US demand for silver coins highest ever since records began in 1986 as private investors seek a safe haven
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March 31, 2013 - 10:14am
Sales of American Eagle silver coins produced by the US Mint have surpassed 14 million so far this year, a number not hit until late May last year with sales running at their highest level ever since records began in 1986. If the price of silver was set by coin sales then it would be at a new all-time high, but the Comex futures pit still rules the price.
Investors have to wonder whom is the better judge: thousands of small investors worried about inflation and the risk of a dollar, banking and bond market collapse, or the professional hedge fund traders and bullion banks who dominate the Comex?
Manipulated market
If the Comex was not such an obviously manipulated market then it would be tempting to vote for the professionals. But in this instance the price is largely set by an inside job with a bias towards lower silver prices.
Besides smaller investors in coins hardly represent a floodtide when you consider what they have invested so far this year. Those 14 million coins cost all of $400 million, the sort of sum that a top hedge fund professional would consider a bad year.
However, it ought to be a sobering consideration that even this modest level of demand could not be met by the US Mint in January when it suspended sales for a period. Just where are buyers going to get their coins if this kind of demand keeps up or more likely gets even stronger?
Higher coin prices
Well, they will buy them from each other and push up the premium paid on coins by comparison to the spot or Comex price of silver. Will that eventually impact on the Comex price of silver? It just has to down the line.
So the explosion of coin buying is a concrete indicator of a silver price surge coming soon, whatever the short term vagaries of the global financial markets might do to the Comex silver price in the meantime. Coin holders should take heart and keep their bullion.
As we have commented on ArabianMoney before the Cyprus bank bail-in is a catastrophe in the making that will boost gold prices and silver will gain even more as a leveraged play on gold.
