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Silver Shortage Coming

Silver Coins Sell Out

Written by Swagato Chakravorty
Posted March 18, 2013 at 7:25PM

As of March 11, 2012-W Uncirculated American Silver Eagle coins were not available for purchase anymore from the U.S. Mint.

Since August 2 of last year, when they had gone on sale, SilverCoinsToday reports that 202,504 were purchased. However, that figure is for individual purchases; the coins also form part of the 2012 Annual Uncirculated Dollar Coin Set, which is still available from the Mint.

That means there will likely be more sales for the Silver Eagle coins. Altogether, we’re looking at 220,559 and growing. Nevertheless, back in 2006, sales amounted to 466,573. As recently as 2011, 409,927 coins were sold. Clearly, there is a significant shortfall in sales of the one troy ounce silver coin.

Aside from this news from the Mint, consider that over the past month, silver prices have crashed by 10 percent. Sales of Silver Eagles had first been suspended around New Year’s, then resumed briefly, and now there’s another shortage. All this and Q1 isn’t even over.

2012 silver eagleUp north, Canada has begun rationing its own silver coin, the Maple Leaf. And meanwhile, the cost of silver continues to barrel downward. That paradox could be explained if investors were relying on, say, the continued availability of Chinese silver.

But the International Business Times reports that even that’s in question now. Despite a production increase of nearly 1200 percent, the Chinese are facing some trouble buying Chinese Silver Pandas. And now, it seems that demand is growing for some long-overlooked alternative coins, such as the 1.5 oz. Canadian Silver Polar Bear, which is not only larger, and manufactured from .9999 silver, but is also backed by the Canadian government and thus can be used in IRAs.

Overall, a picture seems to be emerging of a worldwide shortage in the supply of silver, though there are alternatives available for purchase at the moment.

More interesting news appears via Mineweb, which points out that gold bars and silver coins are selling like hot cakes. But China and India have the bulk of gold production, and China is hoarding that while India is smuggling even more. So where is it coming from?

Mineweb suggests part of the demand is perhaps being met by offloading from gold-backed ETFs, such as the SPDR Gold ETF (NYSE: GLD). However, some analysts are even questioning just how much physical gold these ETFs mess around with. Mineweb mentions Eric Sprott as one of these skeptics.

Sprott also wonders whether Central Banks in the Western world aren’t simply supplying physical gold to the markets without reporting it officially. The recent Fed audit in New York, for example, occurred riding on questions whether the Fed’s gold was as much as claimed.

Could gold bullion, then, be leased out by banks? That would indeed allow gold to still be reported on the books, while also satisfying the market’s seemingly insatiable demand. Of course, the real physical shortage of the metal would mean difficulties in actually restoring the bullion.

The ongoing flurry of stimulus actions being undertaken simultaneously by various central banks around the world is what makes the quantity of physical gold and silver that’s available highly relevant. It’s a question of ensuring market stability. Gold has, after all, served as a safe-haven of sorts on many occasions. Silver, apart from its broad range of industrial applications, is the next choice. A real shortage for either of these would send the market into seizures.

Gold is already, in the analyses of many, heading for a production shortage in the near future, and silver seems to be following closely behind. Given that central banks appear bent on stockpiling as much gold as they can, and as investors increasingly turn to silver due to its many applications, both of these precious metals could soon skyrocket as shortfalls become more apparent.


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