The U.S. Mint sold out of 2013 American Eagle silver coins at a time when investors bought the most metal in five years through the biggest exchange-traded product.
The mint’s sales are “temporarily” suspended and will resume on or about the week of Jan. 28 when inventory is replenished, it said yesterday in an e-mailed statement. Holdings in the iShares Silver Trust jumped 571.6 metric tons on Jan. 16, an increase now valued at $584 million. Prices may rise as much as 27 percent to $40.25 an ounce this year, a Bloomberg survey of 49 analysts, traders and investors last month showed.
Global assets in silver ETPs climbed to a record valued at $20.1 billion as central banks from the U.S. to China pledged more steps to boost economic growth. The stimulus is raising demand for precious metals as a hedge against faster inflation and currency debasement. Strengthening economies may also benefit silver, because 53 percent of it is used in everything from televisions to batteries, the Silver Institute says.
“With silver, you can benefit from both sides: its safe- haven status and the fact that it’s also an industrial commodity,” said Frederique Dubrion, the Geneva-based president and chief investment officer of Blue Star Advisors SA, which manages metals and energy assets. “Given some positive leading indicators, especially in the U.S., investors would probably prefer turning to silver rather than to gold.”
Silver for immediate delivery climbed 4.8 percent to $31.795 in London this month, extending last year’s 9 percent advance. Only platinum among the main four precious metals has performed better so far in January, rising 9.9 percent. Silver reached a record $49.79 in April 2011.
Global ETP assets were at an all-time high of 19,686.55 tons yesterday, equal to about nine months of mine production, according to data compiled by Bloomberg and Barclays Plc. The increase in the iShares Silver Trust two days ago was the biggest since December 2007. BlackRock Inc. (BLK), the manager of the fund, confirmed the figures.
The U.S. Mint sold 6.01 million ounces of American Eagle silver coins so far this month. That’s the most since the 6.11 million ounces sold in January last year, its website shows. December’s total was 1.64 million ounces.
Sales have been suspended before. The mint stopped selling most American Eagle coins made from precious metals in November 2009 because of depleted inventories. It said in May 2011 that its San Francisco facility would start producing silver American Eagles to meet demand at “unprecedented high levels.” The Austrian Mint said in February 2011 it would stop making silver coins for general circulation after prices surged.
“It is easy to infer that some element of the fear trade may be at play,” Joni Teves, an analyst at UBS AG in London, wrote today in an e-mailed report. “We view the chunky sales of American Eagle coins more a function of seasonality than anything else. It is important to keep an eye on U.S. coin sales in the coming months to see if volumes remain elevated as the debt ceiling showdown plays out.”
Hedge funds and other speculators cut bullish bets for six consecutive weeks and held a net-long position of 21,002 contracts by Jan. 8, the least since Aug. 21, U.S. Commodity Futures Trading Commission data show. Prices rebounded 8.7 percent since reaching a four-month low of $29.24 on Jan. 4.
Options traders are divided, with the most widely held contract conferring the right to sell at $20 by the end of this year, while the next most popular contract gives owners the right to buy at $50 by then, Comex data show. The metal will be at $30.50 in three months, and $30.10 in six and 12 months, Goldman Sachs Group Inc. forecast Jan. 13.
The ETP and coin demand comes amid political wrangling between President Barack Obama and Republican lawmakers over the U.S. debt ceiling. Since 1960, Congress has raised or revised the debt limit 79 times, including 49 times under Republican presidents, according to the Treasury Department.
While the World Bank cut its global growth forecast for this year on Jan. 15 to 2.4 percent, from a June projection of 3 percent, it expects expansion to accelerate to 3.1 percent in 2014. A car contains as much as 30 grams of silver and a mobile phone about 0.25 gram, according to the Washington-based Silver Institute.
While gold’s 12-year rally is the longest winning streak in at least nine decades and prices are 12 percent below the record set in September 2011, its 7.1 percent gain last year was the smallest since 2008. Silver is trading 36 percent below its all- time high.
The recent jump in silver demand may be as some investors seek an alternative to gold’s “lackluster performance,” Deutsche Bank AG said today in a report. Investor interest in silver “remains key” because supply will outpace demand by 6,441 tons this year, Barclays said Jan. 16.
“Investors appear to be putting their money increasingly into silver ETFs as an investment alternative,” analysts at Commerzbank AG wrote today in a report. “It can only be a question of time before the buoyant ETF demand causes the silver price to rise.”
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