Lower Metal Prices Creating Supply Issues

- September 01, 2015 -

Recent depressed prices for precious metals have led to the usual market response, a surge in physical demand for bullion coins and bars globally. This is not only confirmed by the volume of our local and national sales of late, it’s confirmed by sales figures and production issues at both government and private mints and refiners. There have been frequent shortages of many of the most popular silver and gold bullion items both locally and nationally over the past several weeks. Here at Jack Hunt Gold & Silver we have been out of virtually every product we offer at one point or another over the last month. Ultimately these production glitches, delivery issues and shortages have led to rising premiums on physical metal.

Meanwhile the U.S. Mint has reintroduced sales of its Silver Eagles, albeit on a strict allocation basis, following a three week suspension in July. On July 7 the U.S. Mint was forced to suspend sales having exhausted its inventory. That action suggests there was either a shortage in physical silver blanks or the physical silver bullion needed in the manufacture of the blanks. Since the lifting of the official suspension the mint has placed restrictions on distribution and Silver Eagle sales remain “allocated” to wholesalers like ourselves in order to maintain a minimal inventory at the mint.

The U.S. Mint is legally required to supply as much silver as needed to meet demand. Their inability to do so suggests demand remains very robust. July Silver Eagles sales are estimated at slightly over 4 million units compared to the June totals of 4.8 million coins. However, considering sales were suspended for three weeks in July the sale of 4 million Silver Eagles in less than ten days suggests extraordinary demand.

The U.S. Mint is also seeing strong demand for Gold Eagle coins, especially the one ounce coin. July sales of over 136,000 one ounce Gold Eagles easily doubled June sales and represents the highest monthly sales total since April 2013.

There has been an excessive amount of negative publicity directed towards precious metals over the past several months. This negativity is not supported by market activity in physical silver and gold where shortages are common despite falling prices.