Over the last two months, the physical precious metals market has experienced a strong wave of demand that it’s difficult to put into proper context. Our sales for the period are up nearly 500-700% over the previous period. The increase in volume has caused several unforeseen issues with mints, refiners, and suppliers. The demand surge along with the repercussions of Covid-19 have disrupted the entire supply chain in some way, shape, or form.
Hundreds of products on our website sold out overnight. The limited inventory which we were able to purchase had to be sold on a lengthy delay. Acquisition costs of all inventory dramatically increased in price as we efforted to keep products in the pipeline. Contributing to the chaos was a series of obstacles relating to getting existing purchase orders delivered in a timely manner.
In the eight years of our business, we have never encountered such unique logistical challenges. Any inventory needing transportation was delayed with shortages in armored vehicles available to transport it (note this was partially created by the Federal Reserve moving money between banks at an escalated clip). We ran into weight and valuation restrictions on both trucks and planes due to the unprecedented volume of metal we needed to move. Due to the decrease in international travel, there were fewer transcontinental flights bringing in gold bars from overseas where the majority of gold is refined and minted. Any planes which are available continue to quote 3-4x the normal cost to transport gold into the United States.
The SD Bullion distribution center, while following protocol on safe practices from the CDC and local governments, has been operating 24 hours a day during this unprecedented time to get customers’ orders shipped as quickly as possible. Due to this effort we have successfully reduced our processing times this week. We are very close to getting back to the standard processing times customers have come to expect with SD Bullion.
As we inch closer to normality at SD Bullion, we are unsure of what the immediate future holds in our industry. Some are of the opinion that this is merely the eye of the storm we find ourselves in. While retail demand has decreased slightly from its peak, it still remains well above normal. Furthermore, a number of major refiners, mining companies, and mints remain closed. Some international borders have yet to open.
We expect major bullion items will continue to come in and out of stock on our website for the foreseeable future. While we have been able to replenish some of our inventory, our acquisition costs remain substantially higher. The paper spot price continues to decouple from the physical spot price on deliverable exchanges possibly indicating a shortage of underlying metal. We personally believe the case for owning physical precious metals is as important now as it ever has been.
Select members of our SD Bullion executive team recently participated in a live broadcast to discuss this topic and more; it’s critical that we continue the dialogue with customers as news and conditions evolve.
