Recent downturns in gold prices and silver prices have spurred a dramatic increase in both old and new bullion buyers snapping up physical precious metals at perceived low valuations.
For many decades now, the US Mint American Silver Eagle coin has remained the #1 choice for most physical silver bullion buyers worldwide.
In terms of annual sales volumes and total US dollars sold versus other silver bullion government mint and private mint competitors, the 1 oz American Silver Eagle coin is still the most highly purchased form of silver bullion worldwide (find updated US Mint sales data here).
Not surprising, with this recent downturn in precious metal prices, available silver bullion inventories are beginning to sell out and backorder.
We foresaw and wrote about this shrinking silver bullion supply situation coming a weeks ago in SD Bullion’s new research blog.
Thus today, the following communication issued by the US Mint’s Branch Chief was not surprising to us:
Date: Wed, 5 Sep 2018
Subject: 2018 American Eagle Silver Bullion Coins Temporarily Sold Out
This is to inform you that due to recent increased demand, the United States Mint has temporarily sold out of its inventories of 2018 American Eagle Silver Bullion Coins.
All orders received prior to this communication shall be honored and settled according to pre-agreed upon value date arrangements.
The United States Mint is in the process of producing additional 2018 American Eagle Silver Bullion Coins. We will make these coins available for sale shortly.
Please let me know if you have any additional questions.
Jack A. Szczerban
Branch Chief, Bullion Directorate
United States Mint
Of course this latest US Mint sell out only pertains to Silver Eagle coins.
US Mint American Gold Eagle coin supplies still stand at reasonable, albeit recently lightened levels.
For seasoned bullion buyers, this latest sell out of US Mint 1 oz American Silver Eagle Coins is not a new phenomenon.
We have seen this happen in various years past, including periods of bullion product rationing, sell outs, etc.
What is different this time around is the low Silver Eagle coin volumes being sold by the US Mint month on month, compared to somewhat recent years of 2009 through 2016.
It appears like much of our industry, perhaps the US Mint has cut down on staffing, even silver planchet inventory levels, and other resources required to meet this latest spike in silver bullion product demand.
Typical to past US Mint silver sell outs and coin rationings, product and price premiums usually also increase in order to meet the silver bullion supply demand equilibrium. Smart bullion dealers are not going to sell out of their shrinking inventories without a reasonable profit to match.
You can see various 1 oz American Silver Eagle coin premium price over spot spikes in the following chart below.
The price premiums spike coincide with the fall 2008 fiasco where virtually any and all bullion dealers ran out of bullion inventories, the early 2013 allocation rationing, and the middle 2015 sell out and order shut down.
Historically price premium spikes for American Silver Eagles tend to flow into other silver bullion product premiums. In other words, if the price premiums for Silver Eagles pops higher, you can expect various price increases and sellouts in competing silver bullion products to also ensue.
US Mint American Eagle Bullion Program 2010 Amendment
Yet even most industry onlookers and bullion buyers do not know that a small change to US law was made in 2010. It allows the Secretary of the US Treasury by fiat, and not outright public demand per say, to alone determine what quantities of American Silver Eagle coin supplies are sufficient to meet ongoing demand.
Pre 2010 amendment and law change:
(e)Notwithstanding any other provision of law, the Secretary shall mint and issue, in quantities sufficient to meet public demand,
Post 2010 law change:
(e)Notwithstanding any other provision of law, the Secretary shall mint and issue, in qualities and quantities that the Secretary determines are sufficient to meet public demand,
We do not expect the recent sell out of Silver Eagle coins to the be the highest priority of Secretary of the Treasury at the moment.
Bullion buyers should expect further silver bullion supply constraints both currently and ahead, especially if silver spot prices dip into the $13 or $12 oz zone some respected technical analysts have been calling for weeks / months in advance.
The following US Mint Silver Eagle coin annual sales chart encompassed the entire history of the US Mint American Eagle Bullion Coin Program. As you can see, the 2008 global financial crisis took the program to another level entirely.
Even 10 years after the greatest financial crisis started, the worst since the 1929 depression, there are still both new and an already established base of silver bullion buyers who continue to aggressively buy silver bullion on spot price dips.
This recent US Mint sell out is just one example of that fact.
The following US Mint tour video was cut in 2014, but it’s still applicable to the way in which the American Silver Eagle coins are produced today. The only real difference is that the US Mint is currently selling less than ½ the volume it was then, yet still having issues meeting demand spikes in the short term.
US Mint American Silver Eagle Coin Tour (2014)
G47 Marketplace American Silver Eagles | ISDA ICO Vesting Account
More than likely the US Mint is currently dealing with a shortfall of silver planchets on hand.
The silver used in the program does not have to be mined in the USA as that law too was amended many years back. The US Mint does use silver coin planchet suppliers from Australia as well as domestic suppliers like the Sunshine Mint.
In terms of silver bullion on hand, don’t expect the Secretary of the US Treasury to have any available as they rely on private silver planchet suppliers and ‘just in time’ delivery for their program.
As most bullion buyers know, en masse the US government figuratively sold silver out in 1964.
The fact that the US government’s often clunky silver bullion coin program remains the largest in the world, illustrates just how tiny the silver bullion industry remains in the grand scope of global finance and economic financialization.
Sneaky law amendments aside, it does not take much silver bullion demand to break the industry’s small supply demand equilibrium.
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