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Russia’s central bank announced that it plans to purchase silver as part of its reserves, a move that could significantly raise the price of silver in the coming months.
For at least 20 years until recently, the only precious metal that central banks held in their reserves was gold. Global central banks, in total, have been strong net buyers of physical gold for the past several years. As one example, Poland’s central bank gold reserves now exceed those held by Great Britain.
Recently, Russia’s central bank also started adding platinum and palladium to its reserves. This is sensible as that nation is among the world’s largest producers of both metals.
Two weeks ago, Russia’s Interfax reported that Russia’s Draft Federal Budget for the coming year includes plans for the State Fund, that nation’s central bank, to continue adding gold, platinum, and palladium reserves and, for the first time, also to acquire silver.
Last year, Russia was the world’s eighth-largest silver producer, at 38.5 million ounces. It is far less important to Russia’s economy than the value of its gold, platinum, and palladium industries. In that sense, it might not make sense for Russia’s central bank to acquire silver.
However, this could be a shrewd move. On April 29, 2011, the COMEX closing prices for gold, silver, and palladium were $1,556.50, $48.59, and less than $800. The prices of gold and palladium have far outperformed that of silver since then, meaning that today’s silver price could prove to be a real bargain.
Silver has also seen a dramatic increase in demand in recent years for industrial applications such as photovoltaic, antibacterial, and electrical conductivity purposes. As a result, new and recycled silver supplies have fallen far short of meeting physical demand. The Silver Institute reports and forecasts that from 2022 through 2024, global supplies of 3.030 billion ounces of silver will fall short of meeting demand by a combined 663 million ounces.
In decades past, the US government and the central banks in India and Mexico held silver as part of their reserves. Thus, the concept of Russia’s central bank acquiring silver as part of its reserves is not new. But it could be spectacularly profitable for the Russian government.
If this happens, don’t be surprised if the price of silver jumps at least fifty percent within the next 24 months.
Last week’s numismatic trivia question.
Last week, I asked— Including the United States dollar, how many different dollars are used around the world as current circulating currencies? Answer: There are currently 24 different circulating dollars. They are from Australia, Bahamas, Barbados, Belize, Bermuda, Brunei, Canada, Cayman Islands, East Caribbean, Fiji, Guyana, Hong Kong, Jamaica, Kiribati, Liberia, Namibia, New Zealand, Singapore, Solomon Islands, Surinam, Taiwan, Trinidad & Tobago, Tuvalu, and the United States.
The East Caribbean Dollar is legal tender in Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines. The Australian dollar is also legal tender in Kiribati, Nauru, and Tuvalu. The US dollar is current legal tender or used as spending money in Bonaire, British Indian Ocean Territory, British Virgin Islands, East Timor (also known as Timor-Leste), Ecuador, El Salvador, Marshall Islands, Federated States of Micronesia, Palau, Saba, Sint Eustatius, and Turks and Caicos Islands.
This week’s trivia question
Here is this week’s question. Why did “paper money” issued by Colorado private mint Clark, Gruber & Co. during the Civil War change hands for as much at 104% of its stated face value? Come back next week for the answer.
Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He also received the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, the 2017 Exemplary Service Award, the 2012 Harry Forman National Dealer of the Year Award, and the 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild (including twice in 2020), the Professional Numismatists Guild, the Industry Council for Tangible Assets, and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at www.libertycoinservice.com. Some of his radio commentaries, "Things You ‘Know’ That Just Aren’t So,” and “Important News You Need To Know,” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio archives posted at www.1320wils.com).
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