Record setting silver coin salesRecord-Setting American Eagle Silver-Coin Sales Could Be Greater If Not For Rationing
20 January 2011, 3:57 p.m.
By Allen Sykora
Of Kitco News
https://www.kitco.com/
(Kitco News) - Sales of the U.S. Mint’sAmerican Eagle silver bullion coins since the start of the New Yearhave not only set a monthly record with a third of January still to go,but demand is so strong that dealers say they could be selling evenmore if not for limited allocations.
Some report that interest in silver coins appears to beoutpacing gold coins at the moment, with many favoring the grey metalas a more affordable investment.
The U.S. Mint’s Web site currently shows that 4,588,000one-ounce coins have been sold so far this month. This is higher thanthe previous monthly record of 4,260,000 set back in November, saidMint spokesman Michael White.
“It’s insane,” said Jim Hausman, president of The Gold Center,one of the authorized purchasers of Mint coins, which in turn makesthem available to the public. “I just can’t believe this demand justkeeps growing for Silver Eagles.”
Back in 1996, coin sales for the entire year bottomed at3,466,000 ounces, the Mint’s Web site shows. “And they do that now in20 days,” Hausman said.
David Morgan, independent precious-metals analyst withSilver-Investor.com, pointed out that the demand for silver coins hasskyrocketed in the last few years, in particular. “Silver Eagles havebecome kind of the premier silver investment,” he said.
Mint sales for 2010 are listed at a yearly record of 34,662,500ounces. This tally is more than triple the 9,887,000 sales from 2007,when precious-metals were already well into a decade-long bull market.
“Whatever comes in goes out the same day,” said Terry Hanlon,president Dillon Gage Metals Division, another Mint authorizedpurchaser. “We’re moving massive quantities, with noticeably biggerinterest in silver than gold right now.”
Some of the interest in silver is because one ounce, around$27.70 as of mid-afternoon Thursday, is more affordable for manyinvestors than one ounce of gold around $1,350. “In general, people arebecoming more comfortable owning silver and recognizing silver as agood alternative to buying gold,” Hanlon said.
American Eagle gold bullion coins so far in January have totaled75,500 ounces, which is down from 85,000 in the same month a year ago,according to the Mint Web site.
January naturally tends to be a strong month for silver-coinsales as the government starts minting coins for a new year, Morgan andHanlon said.
“There is always a big surge from not only investors but alsocollectors,” Morgan said. They then store coins “untouched” in“pristine condition” as they wait for silver prices to rise or for thecollector value of the coin to increase. This includes secondarydealers who obtain boxes of 500 coins.
“But this (current strong sales) goes way beyond the normal seasonal buying,” Hanlon continued.
Gold and silver both rose during 2010 on investment demand dueto factors such as sagging confidence in paper currencies, Europeansovereign-debt issues, worries that fiscal and monetary stimulusefforts will eventually lead to inflation, and geopolitical concernssuch as tensions on the Korean Peninsula. Silver has the added benefitof increased industrial use whenever the economy recovers.
Hausman said the allocation he has been able to obtain from theMint has been declining in recent weeks, adding that his fullallocation for this week was “snapped up in a heartbeat.” In “normalconditions,” he said, he can order whatever he needs, up to a fewhundred thousand. However, his most recent weekly allocation was135,000, in turn down from roughly 175,000 the week before, in turn downfrom approximately 260,000 the prior week.
“We have no idea next Monday morning whether we’ll be offered150,000 coins or 50,000 coins,” he said. “If it keeps dropping like itis, there will be a major shortage again and you’ll see the premiumsskyrocket.”
Dealers could be selling more 2011 coins if they were available,although it’s hard to quantify just how much since it also hinges onfactors such as whether other distributors are sold out.
“If you just took the Silver Eagles, we could probably beselling a minimum of 50% more than we are doing right now,” Hanlonsaid.
He also said his company also has been asking the world’s othermajor Mints for more silver than it can get. “I don’t know that thereis a real shortage of silver, but there certainly is a shortage offabricated silver,” he said.
As it is, his company’s coin and bar sales this month are doublewhat they were during the same period a year ago. “It would be an evenbigger number if we could get more coins and bars,” he added.
The U.S. Mint explained that the coin allocations are occurringbecause sales have been far greater than had been anticipated, meaningthe private-sector fabricators did not carry a large enough inventoryof the blanks, or planchets.
“Demand is just very high,” said the Mint’s White.
Hanlon said there has been limited supply from the secondarymarket to help meet general silver-coin demand. This is selling bythose who already own silver coins in order to capture profits. “Wehave seen way less of that than we hoped to or normally do,” he said.Instead, investors are opting to hang onto their coins.
Concluded Morgan: “I’m glad to see that the investing public iswaking up to the fact that silver is a very good investment. And, Istill think it is a better opportunity long term than gold is.”
By Allen Sykora of Kitco News; asykora@kitco.com