July 5, 2022

Why The Long Term Price of Silver Is Guaranteed To Rise

By: GE Christenson

Walking-Liberty-HalfBegin the analysis in 1971 when Nixon dropped the link between the dollar and gold. A pack of Marlboros cost (depending on local taxes) about $0.39. We paid about $0.36 for a gallon of gasoline. The DOW Index was about 850. Silver was priced at about $1.39.

Times have changed! Read Part 1 of Silver – Keep It Simple!

Today we have more currency in circulation, far more debt, and much higher prices – what does it mean?

Examine Graph 1. The prices for retail cigarettes, crude oil, national debt, silver, and the true money supply (TMS) (see notes at end) are shown on a log scale graph with all prices normalized to start at 1.0 in 1971.

Click on image to enlarge.
  • National debt (green line) has increased rapidly since 1971 and even more rapidly, on average, than the other items. (National debt has increased over 12% per year for the last five years.)
  • Silver (black line) and crude oil (red line) prices have been erratic with peaks in the early 1980s, troughs in the late 1990s, and substantial rises since 2001.
  • Cigarettes and TMS have increased steadily since 1971.
  • TMS (also M2, M3, etc.), debt, and most commodity prices have increased exponentially since 1971. Because the dollar was not backed by gold, dollar creation, total debt, and prices increased rapidly.
  • Not shown are some prices that increased more rapidly (medical costs and college tuition) and some that increased more slowly (postage and bread).

Graph 2 shows annual silver and crude prices smoothed with a centered five period moving average. This removes much of the “noise” in the price data and shows longer term trends better. Note that the price of silver actually reached about $50 per ounce in early 1980, but the average daily price in 1980 was only $16.39; the smoothed daily average was about $11.

Click on image to enlarge.

Statistical Correlations

  • Silver prices in dollars (annual average of daily price) correlated with crude prices in dollars (annual average of daily price) at 0.83 – a good correlation. Both are commodities, both are affected by politics, and both are sensitive to money supply, actual inflation, and inflationary expectations.
  • TMS correlated with national debt at 0.99 – a tight correlation. When budget deficits increase the national debt, the money supply expands accordingly.
  • Silver prices (annual average shown) correlated with national debt at 0.67 and with TMS at 0.58. The smoothed silver price correlation to national debt was 0.76 over 40 years and much higher over the past 13 years.
  • Silver prices (smoothed) correlated with crude prices (smoothed) at 0.93 – an excellent correlation.

So What?

  • National debt correlates tightly with TMS. Smoothed silver prices correlate well with both national debt and TMS. We may be apprehensive about future silver prices, but we can be 99.99% certain about the inevitable increase in national debt. Based on the 40 year correlation between silver and national debt, silver prices will continue to rise.
  • Both crude oil and silver are commodities that experience large price volatility. On average, they go up and down together; and, over a 40 year history, their prices have clearly moved substantially higher. I see many reasons to expect both to move higher in the long term.
  • Crude oil is the most important commodity in the world. Its per capita use, on average, is rising and the world’s population is increasing, so demand will remain strong, unless the world suffers a massive financial and economic collapse. Further, the easily available oil has been taken so there is little chance that inexpensive supply will increase. More demand coupled with flat or declining supply requires higher future prices. Higher crude oil prices strongly suggest higher silver prices.
  • Central banks are “printing money” in their desperate attempt to fight deflation, levitate asset prices, bailout banks and countries, and encourage inflation. This guarantees further increases in national debt and TMS and price increases for most commodities including crude oil, cigarettes, and silver.

Price of Silver as a Projection Based on Other Variables

We can construct a calculated price for silver based on three variables – national debt, TMS, and the price of crude oil. Examine Graph 3 of smoothed silver prices and the calculated price of silver based on those three variables. Note that the correlation is 0.86 – quite good. The silver price has both a monetary component (national debt and TMS) and a commodity component (crude oil). Together they produce a simple but effective projection for the smoothed average price of silver over the past 42 years.

Click on image to enlarge.

For the Future

Assume national debt increases 12% per year for the next five years like it has for the past five years. Assume TMS and crude continue their past five year growth rates (11% and 8%). The estimated price for the smoothed average price of silver is about $55 in 2016. The peak price on a spike higher could easily be triple the smoothed price. Look for $100 silver in 2015 – 2017 unless a deflationary collapse occurs – to the detriment of everyone including banks, politicians, and national governments.

Conclusion

Debt, money supply, and the prices for most commodities have exponentially increased over the past 42 years. Prices for crude oil and silver have substantially increased but inconsistently. I can be certain of death and taxes, and I feel confident that the national debt and prices for crude oil, cigarettes, silver, and most other consumer items will drastically increase in the next few years – under circumstances similar to the past 40 years. A hyperinflationary increase is also possible, in which case, all commodity prices will be unbelievably higher. Assuming no deflationary collapse, expect $100 silver relatively soon – perhaps in 2016. Read Past & Future Speculative Bubbles – What They Indicate for Gold and Silver!

GE Christenson
aka Deviant Investor

Silver Bullion Coin Sales Heading for Record Highs In 2013

Sales of the American Eagle silver bullion coins soared in March, continuing a trend of record breaking sales that has been in force for the past five years.

american-silver-eaglePrior to the financial crisis, sales of the one ounce American silver eagles averaged about 10 million coins per year.  The near collapse of the financial system in 2008 raised profound questions about the integrity of the financial system and the rush to precious metals was on.  Since 2008, annual sales of the American Eagle silver bullion coins have soared with average annual sales of over 31 million coins.

According to the U.S. Mint, sales of the American Eagle silver bullion coins totaled 3,356,500 ounces in March, up 32% from comparable sales of 2,542,000 ounces during March 2012.   Total sales of 14,223,000 ounces through March 31, 2013 soared by 40.3% over the comparable prior year period.

The previous record year for silver bullion coins was in 2011 when 39,868,500 coins were sold. The 2011 record may wind up looking like a low number compared to projected total sales for 2013.  Based on sales for the first three months of the year, annualized sales for 2013 could hit a record shattering 57 million ounces although even this estimate may be too low.  As the slow motion collapse of the European banking system speeds up, the looming specter of  huge losses by bank depositors could create a total loss of confidence in paper money and ignite a panic move into gold and silver.

The U.S. Mint has vastly underestimated demand for the American Eagle silver bullion coins and was recently forced to suspend sales twice as physical demand for silver soared (see U.S. Mint Sold Out).

Since 2000, investors have purchased almost a quarter billion ounces of silver bullion coins from the U.S. Mint, worth almost $7 billion based on the current price of silver.

American Silver Eagle Bullion Coins

YEAR

OUNCES SOLD

2000

                 9,133,000

2001

                 8,827,500

2002

               10,475,500

2003

                 9,153,500

2004

                 9,617,000

2005

                 8,405,000

2006

               10,021,000

2007

                 9,887,000

2008

               19,583,500

2009

               28,766,500

2010

               34,662,500

2011

               39,868,500

2012

33,742,500

2013

14,223,000

TOTAL

            246,366,000

Total sales for 2013 are through March 31, 2013.

COMEX Price Manipulation Forces Silver Price Down Despite Demand Increase

By: Mike McGill of Liberty Gold and Silver

Let’s begin with a definition. Investopedia.com defines the Law of Supply and Demand as follows:

The effect that the availability of a particular product and the desire (or demand) for that product has on price. Generally, if there is a low supply and a high demand, the price will be high. In contrast, the greater the supply and the lower the demand, the lower the price will be.

A solid definition, agreed? The Law of Supply and Demand should be the core premise of all economic studies as it has proved itself to be historically true.

How can we explain what has happened recently with the price of silver? In about three months, silver has declined from its late-November price of about $34 per ounce to its current price of about $28.50 as of today’s close (February 28, 2013). That’s a drop of about $5.50, which equates to a decline of over 16% in about 90 days. An economist with a solid grounding in the supply and demand theory, when viewing this decline, would have to conclude one of two things. Either the supply of silver had recently rapidly expanded or the demand for the precious metal had substantially decreased over the same period. These would appear to be the only logical explanations for this situation.

However, in the alternate universe of manipulated markets, insane derivatives, massive criminal fraud in both the banking and commodities markets, central bank machinations with currency handouts, and complete dereliction of duty on the part of regulatory bodies, it seems that the basic laws of economic price discovery no longer apply.

We need to ask ourselves how is it possible for the price of silver to undergo a substantial drop in price while simultaneously experiencing extremely tight supplies and burgeoning demand. In order to make a professional inquiry regarding this conundrum, we will dispel all the blather from the CNBC crowd that precious metals are in a bubble (they are NOT; both gold and silver remain firmly in a ten year upward channel of growth) and adopt an attitude like Dragnet’s Sergeant Friday, “Just the facts, ma’am, just the facts.”

Here are those facts:

In 2012, silver sales soared. The US Mint reported that the sale of American Silver Eagle bullion coins topped off at the third highest annual total in the twenty-seven year history of the series. Just past mid-December, the US Mint told its distributors that it had “sold all remaining inventories of 2012 American Eagle Bullion Coins,” adding that “no additional coins will be struck.” Until the sell-out, Silver Eagles were on pace to eclipse the second best annual sales in history. Even more amazing was the ratio of sales of Silver versus Gold Eagles – over fifty to one. In total dollars, the sale of Silver Eagles almost matched that of Gold Eagles – nearly 98%.

In January of this year, the sale of Silver Eagles was tremendous. So strong was the demand that the US Mint notified all its distributors shortly past mid-month that it had halted all new orders because it had run out of bullion supply. Despite two production shutdowns in January, the US Mint sold a record breaking 7.13 million Silver Eagles in ONLY TEN BUSINESS DAYS, shattering the previous monthly record set in 2011. Currently, the US Mint is on allocation rationing to its distributors – and we’re into this year only eight weeks!

Another instance of extreme silver shortage that has seen little to no reporting is the near total annihilation in the availability of “junk silver” (pre-1965 US silver coins). As of the beginning of this week, almost none could be found anywhere in the country except in extremely tiny amounts. Nearly every wholesaler and retailer in the nation was completely sold out. Waiting time for orders is at least a month with six weeks being quoted as a reliable delivery date.

Just a week ago, it was reported that Apple will be delaying its new 21.5 iMacs because of a shortage of silver in China. Silver is used extensively in iMacs. The production delays are already three months and counting.

On the demand side of this equation, wholesale premiums over the silver spot price have risen as much as six-fold in the past two months. Retail mark-ups for these coins have never been greater since the 1980 high when silver topped $50.

What is one to conclude with this incredible contradiction of drum-tight silver supply and record breaking demand weighed against a silver price decline of nearly 16% in the last three months? It is difficult not to conclude that there has been market intervention and/or price manipulation occurring.

As we’ve reported several times over the last few years, the spot price of precious metals is set almost entirely by the bid-ask trading action in the world’s commodity pits, principally the COMEX in New York and the London Bullion Market Association. These exchanges have been notorious for allowing massive naked short selling by large investment banks such as JPMorgan Chase and Goldman Sachs without these firms having to post either the normally required margin deposits or having adequate silver on deposit with these exchanges to satisfy delivery requirements for those traders who might wish to take physical delivery of the silver upon contract expiration. Both of these activities are violations of the rules of the futures exchanges involved as well as federal requirements that are supposed to be enforced in the US by the Commodities Futures Trading Commission (CFTC). The CFTC itself has been repeatedly accused by the Gold Anti-Trust Action Committee (GATA) and many others of being derelict, if not outright complicit, in allowing these trading violations to continue. Link is here.

What we’re seeing is a big disconnect between silver’s paper price and its actual physical availability. It is not inconceivable that what is occurring is similar to what happened to markets in the old Soviet Union. The communist ruled markets quoted cheap prices for products that were chronically in short supply. The real market, the “black market,” was where you could purchase real goods with fair price discovery. When this dichotomy completely broke down, so did the Soviet Union. It is not difficult to foresee that a breakdown and growing distrust of the paper silver markets could well cause a price explosion in physical silver.

We have been warning for years that paper markets in general and precious metals markets specifically, should be viewed with suspicion, as they all contain counter party risk, which cannot be honored. The only sure way to fully protect oneself is to own physical coins and bullion. Do it today while the “paper price” is still low.

Gold and Silver Bullion Coin Sales Soar In February

Sales of both the American Eagle gold and silver bullion coins soared in February compared to the previous year.

According to the U.S. Mint, sales of the American Eagle gold bullion coin totaled 80,500 ounces in February, up 283% from comparable sales of 21,000 ounces during February 2012.  During January, the Mint sold 150,000 ounces of the gold bullion coins compared to 127,000 ounces during January 2012.  January gold bullion sales were the six largest on record and the most since July 2010 when the Mint sold 151,500 ounces.

Total 2013 sales of the American Eagle gold bullion coin through February are up 56% over the comparable period for last year.  Year to date, the U.S. Mint has sold 230,500 ounces of gold bullion coins compared to a total of 148,000 ounces during the first two months of 2012.

The American Eagle gold bullion coin is available in one ounce, one-half ounce, one quarter ounce and one-tenth ounce versions.   The vast majority of gold bullion coins are purchased as one ounce coins as can be seen from the February sales breakdown listed below.

FEB 2013 GOLD BULLION SALES
OUNCES # COINS
ONE 68,000 68,000
HALF 2,500 5,000
QUARTER 3,000 12,000
TENTH 7,000 70,000
80,500 155,000

Sales of the American Eagle silver bullion coin also remained robust after last month’s record shattering sales total.  During January, the U.S. Mint sold 7,498,000 silver bullion coins as public demand for physical silver coin soared.  The huge demand for the American Eagle silver coins forced the U.S. Mint to suspend sales twice as they sought to ramp up production to meet demand.  Ever since the financial crisis and the subsequent open ended money printing operations by the Federal Reserve, demand for physical silver has continued strong.   Prior to 2008, total annual sales of the silver bullion coins averaged only around 9.5 million coins.  During 2012, the U.S. Mint sold 33,742,500 silver bullion coins.

During February, the U.S. Mint reported that 3,368,500 American Eagle silver bullion coins were sold, an increase of 126% over sales of 1,490,000 ounces during February 2012.  Year to date sales of the silver bullion coins through February total 10,866,500, up by 43% over the comparable two month period during 2012 when 7,597,000 silver bullion coins were sold.

Long term investors are taking advantage of temporary price weakness in precious metals to add to positions (see APMEX Reports Sales Spike).   Virtually every major central bank in the world is now engaged in open ended money printing operations and blatant attempts to competitively devalue their currencies.  The public is not stupid and continued demand for physical gold and silver proves that gold and silver are becoming the default store of value.

Both the American Eagle gold and silver bullion coins are sold to the Mint’s network of authorized purchasers who buy the coins in bulk based on the market value of the precious metals and a markup by the Mint.  The public is not allowed to purchase bullion coins directly from the Mint but are allowed to buy numismatic versions of the coins.  The gold and silver bullion coins are sold by the authorized purchasers to the public, other bullion dealers and coin dealers.  The rationale for the Mint’s use of authorized purchasers is that this method makes the coins widely available to the public with reasonable transaction costs.

APMEX Reports Sales Spike on eBay Bullion Center

Last  Wednesday, with New York gold down over $40 per ounce, even long time gold bulls were advising caution before committing to further investment.  Some precious metals dealers reported a flood of panic selling by anxious investors who were unloading physical coin and bar.

With everyone fearful of lower prices, exactly who was buying all that gold and silver from panicked investors?

Michael Haynes, CEO of APMEX, one of the countries largest precious metals dealers, said “As gold and silver prices continue to drop, long-term investors immediately reacted to the market movement. Recognizing that the precious metals were on sale and at a discount relative to the expected future values, buyers of physical bullion increased purchasing at the APMEX Bullion Center on eBay.”

Michael Haynes explained further.

“This was the second largest selling day for the APMEX Bullion Center on eBay since inception about five months ago, beating the next highest selling day by more than 30%. As Gold and Silver prices fell, heavily influenced by the reaction of day traders to the minutes from the recent Federal Reserve Open Market Committee meeting, physical sales of both metals skyrocketed. Buyers of physical Gold and Silver have a moderate to long term view and concluded that with the price movements, the precious metals were on sale and at a discount relative to the expected future values. These investors in physical Gold and Silver apparently see the long term issues faced by the U.S. economy and seek some asset allocation into the non-correlated asset class of precious metals to protect and hedge their investments in paper assets like Stocks and Bonds.”

According to APMEX, the top sellers on the Bullion Center are the 1 oz Silver American Eagle, the 1 oz Gold American Eagle, the 5 gram Statue of Liberty Credit Suisse Gold Bar and the 100 oz Royal Canadian Mint Silver Bar.

Every bull market has corrections which offer long term investors the opportunity to add to positions at bargain prices.  The high volume of gold and silver purchases on the eBay Bullion Center indicates that mainstream buyers remain committed to precious metals as a method of wealth preservation.

Expect $200 Silver As The Shift To Real Assets Accelerates

By: Deviant Investor

silver-coin-sm

    • Silver has no counter-party risk. It is not someone else’s liability. Silver Eagles or Canadian Silver Maple Leaf coins are recognized around the world and have intrinsic value everywhere. The same is NOT true for hundreds of paper currencies that have become worthless, usually because the government or central bank printed them to excess to pay the debts of governments that did not control spending.
    • The price of silver in US dollars since the year 2001 has been strongly correlated with the ever-increasing official national debt of the United States. Read $100 Silver! Yes, But When? I doubt that anyone believes the national debt will decrease or even remain constant over the next four years. We have every reason to believe that it will increase by well over $1,000,000,000,000 per year for many years. If the national debt is rapidly increasing and it correlates, on average, with the price of silver, then we can be reasonably certain that the HIGHLY VOLATILE price of silver will increase substantially over the next few years.

Click on image to enlarge.
    • Silver has been used as money (medium of exchange and a store of value) for over 3,000 years. In most cultures, silver has been used for daily transactions far more often than gold. I have read that the word for “money” is the same as the word for “silver” in many languages.
    • In the United States silver was used as money – coins – until the 1960s when inflation in the paper money supply caused the price of silver to rise sufficiently that silver coins were removed from circulation. Do you remember silver dollars? They contained approximately 0.77 ounces of silver. Currently the US Mint produces silver eagles which contain 1.0 ounce of silver – and cost approximately $35.

silver-coin

  • Argentina has devalued their currency several times and has dropped eight zeros off their unbacked paper money in the past 30 years. The United States has not dropped any zeros from dollars, but it took approximately one-half of one dollar to buy an ounce of silver 100 years ago, while it takes over 30 in today’s reduced value dollars. It took about 20 dollars to buy an ounce of gold 100 years ago and it takes over 1,600 dollars to buy that same ounce of gold today. There are many more dollars (paper and electronic) in circulation today compared to 100 years ago. Hence the prices, measured in declining value dollars, for silver, gold, wheat, crude oil, bread, coffee, and ammunition is MUCH larger.

 

  • Throughout history the prices of gold and silver have increased and decreased together, usually with gold costing 10 to 20 times as much as silver. A historical ratio of 15 or 16 is often quoted and that places the current ratio, which is in excess of 50, as relatively high. Since Nixon “closed the gold window” on August 15, 1971 and allowed the dollar to become an unbacked paper currency that could be created in nearly unlimited quantities, the gold to silver ratio has ranged from a high of approximately 100 to a low of approximately 17. There is room for silver prices to explode higher, narrowing the ratio to perhaps 20 to 1. When gold reaches $3,500 (Jim Sinclair) and subsequently much higher in the next few years, and assuming the ratio drops to approximately 20 to 1, the price of silver could approach $200 per ounce, on its way to a much higher number, depending on the extent of the QE-Infinity “money printing,” panic, hyperinflation, and investor demand.

 

  • If you think a silver price of $200 per ounce is outrageous, I suspect you would find near universal agreement among most Americans. But is a national debt in excess of $16,000,000,000,000 less outrageous? If unfunded liabilities are included the “fiscal gap” is, depending on who is calculating it, approximately $100,000,000,000,000 to $220,000,000,000,000. For perspective, that places the unfunded liabilities of the US government at approximately $700,000 per person in the United States. Is $700,000 unfunded liability (debt) per man, woman, and child more believable than a price for silver of $200?

It seems likely that the populace will eventually realize that:

  • Government spending is out of control and will not be voluntarily reduced.
  • “Printing money” or debt monetization (QE) is necessary and inevitable in order to continue funding the excess spending of the US government. More money in circulation means a declining purchasing power for the dollar. The decline is likely to accelerate at some time in the future.
  • The real value of our savings and retirement diminishes as the dollar declines in value.
  • People will panic and shift into real assets to preserve their purchasing power. (There is no fever like gold fever!)
  • That panic will cause gold, silver, and many other real assets to drastically increase in price, as measured in devalued dollars.
  • It is better to be early than late if a panic-moment is about to arrive.
  • Silver is less expensive per ounce than gold and more available for purchase than gold, particularly for middle-class westerners. An investment into silver is likely to appreciate more than a similar investment in gold.

What Do You Believe?

  • Do you believe that excessive spending and debt will be reduced?
  • Do you believe that the decline in purchasing power of the dollar over the last 100 years will suddenly
  • Do you believe that congressional promises for Social Security, Medicare, Medicaid, and government pensions will be broken?
  • Do you believe the Federal Reserve will continue to print the money to pay for those promises?
  • Do you believe your savings and retirement are totally safe in paper investments denominated in dollars?
  • Do you believe, as history indicates, that paper money eventually devalues to zero while gold and silver retain their value?
  • Do you believe that the world will suddenly stop using silver, instead of finding new uses for it every year?
  • Would you rather trust silver coins in a safe place or paper money and political promises?
    Most people will do nothing to protect their financial future. Will you?
    GE Christenson
    aka Deviant Investor

American Eagle Gold Bullion Coin Sales Soar In January To Multi-Year High

Sales of the American Eagle gold bullion coin soared during the first month of the year.  According to the US Mint, gold bullion coin sales totaled 150,000 ounces, up 97.4% from December 2012 when 76,000 ounces were sold.  Sales for the month were up 18.1% from comparable sales of 127,000 ounces a year ago during January 2012.

There has been a surge in demand for both gold and silver bullion coins during the first month of 2013.  Sales of the American Silver Eagle bullion coins hit an all time record high during January as public demand for physical silver soared.  The U.S. Mint has been forced to suspend sales of the silver bullion coins twice since last December since their entire stock was sold out.  In addition, opening day sales for the 2013 American Silver Eagle bullion coins were the largest on record with total sales of 3,937,000 coins.  To put this huge sales figure into perspective, prior to 2008, total annual sales of the silver bullion coins was only about 9.5 million coins.

January sales of 150,000  ounces of American Eagle gold bullion coins was the sixth largest on record and represents a multi-year high in sales since July 2010 when 152,000 ounces were sold.  The previous record months were June 2010 with 151,500 ounces, December 2009 with 231,500 ounces, April 2009 with 157,500 ounces and December 2008 with 176,000 ounces.

The gold bullion coins are available in one ounce, one-half ounce, one quarter ounce and one-tenth ounce.  The total number of coins sold during January 2013 was 275,500 as shown below.

JAN 2013 GOLD BULLION SALES
OUNCES # COINS
ONE 124,500 124,500
HALF 8,500 17,000
QUARTER 6,000 24,000
TENTH 11,000 110,000
150,000 275,500

The American Eagle gold bullion coins are not sold directly to the public but rather to the Mint’s network of authorized purchasers who buy the coins in bulk based upon the market value of gold and a Mint markup.  The authorized purchasers then resell the coins to the public, coin dealers and other bullion dealers.  The U.S. Mint utilizes this distribution channel in order to make the coins widely available to the public with reasonable transaction costs and premiums in line with other bullion programs.

American Silver Eagle Bullion Coin Sales Soar To All Time Record High

With two days remaining in the month of January, U.S. Mint sales of the American Silver Eagle bullion coins have already established an all time record high.   The latest numbers from the Mint show total sales of 7,420,000 silver bullion coins as January 29, 2013.  Total sales during January 2012 amounted to 6,107,000 coins.  During January 2011 (the previous monthly record high for silver bullion coin sales) the Mint sold 6,422,000 coins.

The public demand for silver seems insatiable.  To put the unprecedented demand for silver into perspective, prior to the financial crisis of  2008, total yearly sales of the silver bullion coin averaged only about 9.5 million coins per year.  With the Federal Reserve furiously printing money to keep the financial system glued together, investor demand for both physical silver and gold bullion is likely to increase dramatically.

The US Mint has been unable to keep up with the demand for American Silver Eagles for the past two months (see U.S. Mint Sold Out).  During December, unexpectedly strong demand resulted in the suspension of silver bullion coin sales during mid December after the entire stock of 2012 coins was sold out.  At the time the Mint announced that the 2013 American Silver Eagles would be available on January 7, 2013.

Opening day sales on January 7th for the 2013 American Silver Eagle bullion coins turned out to be the largest on record with sales of 3,937,000 coins.  Demand for silver bullion continued to climb and by January 17th, the Mint once again announced that sales of the silver bullion coins would be suspended until the last week of January.  When sales resumed this week, demand was again much higher than anticipated.  Due to record demand, the Mint previously announced that they may have to institute rationing of the coins.  Since the US Mint’s production schedule has been blown right out the window for two months running, it would not be surprising if rationing of the coins was implemented.

Sales of the American Eagle Gold bullion coins has also soared during the first month of the year.  January sales to date of 140,000 ounces of gold bullion coins is the highest monthly sales since June 2010 when the Mint sold 151,500 ounces.

Silver Eagle Demand Soars – U.S. Mint Sold Out

Demand for the United States Mint’s American Silver Eagle bullion coins has been off the charts since the beginning of the year.  After running out of the silver bullion coins last year, 2013 opening day sales of the Silver Eagles were the largest on record with sales of 3,937,000 coins.   First day sales of the silver coins amounted to an astonishing 12% of last year’s total sales of 33,742,500 coins.

Coin Update reports on the rush to Silver Eagles and the likelihood of product allocation once the U.S. Mint is able to catch up with demand.

The US Mint expects the temporary sell out of the 2013-dated coins to last until on or about the week of January 28, 2013. At that point, sales will be resumed under an allocation process. During previous periods of strong demand for gold and silver bullion coins, the Mint has used an allocation process to ration available supplies amongst their primary distributors.

Periodic suspensions and rationing of Silver Eagle bullion coins had become almost commonplace between the years of 2008 and 2010. This situation would led to the cancellation of collector versions of the coins in 2009 and a 2010 Congressional hearing which highlighted the inefficiencies of the Mint’s bullion coin programs. The Mint managed to work its way out of these problems by implementing process improvements at the West Point Mint, increasing the number of precious metals blank suppliers, and adding supplemental Silver Eagle production at the San Francisco Mint, while at the same time demand for silver bullion coins had lessened. For much of 2011 and 2012, the Mint had managed to keep up with demand for their bullion coins and had resumed the traditional numismatic offerings.

The past month seems to be a return to the times of old. The US Mint has not been able to keep up with higher levels of demand, and once again resorted to sales suspensions and rationing as they try to catch up.

Sales of the American Silver Eagle bullion coins has climbed steadily since 2007.  Although total sales for 2012 were below the prior year’s total, they might have hit record highs except for the fact that demand depleted the Mint’s supply of the coins in mid December.  Investors who have steadily accumulated the silver bullion coins are sitting on huge gains, with silver up by double digits for seven of the last ten years.

Investors have purchased almost a quarter billion Silver Eagles since 2000.  The total value of the beautiful one ounce coins are now worth over $7 billion dollars at current market prices.

Late Note:

The premium on the Silver Eagles has increased dramatically after the U.S. Mint announced that it was sold out. Yesterday, one of the dealers I purchase bullion coins from was pricing the 2013 Silver Eagles as low as $2.69 over spot – today the price is $3.99 over spot – a huge increase of 48%.

American Silver Eagle Bullion Coin Sales For 2012 Tops 33 Million Ounces – Mint Runs Out Of Coins

According to the U.S. Mint, total sales of the American Silver Eagle bullion coins for December 2012 totaled only 1,635,000 ounces, down by 18.6% from 2,009,000 coins sold during December 2011.  The lowest monthly sales for the year occurred in February when 1,490,000 Silver Eagle Bullion coins were sold.  The highest monthly sales of the Silver Eagles occurred in January when 6,107,000 coins were sold.

Demand for the Silver Eagle bullion coins has been robust this year and the low sales for December do not reflect reduced demand but rather reduced U.S. Mint production.   As reported by Coin Update, the Mint reported in mid December that all Silver Eagle bullion coins had sold out and no additional coins would be struck during 2012.  The Mint announced that the 2013 Silver Eagle bullion coins should be available to authorized purchasers on January 7, 2013.

As with other bullion programs, the US Mint does not sell Silver Eagle bullion coins directly to the public, but distributes them through a network of authorized purchasers. The primary distributors are able to purchase the coins in bulk quantities at a price based on the market price of silver plus a fixed mark up. The coins are then resold to other bullion dealers, coin dealers, and the public.

The US Mint originally began accepting orders for the 2012 Silver Eagles from authorized purchasers on January 3, 2012. After a strong January, monthly sales trailed the levels of the prior year until October when demand started to move higher. In November, bullion sales continued their renewed strength, with sales of American Gold and Silver Eagles more than doubling the figures from the year ago period.

The strong sales in November caused the United States Mint to adjust their production plans for one ounce and one-tenth ounce American Gold Eagle bullion coins in order to avoid selling out prior to the end of the year. Apparently, the Mint did not adjust production plans for American Silver Eagle bullion coins.

The sales figures for December would likely have exceeded 3 million ounces if the Mint had produced enough silver bullion coins to meet demand.  Nonetheless, total sales of the Silver Eagle bullion coins for 2012 were the third highest on record with a total of 33,742,500 coins sold.  All time record sales of the Silver Eagle coins occurred during 2011 when almost 40 million coins were sold.

 

Demand for the Silver Eagles has soared since the financial crisis began in 2008 and recent announcements by the Federal Reserve and other central banks pledging unlimited money printing is certain to increase investors demand for safe haven precious metals.

Since 2000, investors have purchased an astonishing 232,143,000 American Silver Eagle one ounce coins worth over $7 billion at current market prices.