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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Demand for US Mints Silver Eagles has ‘Returned with a Vengeance’

Commodities / Gold and Silver 2016 Oct 21, 2016 - 01:32 PM GMT

By: GoldCore

Commodities

As gold and silver step back slightly to sit and wait for US economic data to be released later today we bring you news of the US Mint Silver Eagle demand that has ‘Returned with a Vengeance’ as reported by silverseek.com.

Last month it seemed some of the heat had come out of the US Mint Silver market when sales had failed to maintain the momentum seen in the first five months of the year when between 5.9m and 4 million coins had been sold each month.


But things have dramatically picked up. Sales of US Mint Silver Eagles in the month of October have reached 2,925,000, 75% higher than those seen in September when just 1,675,000 were sold, reports silverseek.com. Buyers have already bought more than the previous record month of June when they snapped up some 2,837,000. Given October’s buying patterns commentators now expect sales to touch 4,000,000 in total should the pace continue.

Silver Eagle sales this year lift the tally higher than all but five of the years in the last thirty.

Last year sales reached 47 million coins, and have reached over 35.35 million coins this year. At present the buying pace is not keeping up with the record year that was 2015, but it isn’t far off. We’re 80% through the year and sales are 71% of last year’s total.

The sales figures for October-to-date are not that surprising when you consider the 1 million coins that were shifted in 24 hours by the US Mint earlier this month as the price fell to $17.65/oz. source

One reason for the drop off over the summer may have been the silver price.  Last July, the sub $15/oz price of silver saw investors snapping up coins from authorised dealers, this year summer saw highs of over $20/oz prompting some buyers to draw a profit.

silverseeker.com also draws our attention to Gold Eagles which are also set to outperform September’s sales numbers of 94,000 compared to 84,000 this month to-date. If buying remains at pace, sales could reach 130,000 coins making this month the highest of 2016 beating the January record of 124,000.

Unlike Silver Eagles, Gold Eagles’ buying rate has outpaced that seen in 2014 and 2015. In the months from January to September, 692,000 ounces were sold, an increase from 670,000 in 2015 and 379,000 in 2014.

All of this is clearly positive news given Thomson Reuters (and the FT’s trumpet fare) reported that net sales volumes to retail investors in the US of gold and silver coins and bars fell 40 to 50 per cent in the third quarter.

Coining the landscape

Silver and gold coin sales have been an interesting indicator of economic and political sentiment, over the years but none more so since the financial crisis in 2008.

Between 1987- 2000, fifteen SilverEagles were sold for every 1oz Gold Eagle.  This nearly doubled between 2001 and 2007 when the ratio climbed to 29:1.  But post financial crisis in 2008 things really exploded. In the first six years (2008- 2014) the ratio averaged 49:1.

In March this year the ratio hit a huge 141.59 times more Silver Eagles sold than gold, this has gradually fallen and in August this year the ratio fell to just 25.61 Silver Eagles to every one Gold Eagle sold.

Given that global production of silver has recently only been about 8.5 times more than gold, you can see where we are going in terms of shortages.

As Goldcore reported, in 2015 the US Mint, Royal Canadian Mint and Perth Mint each set new records for silver coin sales. This has seemingly continued this year against a backdrop of increased political uncertainty as earlier this year the Royal Mint reported a ‘surge’ in demand for coins following the Bank of England’s decision to cut base rates to 0.25% in August.

Future for silver

Longer term, we expect silver to return to and surpass the nominal silver bullion high of $50/oz seen in 1980 and very nearly again in April 2011.

The fundamentals for the silver price remain strong, as they do for gold which many expect to see bottom out at $1,250/oz.

Countries continue to import silver for industrial and technological purposes and whilst mining companies are bringing up more silver than ever before their capital is low, which implies future shortages in both the gold and silver supply chains.

At present the US dollar’s strength is driven by the weakness of other currencies, this will remain the case as any other factors (namely a rate hike) are unlikely take effect prior to the US election.

This will no doubt impact gold and silver which look out over a horizon that includes Brexit, a tricky French election, Italian referendum (both of which may rock the Euro) and a struggling banking sector including RBS and Deutsche Bank which are both down this year.

So whilst the market is distracted by a seemingly strong dollar, its important to remember that the situation that is keeping it strong will remain after an election which will no doubt take its toll on it. This will only be good for gold and silver, and in the meantime why not take advantage of cheaper silver coins.

Read Silverseek’s piece here.

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Gold Prices (LBMA AM)

21 Oct: USD 1,263.95, GBP 1,033.79 & EUR 1,160.69 per ounce
20 Oct: USD 1,269.20, GBP 1,034.65 & EUR 1,156.75 per ounce
19 Oct: USD 1,269.75, GBP 1,031.29 & EUR 1,154.97 per ounce
18 Oct: USD 1,261.65, GBP 1,031.15 & EUR 1,145.33 per ounce
17 Oct: USD 1,252.70, GBP 1,029.59 & EUR 1,139.58 per ounce
14 Oct: USD 1,256.15, GBP 1,028.79 & EUR 1,140.08 per ounce
13 Oct: USD 1,258.00, GBP 1,029.93 & EUR 1,141.76 per ounce

Silver Prices (LBMA)

21 Oct: USD 17.51, GBP 14.34 & EUR 16.08 per ounce
20 Oct: USD 17.60, GBP 14.35 & EUR 16.03 per ounce
19 Oct: USD 17.69, GBP 14.38 & EUR 16.11 per ounce
18 Oct: USD 17.65, GBP 14.37 & EUR 16.03 per ounce
17 Oct: USD 17.40, GBP 14.30 & EUR 15.83 per ounce
14 Oct: USD 17.47, GBP 14.28 & EUR 15.86 per ounce
13 Oct: USD 17.59, GBP 14.40 & EUR 15.95 per ounce

This update can be found on the GoldCore blog here.

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