An interesting development for the supply/demand/physical side of things. Thanks to long-time reader Shill for drawing my attention to this.
The latest production figures from the U.S. Mint show a dramatic decline in the sale of both gold and silver bullion coins.
According to the U.S. Mint, sales of American Gold Eagle bullion coins in February 2012 totalled 21,000 ounces, a decrease of 83.5% from January sales of 127,000 ounces. Gold bullion coin sales declined by 77.3% from the prior year when a total of 92,500 ounces were sold in February 2011.
Sales of the American Gold Eagle bullion coins during February is the lowest since June 2008 when the Mint sold 15,500 ounces. During 2011, the U.S. Mint sold an average of 83,333 ounces of gold bullion coins each month and rang up annual sales of 1,000,000 ounces. During 2011, sales of the gold bullion coins declined for the third consecutive year.
Sales of the American Silver Eagle bullion coins also declined dramatically during February. The U.S. Mint reports total February sales of 1,490,000 silver bullion coins, down 76.6% compared to 6,107,000 during the previous month. Sales of the silver bullion coins during February declined by 54% from February 2011 sales of 3,240,000 ounces. Sales of the American Silver Eagle bullion coins were the lowest since November 2011 when the U.S. Mint sold 1,384,000 ounces.
Again, not to beat a dead horse, but NOTICE the chart above and the spike in silver bullion from the start of the financial crisis. NOTICE the exponential rise compared to prior years. It is extremely hard to not see the point I have been trying to make the last 5-6 months to anyone that would listen. The timing seems perfect. It all coincides with when the silver perma-bulls started pushing silver as the ‘next big thing’.
Sales are lower…not because of a shortage of silver on the supply side folks. Sales are lower because there is less demand.
The U.S. public has acquired over 200 million ounces of American Silver Eagle bullion coins since 2000 which are now valued at roughly $7.4 billion. By comparison, the iShares Silver Trust ETF (SLV) currently holds 313 million ounces of silver bullion valued at $11.7 billion.
Check out these numbers:
The following are the historical annual sales figures from the US Mint pertaining to sales of Silver Eagles.
The real important factor to consider looking beyond the numbers is that the Mint was able to obtain so much silver … as did the Canadian Mint and Perth Mint. Recently, Much quoted Eric Sprott was able to obtain a significant amount of silver for his Silver Trust.
So what gives? Is investment demand for silver bullion fading? A 76% decline in month over month figures surely paints that picture doesn’t it?
Another very very important factor for consideration is this … Silver Eagles, (and we can add the Canadian Maple, Aussie Kookaburra/Koala, Austrian Philharmonic, Mexican Libertad etc) are usually, actually pretty much NEVER bought to be melted for industrial use. They are bought to be stored. This is supply that is not permanently removed from the market. This is supply that WILL hit the market for sale when the owner of the metal feels that they either need to sell it, needs cash or if the price becomes attractive enough to want to sell it. This silver is not “consumed” silver. There are 200 Million ounces of American Silver Eagles out there, just sitting around. Consider that the Canadian Mint and the other Mints noted above and you have half a billion ounces of Silver Bullion coins that is available on the supply side ready to be fed to the market when the buyer desires.
Don’t shoot the messenger … the numbers are what they are.