Supply Problems Worsen in Minted Silver / Commodities / Gold & Silver 2019
Salesof the Silver American Eagles are off to stronger start this year, and the U.S.Mint has once again been caught flat-footed. Dealers received the followingstatement from the Mint last Thursday:
This is to inform youthat we have temporarily sold out of our inventories of 2019-dated AmericanEagle Silver Bullion Coins. In addition, all remaining 2018-dated inventorieshave been sold too.
The West Point Mint isbusy producing additional 2019-dated American Eagle Silver Bullion Coins. Wehope to be able to re-launch the 2019-dated coins in a few weeks.
Premiumsfor the coins moved higher immediately following the announcement, and theycould move higher still if demand remains strong.
Total2018 sales of silverEagles slowed to the lowest level since 2007. The Mint wound up with some excess of2018 dated coins and actually required dealers to take a chunk of ‘18s witheach new order placed for 2019 coins.
Morethan six million 2019 coins have been sold so far, two million more than in thesame period last year. This is in addition to excess 2018 coins having beencleaned out since January 1st.
Thedemand was not fully anticipated, and sales are now suspended for a few weekswhile the poorly managed U.S. Mint plays catch up. When sales resume, dealersare expected to be on “allocation” – or limited as to the quantity of coinsthey may purchase.
Thisleaves the silver bullion market a bit vulnerable to a supply shock right now.The U.S. Mint suspension is not the only bottleneck currently.
Thetwo largest producers of silver rounds and bars have disappeared in recentyears. Elemetal was caught in 2016 with employees later convicted ofinternational money laundering via gold. Republic Metals filed for bankruptcylate last fall.
Asahi,the Japanese firm who purchased Johnson Matthey’s U.S. gold and silver refiningbusiness in 2015, agreed to purchase Republic’s Miami-based plant and equipment.Silver bullion production capacity could get a significant boost when Asahi isable to begin operations.
Asyet, however, there is no firm estimate as to when that will be.
Italso remains to be seen whether Asahi plans to produce the wide range ofproducts and designs formerly made by Republic. Asahi currently only produces 4 sizes of silver bars for retail investors; 1oz, 10 oz, 1 kilo and 100 oz.
Fortunately,the higher silver prices since the lows of last November have sparked a healthyamount of retail selling. So there is more product coming back to dealerinventories on the secondary market – helping to fill the gap.
Whilepremiums certainly rose for most silver products over the past few months, themove has not been excessive. There have been delivery delays for some bars androunds. These have dissipated a bit recently, but could reappear quickly if thehigher premiums and delays associated with Silver Eagles lead to more demandfor rounds and bars.
Nowwould be a difficult time for the silver market to accommodate a surge inbuying demand or a significant drop in supply from investors looking to sell.
By Clint Siegner
Clint Siegner is a Director at MoneyMetals Exchange,perhaps the nation's fastest-growing dealer of low-premium precious metalscoins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon,puts his experience in business management along with his passion for personalliberty, limited government, and honest money into the development of MoneyMetals' brand and reach. This includes writing extensively on the bullionmarkets and their intersection with policy and world affairs.
© 2019 Clint Siegner - All Rights Reserved
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