Wednesday, January 11, 2012

Should Physical Silver Have It's Own Spot Price?

Silver had a great start in 2011, climbing the chart steadily until the great silver price "take-down" in early May. After flirting with $50 per ounce (high of $48.48), spot silver drifted in a lower range and hit a low of $26.87 around year-end. Officially, silver lost about 9% for the year (it's first loss in three years). If only there were two prices quoted for silver, one for the paper traders and the other for the physical market, we would see quite a different story.

The physical silver market is booming and don't let anyone tell you different. Total 2011 Silver Eagles were reported at 39,868,500 (most likely they topped 40,000,000 but weren't reported that way). Here are the totals for Silver Eagles beginning in 1986 (their first year)...

1986 5,393,005, 1987 11,442,335, 1988 5,004,646,
5,203,327, 1990 5,840,210, 1991 7,191,066,
5,540,068, 1993 6,763,762, 1994 4,227,319,
4,672,051, 1996 3,603,386, 1997 4,295,004,
4,847,549, 1999 7,408,640, 2000 9,239,132
2001 9,001,711, 2002 10,539,026, 2003 8,495,008,
8,882,754, 2005 8,891,025, 2006 10,676,522,
2007 9,028,036, 2008 20,583,000, 2009 30,459,000,
2010 34,764,500

On January 3, the first working day of 2012, the US Mint received orders for a whopping 3,197,000 Silver Eagles. That is about 8% of 2011's total figure. It should be noted that the Mint doesn't sell Silver Eagle coins directly to the public but rather through its network of authorized purchasers. So it isn't actual sales to the other coin dealers and investing public. But this huge number seems to indicate the Mint's authorized resellers expect strong demand.

I want to call your attention to this article "For the first time in history, Silver Eagle & Maple Leaf sales will surpass domestic silver production in the U.S. and Canada in 2011". Although it points out that silver production has fallen in both countries, the demand for Silver Eagles and Silver Maple Leafs is on the rise. This interesting article with multiple charts can be found here. Lest you fear you won't get your fair share, at the end of 2011 the U. S. Mint stated "it has enough American Eagle gold and silver bullion coins to meet demand and does not expect to allocate them in early 2012". This Reuters article can be read here.

That's it for now. Thanks for reading.