gold stored be encumbered?
Assuming I had offshore storage is it true that I cant get my  gold back unless I go through HAA?
I did find out HAA uses Wells Fargo. 
And I want to know  Gold Bullion International's part it plays ? 
I worked my azz off  for my hard earned money.  Confiscation , devaluation, taxation , capital controls are all coming  in one degree or another  . This is not a game .
Thanks for the phone number HAA,  Ill call soon, who do I ask for?  I want to talk to management.
Maybe HAA is  best  to be used along with other storage programs   in order to diversify, trade, take delivery etc.  .
I wonder why HAA became a brokerage ?