Submitted by Mark O’Byrne – GoldCore
Silver bullion coins are continuing to see rising premiums and delivery delays due to continuing very robust demand and a lack of supply of all silver bullion coins.
Premiums on silver eagles have been creeping up since mid-May (see chart below) and wholesale premiums have risen from 14% in May to over 25% this week. Silver eagles remain probably one of the best proxies for silver coin demand and also of investment and store of wealth demand for silver.
The shortage of silver coins is due to continuing robust demand and a lack of supply of silver bullion coins. It is primarily due to a lack of coin minting capacity and of actual coin blanks or planchets.
At the same time, it should be noted that premiums are not far above the level seen in 2013 when they went over 22%. Indeed, at the height of the financial crisis in late 2008, premiums on silver eagle coins surged over 70% (see chart below) due to sharp fall in the silver price after the Lehman collapse and the very high silver demand seen at the time.
The U.S. and Canadian Mints are rationing supply and wholesalers are waiting on allocations. For a second week in a row, the U.S Mint has reduced its weekly allocation of silver eagles – limiting sales of the silver coins since their return after temporarily selling out in July.
The allocation this week fell to 750,000 eagles, which is a large over 7% reduction at a time of high demand and delivery delays in the market. Last week’s allocation dropped by 19% to 809,500 coins from the prior week’s supply of 1 million coins. The opening week of September also saw a rationing of just 1 million coins.
These weekly inventories have been snapped up almost immediately. In the last two weeks, all available Eagles were bought in just two days.
|BULLION COIN & BAR PREMIUMS & AVAILABILITY – September 25, 2015|
|Gold Bars (1 oz – Perth Mint)||3.75%||In Stock|
|Gold Bars (1 oz)||4%||In Stock|
|Gold Bars (10 oz)||3.75%||Delivery – 1 to 5 Days|
|Gold Bars (1 kilo)||2.00%||Delivery – 1 to 5 Days|
|Gold Maples (1 oz)||4.25%||In Stock|
|Gold Eagles (1 oz)||5%||In Stock|
|Gold Krugerrands (1 oz)||4.25%||In Stock|
|Gold Philharmonics (1 oz)||5.00%||In Stock|
|Gold Buffalos (1 oz)||5.00%||Delivery – 1 to 2 Days|
|Gold Sovereigns (0.2354 oz)||8.50%||2015 In Stock|
|Gold Sovereigns (0.2354 oz – Pre 1933)||9.00%||Not available in volume|
|Silver Bars (100 oz Generic)||9.50%||Delivery – October 20|
|Silver Bars (100 oz LBMA – Asahi Refinery)||9%||Delivery – Nov 23|
|Silver Bars (1000 oz)||5.50%||Delivery – 1 to 10 Days|
|Silver Eagles (1 oz)||34%||4 Weeks|
|Silver Maples (1 oz)||26%||4 Weeks|
|Silver Kangaroo 2016 (1 oz) – Call to order||22%||Delivery – Oct 7|
American Silver Eagle sales at 34,304,500 for the year continue to run at a record pace, up nearly 15% through the same time last year. In 2014 when Silver Eagle sales ended at a record 44,006,000, the coins through Sept. 21, 2014 posted sales of 29,871,000.
Last year, the U.S. Mint also had to allocate sales but not during the traditionally quieter summer months.
Another sign of strong demand for silver is the very high demand for the Perth Mint’s new 2016 silver kangaroo coin. The Perth Mint was quickly cleared out of the initial allocations.
Wholesale demand was unprecedented, with current orders already far exceeding expectations. This demand has created a significant backlog, which the Perth Mint is working to resolve by making additional press time available for manufacturing.
They temporarily suspended taking orders to ensure the current backlog does not get any bigger. Moving forward they will allocate a specific number of silver coins to their authorised dealers – one of which is GoldCore.
The huge demand for the new coin is due to continuing robust demand for silver bullion in general but also due to the competitive pricing on the new coins. Also, the fact that the Kangaroos are a brand new coin and many dealers bought them knowing that bullion coin buyers and collectors will wish to acquire the new coins.
Retail bullion buyers remain the primary buyers of silver bullion today. There is chatter of some institutional buying of bullion coins and bars as well but we have yet to see evidence of this. The move higher in premiums is quite a big move up in a short period of time and is important to keep an eye on. It is interesting, that premiums began to move higher in mid May when there were suggestions that JP Morgan was buying silver in volume.
We expect the current situation to continue and possibly to deepen as silver remains undervalued.
Bullion buyers are looking at silver at near $15 per ounce, gold at over $1,150 per ounce and the gold silver ratio at 76 (1154/15.26) and they rightly see silver as good value relative to gold and indeed to stock, bond and property markets, many of which remain near all time record highs. Conversely silver is nearly 70% below its record nominal high in 2011 and 90% below its inflation adjusted high or real record high of $150 per ounce in 1980.
Mainstream retail “mom and pop” investors are not buying bullion as the lack of risk aversion has led to stocks and property again becoming the assets of choice of retail investors – as was the case in 1999 and 2007. We all know how that turned out.
The smart money is re-balancing and selling their recent outperforming assets and ‘winners’ such as stocks and buying gold and particularly silver bullion today in anticipation of higher prices.
Today’s Gold Prices: USD 1145.50, EUR 1027.63 and GBP 752.18 per ounce.
Yesterday’s Gold Prices: USD 1134.45, EUR 1012.31 and GBP 742.73 per ounce.
Gold in US Dollars – 1 Week
Gold rose over 2% yesterday or $22.80 to $1,152.90 per ounce yesterday while silver rose 34 cents or 2.3% to $15.13 per ounce. Gold also eked out further gains in euros, pounds and most major currencies.
In Singapore, gold bullion moved lower and remained weak in trading in London, remaining above the $1,140 per ounce level. Silver prices are another 0.5% lower to $15.16 today, while platinum is 0.8% lower
Gold is lower after yesterday’s 2.1% rally, which took it back above its 100-day simple moving average at $1,149 per ounce. Gold has not managed to close above that level since mid June.
Gold has had a nice move up in recent days and its 14 day relative strength index is up to 58.8. This is its most elevated in a month but it is still some way from overbought territory suggesting further gains may be due prior to a pullback.
Palladium is 1% higher again today and has surged 8% this week – its biggest weekly rise since March 2013. The move this week appears to be a short squeeze and may be the precursor for the long awaited move higher in gold and silver.
The fundamental backdrop for gold remains bullish as central banks continue to add to their gold allocations and the credibility of the Federal Reserve increasingly comes into question.
Janet Yellen’s ill health over night will not help increasing doubts about the Fed’s stewardship of U.S. monetary policy and of the U.S. economy itself.
The 69 year old faltered near the end of her presentation, pausing for a long stretch, stumbling over some words and coughing. Michael Ash, the chairman of UMass Amherst’s economics department, approached Yellen to ask if she was all right and offered to help her off stage as she concluded. The Fed blamed Ms. Yellen’s stumble on feeling dehydrated after a long day and long speech under bright light.
It sets the stage for the succession of Stanley Fischer, one of the most dovish central bankers in the world and one of the most radical proponents of uber ultra loose monetary policies. He is a strong proponent of money printing and further QE would be expected under his stewardship.
Indeed, his radical monetary policies go as far as to advocate that central banks digitally create money in order to buy stocks and support stock market indices. His likely accession to the Fed throne will be extremely bullish for gold.
Creditor nation central banks continue to add to their gold allocations. Russia,Kazakhstan and Belarus increased their gold reserves in August. Kazakhstan increased their reserves for a 35th consecutive month and Russia has been adding to their gold bullion reserves since 2007.
Kazakhstan purchased about 2.1 metric tons to take its reserves to about 210.2 tons last month, while Russia boosted holdings to 1,317.7 tons from 1,288.2 tons in July, data on the IMF’s website showed. Belarus expanded its reserves to 47.1 tons as Mexico cut them for a 14th month.
Russia, Kazakhstan and Belarus are buying gold along with China due to concerns about the value of the dollar and other fiat currencies.