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Posted By Blog Team

BULLION BARS AND COINS

Internet chatter about a looming shortage of silver should be treated with a healthy dose of skepticism.

As we’ve seen recently, this conversation tends to surface whenever one or more of the world’s major mints announce they’ve sold out of silver bullion coins because of a spike in demand. The hype causes some buyers to panic and pay too much.

There have been a number of temporary coin shortages since the global financial crisis. But the scarcity of coins available for sale on each occasion did not equate to a shortage of metal in world wholesale markets.

What they actually reflected were constraints in the production capacity of bullion mints around the world.

The ability to produce new coins quickly is necessarily held in check by the slowest process in the manufacturing chain – which in coining includes mining, refining, blanking, minting and distribution.

It’s like a baker with only one oven. It doesn’t matter how much flour or how many mixing machines he has, he’s only going to be able to produce so many loaves of bread per day, explains Bron Suchecki on our Research Blog.

One of the major bottlenecks in precious metal coins is the manufacture of blanks, also known as planchets. It’s a surprisingly complex procedure demanding amongst others things rolling, annealing and surface treatments, not to mention a lot of weighing and measuring because of the value of the metal involved.





Because it’s problematic for blank makers to speed up production, you’d probably ask why they don’t expand their factories? Or why mints don’t stockpile their blanks? Good questions that Bron answers comprehensively in Coin Shortage FAQs: telling a real shortage from a capacity shortage, which, as the title suggests, also provides crucial advice on how you can tell whether the next purported silver shortage could actually be a real one!



