Rumor: U.S. Mint Suspends Silver Eagle Sales

Source:

"This move will likely send premiums on Silver Eagles soaring."

This news was initially reported by Patriot News Radio, which you can listen to this video clip. While the information is true and current as displayed on the U.S. Mint page, it is not anything new. The Mint has not sold uncirculated American Eagle silver coins directly on their site for two years, but has continued minting “bullion coins” that are distributed to dealers. I called the U.S. Mint and they confirmed that they did not produce American Eagle Silver Uncirculated coins in the past two years and thus far in 2011 have no plans to re-start production. They also clarified that they are still producing proof Silver Eagle coins, but they have numismatic value and carry a much higher premium. While the hype and rumors are misleading, I think the takeaway is still the same—physical buying is overwhelming supply. Strong demand for Silver Eagles pushed sales to an all-time record of 6.4 million ounces during the month of January. This number is 50% higher than any prior month in the U.S. Mint’s 26 years of published sales history. The latest data also shows that February sales set another all-time record for that particular month and the 7th highest monthly sales ever.

Silver Eagles


But the truly significant point, as discussed in the last edition of the Gold Stock Bull newsletter, is that those 6.4 million coins represent nearly 20% of total domestic mine supply. The U.S. mines only about 40 million ounces a year. If sales continue at this pace, 100% of all silver ever mined will be exhausted by summer on just this one product, which typically represents only 5% of total silver usage.

U.S. law requires that the Mint use domestic supply for gold coins and this is thought to also apply to silver, though some ambiguity remains. So either Congress will need to pass a new law to allow the American Silver Eagle to be struck from foreign-mined silver or it will run out of silver supply for minting. Yet here we are, just entering March and the Mint has already suspended sales citing supply issues:
Production of United States Mint American Eagle Silver Uncirculated Coins continues to be suspended temporarily because of unprecedented demand for American Eagle Silver Bullion Coins. Until recently, all available silver bullion blanks were being allocated to the American Eagle Silver Bullion Coin Program, as the United States Mint is required by Public Law 99-61 to produce these coins "in quantities sufficient to meet public demand. . ."

Although the demand for precious metal coins remains high, the increase in supply of planchets—coupled with a lower demand for bullion orders in August and September—allowed the United States Mint to meet public demand and shift some capacity to produce numismatic versions of the American Eagle 1 oz. Silver Proof Coin.

However, because of the continued demand for American Eagle Silver Bullion Coins, 2010-dated American Eagle Silver Uncirculated Coins will not be produced.

The United States Mint will resume production of American Eagle Silver Uncirculated Coins once sufficient inventories of silver bullion blanks can be acquired to meet market demand for all three American Eagle Silver Coin products.
This move by the Mint is likely to send premiums on Silver Eagles soaring, unless and until it is able to secure new supplies of silver blanks. But with supply shortages popping up across a number of large coin dealers and funds, it is not likely to happen anytime soon—this is especially true if the Mint is expecting to pay paper spot prices. Despite silver breaking out to 31-year highs, it still has much further to go. Silver has yet to reach its nominal high around $50 or inflation-adjusted high above $150. If you haven't secured physical silver in your possession, you might want to get on it while you still can.

Jason Hamlin
Gold Stock Bull

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