Having recently pointed out the surging premiums for physical gold and silver relative to the 'paper' prices spewed forth by the mainstream media, it will likely come as no surprise that, as Reuters reports, "silver [coin] demand is absolutely through the roof," according to the Perth Mint. Confirming the demand side is the U.S. Mint sold 14.26 million ounces of American Eagle silver coins in the third quarter, the highest on records going back to 1986. Dealers and mints trace the supply squeeze to a burst of buying by mom-and-pop investors in the United States, who scrambled to scoop up coins they considered to be at bargain levels after spot silver prices in early July sank to six-year lows.
The global silver-coin market is in the grips of an unprecedented supply squeeze, forcing some mints to ration sales and step up overtime while sending U.S. buyers racing abroad to fulfill a sudden surge in demand.
The U.S. Mint began setting weekly sales quotas for its flagship American Eagle silver coins in July because it can't meet demand, and the Canadian mint followed suit after record monthly sales in July. In Australia, the Perth Mint sold a record of more than 2.5 million ounces of silver this month, nearly four times more than in August, and has begun rationing supply of a new line of coins this month, a mint official said.
"Silver [coin] demand is absolutely through the roof," said Neil Vance, wholesale manager at the Perth Mint. "There seems to be a bit of frenzy as people think there is a shortage of silver. But in fact it is a (crunch in) manufacturing capacity."
While demand has risen in response to the slump in spot prices to $14.33 an ounce in late July and its subsequent drop to fresh six-year lows below $14 an ounce in August, mint officials also said they were caught out by the sudden interest in coins. In July, the U.S. mint halted sales for almost three weeks after running out of "blanks", which are used to make coins.
The spread between silver and gold, a closely watched gauge for the precious metals markets, has risen to its highest in the third quarter since a brief silver frenzy following the financial crisis. Silver coins typically outsell gold anyway because they cost less, but the wide spread meant the silver price is 76 times cheaper than gold, making it even more appealing than usual to investors.
The U.S. Mint sold 14.26 million ounces of American Eagle silver coins in the third quarter, the highest on records going back to 1986. The Canadian mint has been limiting sales of its silver Maple Leaf coins since July after record monthly sales that month, an official told Reuters. Sales were at all-time highs in August and September.
With North American mints overwhelmed by orders, investors and collectors were forced to look overseas for increasingly scarce supplies, triggering a domino effect in Europe and Asia.
"We can only get a fraction of what we could sell," said Terry Hanlon, president of Dillon Gage, one of the world's biggest precious metals dealers, based in Addison, Texas.
Hanlon said he has seen premiums for coins, which are paid on top of the spot price for physical delivery, surge to about $4 to $5 per coin in wholesale deals, compared with $2.30 in June.
For now, however, coin dealers are riding the wave.
Bullion dealers around the globe who typically offer next-day delivery are now taking silver coin orders several weeks out.
"I don't expect things to get better until next year," said Gregor Gregersen, founder and director of retailer Silver Bullion based in Singapore.