Silver and Gold Crater - What?

As I'm writing this, gold is at a two year low, while silver's low goes back 2 1/2 years - the white metal closed at $43.05 two years ago today, April 15, 2011.    Oil is lower than it has been in several months, and the industrial metals: copper, palladium, platinum, lead, nickel, zinc, are also down.  Of course the DJIA is down over $200 and the other stock market indices are also down with it. 

Everybody who follows the metals and the apparent coming collapse of fiat currencies around the world is looking at this and wondering what's going on.  With the warning that I'm not a financial analyst, I'm just a random internet dood with a blog, allow me a couple of observations.   

There's a famous saying that "markets can remain irrational longer than you can remain solvent" and that seems to me to be what's going on.  Substitute the word "governments" for "markets" and I think you've got the picture.  Cyprus' central banker, Mario Draghi, has been in the process of selling off his gold to pay the debts he's required to pay off.  Central bankers have been advising everyone to sell gold - but are buying it themselves in massive quantities.  Are they trying to manipulate the price of gold, like they manipulate the price of stocks and everything else in the world?  Do I have to answer that?  Just as you can't bet against the market when the fed's monetary creation is driving it higher, you can't bet on gold when they're trying to crash the price of it. 

If the times we're living in are a massive - perhaps, final - showdown between Keynesian and Austrian economics, and they certainly seem to be, this is a moment where the Keynesian empire is striking back.  It has been looking like the empire was on the ropes; so much money-creation has been going on with the world still mired in crisis after crisis, that it looked like the final Keynesian monetary bubble was going to pop and the world have to resort to money based on something.  The central banks can flood so much currency that they can cover all the losses, if creditors will only accept this freshly created currency.  It doesn't matter that it's not backed by anything if people would only believe the digitized faux-money in their accounts is worth something. For the moment, it's looking like they can keep the illusion going. 

Do me a favor, though.  Go to Apmex or Kitco or your favorite precious metal vendor and try to buy some silver coins.  What you will find is that you can't buy at today's spot price.  The spot price is meaningless.  At the moment I'm writing this, the spot for silver is $22.72.  $1 face value in silver contains 0.71 troy ounce, and a $100 bag of 90% "junk silver" coins contains $1643.55 at that spot price.  Ordinarily, the coins are offered at a small premium, a few percent, to cover the costs of weighing in the coins, bagging, tagging, and so on.  Today, if you can find any in stock, the cheapest I see on Apmex are $2174.50, almost a 33% markup.  In small quantities, they're getting $6.59 each for silver eagles vs. the usual $4.00 or so. 

Various commentators have been predicting that a great decoupling is coming when the spot price will mean almost nothing.  People who had the metal would sell it for their own price.  That seems to be the situation today.  Clearly, if those dealers thought the price was fair and wanted to sell at spot, they could and would.   That tells me they think this is a sudden sale and it won't stay that low.  Why sell it for $1644 if it's going to go for $2174 soon?  Hold on to it; but if someone wants to pay $2174 now, why not? 

At times like this, I ask myself if anything has suddenly gotten fundamentally better in the world economic situation.  If it has, I don't see it.  I could back up the truck and fill it up, if I could buy at the spot price.