-- Posted 24 August, 2011 | | Discuss This Article - Comments:

Behind the meteoric rise in silver prices might be the European banking crisis, or it may be Ben Bernanke’s next Federal Reserve meeting.  Though the headlines promote one very basic idea—a catalyst necessarily drives prices in the financial markets—transactions must take place for silver prices to move.  It now appears that the catalyst has a driving force: the American public.

Last week, online auction site eBay confirmed an emerging trend: Main Street wants access to gold and silver.  As the stock markets dipped through the early August days, Main Street reshuffled their portfolio at a rate not seen since the financial crisis.  Brokers recorded record transaction figures, thus giving lift to at least one segment of the financial industry still one step removed from retail banking.

Main Street running from stocks isn’t much of a story, but where they found themselves after their risk-flight may prove to set a new trend.  Main Street ran not to fixed-income, which provides the lowest yields in history, but to gold and silver.  And how did main street grab onto the rising commodity bull?  Individual investors were buying over the counter, on eBay.

Quadrupling Volumes

The largest gold and silver seller on eBay, Great Southern Coins, took the time to speak to a CNBC reporter, noting that his company had quadrupled in the 45 days leading up to the August 9^th sell off.  During the height of the European banking fears, when the ECB purchased Spanish and Italian bonds to stave off a collapse, Great Southern Coins registered sales statistics five to six times that of their normal selling trends.

Gold and silver are now mainstream.

The continuation of the trend appears certain.  Few are selling their gold and silver, and those who are buying are buying in bulk, hoping to offset some of their exposure to global growth in their stock portfolios with inexpensive one-ounce silver rounds.

Some sellers took profits as premiums soared.  Shortly after the S&P downgrade of US debt, the price of gold rounds selling on eBay surged to offer one of the frothiest premiums to spot prices.  Sellers in the gold and silver bullion category on the site increased 14% overnight, whereas buyers increased only 10% in number, thus confirming that there is far more buying interest than selling interest on a per person basis, even with gold hitting new record (nominal) highs.

This story gives lift ahead of what should be a very strong Asian market for silver in the autumn months. Recently, Indian gold markets, which open in the earliest trading sessions on Monday, have set the pace for prices for the remainder of the week.  Stronger volume orders and fresh demand from India, plus middle America, should buoy gold and silver as each enters into the strongest market with the highest prices ever.

Should the uncertainty continue to reign over the equity markets, silver looks like America’s go-to risk trade, if not a pure inflation play.  This should bring higher silver prices in the coming months, especially on top of Asia’s strong demand.

Dr. Jeffrey Lewis

www.silver-coin-investor.com