Could there be a shortage of physical metals?

buy gold buy silverTo this day I still can’t decide if we can gauge anything about the metals markets based on the amount of metal, particularly silver and gold eagles, the US Mint’s sales. It’s an interesting side note to make, all the same.

You can look up the US Mint’s annual reports by clicking here.  These reports give you the break down of the mint’s production for the given year.  You can also check out their bullion only sales, by clicking here.  The bullion sales is what we are most interested in.

This has been a good year for gold and silver over all, we are up nearly 11% this year with gold alone, though it doesn’t seem like it with all the ups and downs.  Of course we know that the stock markets have dominated the news.  Although we are having a positive year, the US Mint is showing sales numbers that indicate they are on track to have the slowest year of sales in close to a decade.

If we go back to when the financial crisis is said to have really kicked off, 2008, the US Mint more than doubled their previous year, 2007, sales. In 2008 the US Mint claims to have sold 788,500 ounces of gold eagles and 20,583,000 ounces of silver eagles, in 2007 they only sold 191,020 ounces of gold and 9,028,036 ounces of silver.  The next three years were better than the last, even in 2011 when gold hit the record high the US Mint sold 857,000 ounces of gold and 40,020,000 ounces of silver.  Are we echoing those years?  Do these things follow a cycle?

This is where it gets a bit convoluted.  We have doubled our national debt since 2007, we have had years of QE (over $4 trillion pumped and dumped) and zero percent interest rates to name only a couple issues that have plagued our economy.  Technically and statistically we are far worse off now than in 2008. Also, keep in mind that crypto-currencies had not been introduced back in 2007. I’ll add another element to the question, do these things follow a cycle…and if so are they strengthened by, I’ll call it enhanced economic conditions since the last cycle?

Let’s look at some more recent numbers.  In 2016 the US Mint sold 985,000 ounces of gold compared to only 233,500 ounces sold as of October 1, 2017.  Did you catch that? The US Mint needs to sell 751,500 ounces of gold in the next three months, which is more than triple what they have sold so far this year, to match what they sold in 2016.

What about silver? Silver eagles sold in 2016 numbered 37,701,500 (which is 10 million ounces less than they sold in 2015) verses 15,998,500 so far in 2017.

There’s no telling what will happen the rest of the year. Will the US Mint triple their sales between now and the end of the year?

That remains to be seen but I would guess it’s improbable. It looks like we are going to be closer to 2008 figures this year. Is that significant?  Some say yes it is. I am not so certain as there are so many variables that we have to add and subtract in order to do a fair historical comparison.  I have never been a firm believer that the markets repeat themselves every so many years. We can trace cycles, which is similar, but not the same.  If we do retrace the last decade we can look forward to some much higher metal pricing in the near future. In that regard, hopefully this is the showing of a new cycle.

One thing we have to keep in mind about all this is that the mint has no way of tracking all the US Eagles sales in small business like Pacific Coin Exchange.  A vast majority of American Eagles gold and silver (and most everything else) are resales, which, obviously are not included in the Mint’s numbers.  Does it not go toward reason that the years the mint pumped out nearly a million ounces of gold eagles and over 30 million ounces of silver eagles that those are still being cycled around? Of course it does.

 

Simply because the US Mint sales are down, that doesn’t mean that people are not buying metals, quite the opposite. Private refineries and private mints are picking up the slack being able to offer private minted metals and resale government minted metals at a lower premium.  The US Mint has no plans to lower the premiums on the silver and gold eagle any time soon. Even though silver and gold prices are well with the “great buying opportunity” range, people are always looking for the lower premium and not so much the most current date.

There is an excess of most all paper products, cash, stocks, bonds. There is a limited supply of physical metals. What we are seeing in the industry is that we are at a risk of scarcity with physical metals should a shift occur.  A shift in the markets that seems to be well on it’s way, if not already started.

The excessive nature of our money creation out of thin air and the massive amounts of currency printing that has occurred around the world has given the big boys an real opportunity to buy bulk, and they have been.  All it takes is a small correction in the markets for there to be a run on physical metals.  I’ll not kid you, that could happen any day now.  That’s why you have to have financial insurance.

It boils down to asking yourself if you should take advantage of the buyer’s market we are seeing in gold and silver, while it lasts.

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