EDITOR'S NOTE: Notice how the price of silver surged in October, rising 15% from its September low of $17.89 per ounce? Well, the surge in mint and refiner demand wasn't able to churn out the commensurable supply in September. Plus, the US Mint hasn’t done anything to pick up the pace of production. Read the article below to get the details surrounding the situation. And remember that this week, the PPI, CPI, and retail sales are slated for reporting. Last Friday’s jobs report was a real doozy. It showed that the economy is still growing despite the Fed’s efforts to slow the economy. A growing economy signals a continuation of demand which, in turn, fuels inflation. This week’s report will give us valuable data as to inflation’s likely trajectory. And if it continues to rise, then premiums for both gold and silver are likely to continue rising.
In August, demand for bullion had slacked a bit from the frenetic pace set over the past two years. But buyers came back with a vengeance during September, and inventories of the most popular products are showing the strain.
Premiums are back on the rise and delivery delays have returned for many items, with silver inventories being hardest hit. Money Metals’ weaker competitors are especially struggling.
As buyers turn away from higher-priced silver coins (particularly the problematic Silver Eagle, one-ounce silver rounds and bars of various sizes are now experiencing supply issues.
The major constraint, once again, is in the capacity of mints and refiners to produce retail bullion products. While demand for 1,000 oz silver bars also appears strong, premiums for those large bars are holding steady.
If 1,000 oz bar premiums rise, it would be signaling a true shortage of silver. For now, though, the shortage is in the fabrication capacity of mints and refiners who convert large bars into smaller products.
The pressure on premiums has been driven, at least in part, by the U.S. Mint. Despite its obligation to produce coins in quantities "sufficient to meet public demand," the Mint has done nothing to increase supply.
Rep. Mooney recently chastised the U.S. Mint for mismanagement.
Demand spiked for bullion products two and a half years ago. Private mints and refiners have been steadily growing capacity, but the U.S. Mint is manufacturing excuses instead.
Congressman Alex Mooney (R-WV) sent a terse letter to Mint Director, Ventris Gibson, just over a month ago.
Ms. Gibson replied last week. She blamed issues on COVID and on the vendors who supply blanks.
The U.S. Mint’s response letter was predictably long on excuses and short on solutions.
The top U.S. Mint bureaucrat says she hopes to add some new vendors who can produce blanks, rather than gearing up to produce blanks in-house.
There was no mention of plans to dramatically increase inventories during periods when demand is slower. If the Mint has plans to add any people, equipment or in-house capacity, Gibson didn’t discuss that either.
Until and unless the U.S. Mint gets its act together, it remains wise to avoid the extraordinarily high premiums that come with American Eagles – and even consider selling the Silver Eagles you have to Money Metals for $9.50 over spot to redeploy the funds into more ounces in other forms.
Rounds and bars offer much better value – as do many other silver coins.
As alluded to above, the lowest-cost way to own physical bullion is through Vault Silver and Vault Gold. Pricing there is based on large commercial bar premiums, which remain low and stable.
Vault Metals should get a serious look from any investor planning to have their metal stored in a depository. They will also be a good choice for investors who ultimately want to take delivery of metal, but don’t mind buying and storing low-premium metal until the high premiums for deliverable products subside.
Originally published on Advisor Perspectives.