Gold

[airedale]

News

April 29, 2010
Why Are Silver Sales Soaring?

Jeff Clark, Senior Editor, Casey’s Gold & Resource Report

The U.S. Mint just reported another record, but this time it wasn’t for gold. The Mint sold more Silver Eagles in March and in the first quarter of the year than ever before. A total of 9,023,500 American Silver Eagles were purchased in Q110, the highest amount since the coin debuted in 1986.


While this is certainly bullish, there’s something potentially more potent developing in the background. Namely, how this matches up with U.S. silver production. Like gold, the U.S. Mint only manufactures Eagles from domestic production. And U.S. mine production for silver is about 40 million ounces. In other words, we just reached the point where virtually all U.S. silver production is going toward the manufacturing of Silver Eagles.
Yikes.
This is especially explosive when you consider that roughly 40 per cent of all silver is used for industrial applications, 30 per cent for jewelry, 20 per cent for photography and other uses, and only five per cent or so for coins and medals.
To be sure, mine production is not the only source of silver. In 2009, approximately 52.9 million ounces were recovered from various sources of scrap. Further, the U.S. imported a net of about 112.5 million ounces last year. (Dependence on foreign oil? How about dependence on foreign silver!) So it’s not like there’s a worry there won’t be enough silver to produce the Eagle you want next month.
Still, why so much buying? The silver price ended the first quarter up 15.5 per cent from its February 4th low – but it was basically flat for the quarter overall, up a measly 1.9 per cent. We tend to see buyers clamoring for product when the price takes off, so the jump in demand wasn’t due to screaming headlines about soaring prices.
I have a theory.
For some time, silver has been known as the “poor man’s gold.” Meaning, silver demand tends to increase when gold gets too “expensive.” The gold price has stubbornly stayed above US$1,000 for over six months now and has spent much of that time above US$1,100. You’d be lucky to pay less than US$1,200 right now for a one-ounce coin (after premiums), an amount most workers can’t pluck out of their back pocket. But Joe Sixpack just might grab a “twelve-pack” of silver.
What would perhaps lend evidence to my theory would be if gold sales were down in the face of these higher silver sales.
Sure enough, the U.S. Mint reported a decline in Gold Bullion sales of 20.8 per cent this past quarter as against the same quarter in 2009. Further, other world mints have seen sharp declines in Gold Bullion coin sales as well: the Austrian Mint reported an 80 per cent drop in sales for the first two months of the year and the Royal British Mint a 50 per cent decline in gold coin production for the first quarter.
What’s even more dramatic is the difference in the dollar value of the sales. Gold Eagle sales in the U.S. dropped US$10,263,500 from a year earlier – but silver sales increased by US$61,855,290. So, not only did silver sales make up the drop in gold sales, they exceeded them by $51,591,790.
Is the rush into “poor man’s gold” underway?
Why the answer to that question is significant is that a shift toward silver for this reason could signal we’re inching closer to the greater masses getting involved in the precious metals arena. And that – for those of us who’ve been invested for awhile now – would be music to the ears. Because when they start getting involved, the mania will be underway, and from that point forward, it’s game on.
I’m not saying the mania is starting, and I actually think we could see another sell-off before things take off for good. Gold could dip to US$1,000 and maybe even US$950, with silver going to the US$14 to US$15 range. But as clues like these begin to build up, we’ll know we’re getting closer. (And any drop to those ranges would clearly be a major buying opportunity.)
Everyone talks about gold, but a meaningful portion of one’s precious metals portfolio should be devoted to silver. The market is tiny, making the price potentially explosive. Remember that in the 1970s bull market gold advanced over 700 per cent, but silver soared over 1,400 per cent.
Don’t be a “poor man” by ignoring gold’s shiny cousin.
And while buying silver is a must, it’s the silver stocks that will truly soar in a mania.
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[Skol]

yep then oil went back up as producers where stopping exploration an demand increased prices went up an will continue to go up with inflation
The USD attached debt is only going one way how can any smart economist see the hugely increasing USD debt levels as a positive step longer term
If interest rates go back to some kind of sane level the US will be paying 1 trillion just in interest per year on the massive debt.

Oil is actually useful JB, unlike gold. I can't put gold in my petrol tank.

[Skol]

Conspiracy theory #3

Punters have lost faith in the exchanges because the POG is being manipulated downwards and is not the true value of gold, so the gold is going direct from the mines to the new owners.

Agricultural commodities are the one bright spot at the moment JB, bought some AAC recently. Book value A$2.44

[trackers]

not really sure myself.... it could be still in the mania phase or the bull trap - compare and make your own call....
I got out of my speculative gold longs quite quickly as trading gold is scary to my money management rules but still hold some silver for the long term but have an acceptance of high volatility (possible low prices) with that.
People I listen to (Global Gann Financial) remain bullish on gold but EWI (Prechter using Elliot Wave) spotted an ending diagonal triangle formation (bearish)

Whoops, good call - Thought we were in a discussion about the market in general for some reason, not gold! My bad

[Skol]

Conspiracy theory #4.

Fort Knox is empty.
Fort Knox's vault has a 22 ton steel door and is guarded by tanks, machine guns and hundreds of soldiers. This is to prevent the American public from finding out the vault is empty.

Who cares, in times of crisis it's the USD everyone goes for, not gold.

[Skol]

Conspiracy theory #5

There is a secret 'gold war' being fought between China and the USA. This the 3rd gold war being fought, the USA and its allies losing the first 2.
China has lost faith in the USD and is covertly acquiring trillions of dollars in physical gold which it will distribute one way or another to its populace.
This will then be the springboard for the goldbugs aspirations of 500-1000% return on their investment and US$10,000+ gold.

Yeah right!
As probably the biggest single investor in US Treasuries the Chinese Government will be creaming it as the USD appreciates against almost everything else.

[Skol]

Conspiracy theory #6

There are gold bars out there that are gold coated tungsten. Never verified or proven.

[Skol]

Conspiracy theory #7

I think this is my new favourite.
Haiti, which was subjected to a massive earthquake followed by torrential rain was hit United Nations (which rules the world) directed weather weaponry. This was because Haiti had discovered oil and gold and refused to hand it over to the multi-national corporations.

Yep, there's some loonies out there alright.

[stevo1]

Conspiracy Theory #101

Skol is a Fed Reserve mole cunningly posting on sharetrader to artifically increase the US peso to the detriment of gold and silver and to increase his airlines around the world using his own oil BwaaHaHa bwaHaHa!

[shasta]

Conspiracy Theory #101

Skol is a Fed Reserve mole cunningly posting on sharetrader to artifically increase the US peso to the detriment of gold and silver and to increase his airlines around the world using his own oil BwaaHaHa bwaHaHa!

Very amusing, just like Skol's conspiracies

I love a good conspiracy story

Anyone know if the US has stopped printing money yet?