February 2013 Silver Bullion Newsletter - Maple Leaf Coins and Germany's gold

Posted by Gregor Gregersen on 01 Feb 2013


 

Silver Bullion Pte Ltd

Dear Subscriber,

This newsletter is about Canadian Maple leaf coins as we have considerably lowered premiums on these coins and have increased buyback rates for non-clients for all bullion items - see details below.

I am also sharing my thoughts on Germany's recent 300 metric tonne gold bullion delivery request. Unfulfillable requests for physical delivery caused the US in 1971 to default on their obligation to back US dollars with gold; so this could eventually be a catalyst for a full-fledged US dollar confidence crisis. This is certainly creating a big stir in Germany where the memory of the 1923 hyperinflation of the Reichsmark is still present.

Germany wants some of its gold back... she might get it... in 7 years

Germany has requested that a fifth of German gold reserves in the United States, stored for free by the New York Federal Reserve, be re-patriated back to Germany. As a German citizen I was delighted to hear this and would have expected a German Navy ship to pick up the bullion within a month or two as Venezuela had done.

In monetary terms, the requested gold - 300 metric tonnes or about 9,650,000 troy ounces - is valued at about 16.3 billion USD which is not significant in paper terms as this amount barely covers four to five days of the US budget deficit. However 300 tonnes of physical gold is quite a substantial amount and cannot be procured as easily as currency. So the fact that the gold is "not immediately available" for delivery and that the proposed delivery timeline is seven years is rather disturbing and suggests that the bullion is either not there or is heavily encumbered. Furthermore a recent report by the German Federal Court of Auditors, which reported that the gold held in the US had "never been verified physically", makes this news a hot potato in Germany. You can refer to this Spiegel Article.

So is the gold there or not? The truth might just be somewhere in the middle because even if all the gold is physically stored in New York it might have been "leased out". In such a scheme the gold custodian (e.g. New York Fed) leases his customer's (e.g. Germany) gold to a third party (e.g. a bullion bank or mining company) which will pay a small interest (such as 1%) to the custodian with a promise to return the bullion on a certain date. The third party then turns around, sells the gold, and invests the proceeds in something else such as higher yielding instruments (e.g. 3% Treasury bonds). 

Although the bullion was leased out, the custodian (e.g. New York Fed) will still claim the bullion to be an asset in its inventory even though the lessee has already sold the bullion. This means that the client's (Germany) gold was converted from an asset (physical gold) to a paper liability (a promise) and the asset now belongs to someone else. So the free storage that the client (Germany) is ‘enjoying’ from the custodian (New York Federal Reserve) might not be as good a deal as it seemed.

This is akin to you renting out a condominium to a tenant only to find out that the tenant, without your consent or knowledge, has sold your condo, pocketed the cash but promises to buy you a new condo in seven years' time. The scheme works beautifully as long as the client (Germany) does not ask for his physical bullion back, in which case the custodian (e.g. New York Fed) would have to get the bullion back from the lessee (e.g. bullion bank) who already sold the bullion and might not be able to return the physical asset on short notice.

Ron Paul, a former US congressman and banking oversight committee member, had been trying to introduce a bill to audit US gold holdings and its encumbrances for many years but had little success in lifting this cloud of gold secrecy. If the US House Banking Committee cannot audit the US gold holdings then we have little chance to discover the truth behind the reasons for the seven year delivery timeline.

The lessons from this should be clear however:
  1. Ensure that you own physical silver & gold, not paper liabilities
  2. Ask questions and demand transparency
  3. Proper storage of bullion costs money, if you get it for free you probably have not done enough to satisfy point 1 and 2
by Gregor Gregersen

Maples Leafs -  Strategic Directions and Revised Pricing
The Rationale:
Maple leafs are the best selling coins in Singapore. Our first sale was a tube of Maple Leaf coins in early 2009 and since then we have delivered 347,649 of these coins. The coins are considerably less expensive than American Eagle coins, are characterized by a 99.99% purity compared to the 99.9% industry standard and are extremely liquid. Maple Leaf coins also make good sense for storage as their yellow [500 coin] monster boxes require about 30% less space compared to the green American Eagle boxes and are very durable as well as stackable.

The former head of marketing of the Royal Canadian Mint (the mint that produces Maple Leafs coins) visited us here in Singapore a while ago and told us how he re-designed the yellow monster box to fit into standard US Postal Service parcels in order to better serve the US market. It was this requirement which caused the Mint to switch to 25 coin tubes instead of the industry standard 20 coin packaging. The efficient packaging is a great advantage for storage as a 30% space improvement makes a big difference when hundreds or thousands of these boxes are stored within a limited space in vaults.

Given these factors, it makes strategic sense for us to focus on marketing these coins and provide deep liquidity of silver Maple Leafs (and increasingly gold Maple Leafs) in Singapore. Our S.T.A.R.+ vault storage racks are already optimized for these coins and our new Silver Bullion team addition (James), who is a full-fledged materials engineer, is further refining DUX testing standards and repackaging processes for new upcoming services that are currently under a limited pilot phase.

What this means in terms of availability and pricing:
Although there is a bit of tightness of supply in the bullion industry we just processed a major coin shipment that closed many existing pre-orders and there is another incoming shipment of 24,000 Canadian Maple Leaf coins late next week which should result in good in-stock availability in the near term. Pricing wise we will favour Maple Leaf pricing over other coins (with the possible exception of Mexican Libertads) and have implemented a substantial price reduction on these coins as we are moving to a higher volume pricing model on these coins.

Increased Buyback Rates for Non-Clients
We have also increased our Non-Client buy prices for bullion. The new rates bring Silver Maple Leaf coin non-client prices very close to spot giving non clients an excellent rate to sell their bullion to us.
Lunar Year Coins 2013 - 1/2 oz

Featured Coins and Specials

Silver Maple Leaf Coin 2013 - 1 oz

Silver Maple Leaf 2012 & 2013

This .9999 Canadian Maple Leaf bullion coin is the most popular coin in Singapore. See "Maples Leafs - Strategic Directions and Revised Pricing" above for details.

Silver Koala Coin 2012 - 1 KG

Silver Koala 2012 Coin - 1 Kilo
The front of the 1 kg coin displays a Koala perched on a branch The obverse features Queen Elizabeth II. 1 kg coins are the least expensive coins and this coin is discounted well below normal until February 15th or until supplies last.

Lunar Year Coins 2013 - 1/2 oz

Perth Mint 2013 Lunar Coins 1/2 oz
Costing less than 30 SGD these 1/2 oz (about 15.6 grams) .999 silver coins make excellent gifts for Chinese New Year festivities and, being Investment Precious Metals (IPM) approved bullion, are GST exempt. These coins are a much better value (at around 14% above spot) compared to the coins that are priced 150% above spot rates. It is a no-brainer if you need to fill red packets in the 25 to 30 SGD range.


Bullion Availability Update
In this section we summarize our inventory status and current bullion availabilities as reported by our suppliers and industry sources:
Local & S.T.A.R.+ Storage Availability
  • supply Silver Maple Leaf supply is tighter than usual due to the spill over effect from the shortages of silver American Eagle coins. However we have a ton (literally) of maple leaf coins en route which just cleared most pre-orders. The next 24,000 oz shipment is scheduled to arrive late next week and should give us good in-stock supply depending on the number of pre-orders received until then.
     
  • supply Silver American Eagles - American Eagle coins are on allocation due to record demand. On January 7th, when the US Mint started accepting 2013 Eagle orders, they received  orders for over 4 million coins in a single day. The demand caused a suspension of sales  to allow for production to catch up.

    The Mint has now started accepting orders again and we are accepting pre-orders on eagles given a four week pre-order timeframe. However Maple Leafs might be a better option at this time given the lower price and higher availability. Note that the silver coin is tax exempt in Singapore but the gold American Eagle bullion coin is not.
     
  • supply Johnson Matthey 100 oz Poured Silver Bars - 6,000 oz just came in and bars are available in both S.T.A.R.+ Storage and for immediate pickup.
     
  • supply .9999 Royal Canadian Mint 100 oz Silver Bars - 25,000 oz of these have come in last week and S.T.A.R.+ Storage has parcel availability. We will be obtaining more bars for sale late next week for local pickups as well.
     
  • supply Gold Bullion - Gold Maple Leaf coins are available locally as are 1 oz and 10 oz Credit Suisse Gold bars.
  • supply Perth Mint Silver Coins and Bars Availability of most coins and bars is good locally. All 2012 10 oz Koala coins have been sold but 1 kg Koala coins are still available at very good prices as part of the 2012 Koala Special (until the 15th of February).
     
  • supply Perth Mint Gold Coins and Bars - 200 oz of gold Kangaroo coins and bars just arrived and are available for immediate pickup locally.
     
  • supply Libertad Coins -Limited numbers left. These coins come sealed from the mint with very secure metallic seals on the ‘bank bags’ providing much better tamper protection during shipment.
     
  • supplyPlatinum Sold out.

If you plan to import bullion into Singapore make sure you understand what type of bullion is classified as Singapore IPM Tax Free and what type is not, so that you are not burdened with unnecessary import taxes. See IPM Criteria & Tax Free Bullion for details.


See more products and prices at www.silverbullion.com.sg.

Best Regards

The Silver Bullion Team
Silver Bullion Pte Ltd
Registration Nr: 200907537M
Floor #03-02A Certis CISCO Center II
20 Jalan Afifi, Singapore 409179
Singapore

Phone: (65) 6100-3040
Fax: (65) 6826-4022
Email: [email protected]

 

Information provided here should not be considered as advice or as an offer or enticement to buy, sell or trade. The contents of this publication, including any opinions and analysis, are strictly intended for educational use. Opinions expressed in bylined articles are those of the individual author and do not necessarily reflect the views of Silver Bullion Pte Ltd.

Silver Bullion Pte Ltd. makes no warranties, whether expressed or implied, as to the accuracy of the information provided or for eventual results obtained by using the information. In no case shall Silver Bullion Pte Ltd. be liable for direct, indirect, or incidental damages resulting from the use of the information.

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