Is there a shortage of physical silver available, or have the official North American mints which sell silver coins just heavily under-estimated demand – or, as GATA suggests, is this another ploy to make sure demand for bullion is kept under control as a way of helping prevent a physical shortage developing on the commodity markets by putting a choke on demand and thus suppressing the metal price? While we tend to discount the latter as GATA just finding another factor to support its gold, and now silver, price suppression position, either (or both) the former reasons would seem to fit the current halt or suppression of silver coin sales by two of the world’s largest official mints.
As Mineweb readers will be aware, the U.S. Mint announced that it had suspended sales of its Silver Eagle coins around a week ago following enormous early-year demand (see Over 6 million Silver Eagle bullion coins sold already this year) and would only be able to start supplying authorised dealers again, on an allocation (rationing) basis, from next week. Now a report by precious metals analyst Jason Hamlin in goldstockbull.com notes that the Royal Canadian Mint announced yesterday that it too was having to ration its sales of its popular Silver Maple Leaf coins.
As the U.S. Mint article we published suggests, demand for silver bullion coins has been virtually unprecedented and, we assume, it had not sourced enough silver blanks to meet new demand for this extremely popular way for the individual investor to hold physical silver on its release of the 2013 coins. It now looks as though the Royal Canadian Mint too is seeing tremendous demand – perhaps as a knock-on effect of the U.S. Mint’s sales suspension – with dealers in North America looking to source coin supplies from Mints in which its customers have full confidence. This is not to say that there are not other mints around the world which are perfectly reliable sources of premium silver bullion coins, but the North American investor obviously prefers to stick with their local official coin suppliers and it the U.S. Mint can’t provide enough to meet demand then perhaps the Royal Canadian Mint coins will do as a substitute!
Although some U.S. Silver Eagles and Canadian Maple Leafs may remain available through dealers who had built up their own stocks ahead of the suspension and rationings, naturally the premiums charged on the coins will have been rising, particularly on Silver Eagles. These should reduce again should the allocation quotas be removed if demand falters, but there are also other indications that silver demand in particular is currently running at very high levels indeed. Reports suggest particularly strong demand from areas like India and China where precious metals ownership and giving is inbuilt into the psyche and where gold prices are perhaps running too high for many individuals to buy what they see as meaningful weights of metal. Silver ETF inflows too are also seen to be at exceedingly high levels.
Even so there is, as analyst Ted Butler makes a particular point of reiterating in his commentaries, a huge short position overhang in silver on COMEX, which appears to make the market particularly vulnerable to manipulation by major financial entities with seemingly bottomless pockets. Whether the burgeoning demand for physical silver can overwhelm the potential mega-losses of the short position holders with a significant price surge remains in doubt unless, and until, these mega short positions are unwound, which doesn’t look to be likely to happen any time soon.