Ottawa coin stores have seen an explosive hunger for silver coins and bars since the beginning of 2021, leaving many struggling to keep up with demand.
A new wave of investors, combined with rising demand from individuals looking for a hedge against inflation and economic uncertainty, is colliding with a supply shortage that’s leading to a scarcity of the precious metal at shops in the National Capital Region.
At Alliance Gold & Banknote in Almonte, owner Sean Isaacs said the large volume of advance orders means he’s often selling out even before shipments reach his store.
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“I have 500 ounces of silver on order right now, and I anticipate that by the time it gets here in a week or two, I will have none left,” Isaacs said. “It’s an exciting time for silver.”
Isaacs said silver has “shined from outside of gold’s shadow” for the first time, which he attributes to its relatively low price. The spot price of an ounce of gold is more than $2,200, whereas the spot price for silver is around $33.
However, that hunger for silver has also resulted in Isaacs and his customers paying higher premiums. Even in previous periods of high demand, Isaacs could buy wholesale silver from suppliers at a 15 per cent markup. He is now purchasing ounces for 25 to 30 per cent above the spot price, which he said is “insane” and reflects the increased hunger for the precious metal.
Pandemic-driven demand
Dana Scott, the owner of Ashbrook Collectibles, said the “outrageous demand” for silver first began when the pandemic hit in March 2020. There was a sharp uptick in people phoning her store looking for silver bullion. Meanwhile, the supply of silver became “completely backed up” until July as minters closed production for several weeks before reopening at a reduced capacity.
Scott said the demand for silver at that time was steady, but subsequently skyrocketed in late 2020 and early 2021 amid a new round of public health restrictions aimed at slowing the spread of COVID-19.
At the same time, concerted efforts by a cohort of online investors to buy up assets shorted by institutional funds – most famously shares in GameStop, which owns several video game retail chains – also briefly affected the silver market.
Scott said the effort only pushed the price of silver up by a few dollars, but nevertheless was part of a much wider demographic shift in silver purchasers.
Whereas silver buyers are traditionally older individuals, she has started seeing more women and young people looking to “stack” silver.
“All the people (who are) still working and getting a regular salary can’t travel or go out for dinner, so they have all this extra money and they want to do something with it,” she said. “Metals used to be where a lot of people’s money would go when there was uncertainty in the market, as it was a safe haven and a hedge against inflation,” she said.
Industrial use
Consumers aren’t the only group that’s rushing to buy silver.
Silver is a crucial component in batteries, solar panels, engines, media storage devices and other products, and industrial demand for the precious metal is expected to rise nine per cent this year over 2020 levels.
When combined with rising consumer demand, it’s leading to supplies being squeezed at many shops.
Allana Rossi of Universal Coins said her store has seen a 400 per cent increase in demand for silver bullion, with customers frequently citing demand for a hedge against inflation.
But lately, her silver suppliers have been unable to obtain large quantities from the Royal Canadian Mint, and have instead looked to secondary suppliers to meet the demand.
“As of last month, they say it will take three weeks for them to get their supply, which is very unusual,” she said. “I’ve dealt with this company for 30 years, and this has never happened before.”
