American Eagle silver bullion coin sales are headed toward another year of record breaking sales.
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2015 sales year-to-date have exceeded the same period in 2014. Sales through the third week in October are 38,986,000 ounces compared to last year’s 38,121,000 ounces. If this sales trend continues, the total number of ounces sold in 2015 will exceed last year’s record of 44,006,000.
Sales would have been even higher except that demand has been so high, it has wiped out the United States Mint’s inventories and outstripped its ability to produce fast enough to replenish those inventories. The coins have been on and off allocation for the past six months.
This number has been nothing short of astounding. Pre-Financial Crisis sales were 9,887,000 ounces in 1997. They doubled in 2008 to 19,583,500 ounces and they doubled again by 2011 to 39,868,500 ounces. Sales have increased and set new historical records every year except 2012.
What is behind this history making demand for U.S.-made silver bullion coins? While it is hard to say definitively, there are several likely reasons.
The weakening American economy has cast doubt on the efficacy of quantitative easing and low interest rates, which in turn impacts confidence in the dollar. However, currently the dollar is stronger than its peers and deflation is more of a fear than inflation. But in times of economic uncertainty, investors usually want to hedge their bets by diversifying their portfolios into tangible assets like silver.
Most individual investors do not have the same hedging alternatives that institutional investors do. Esoteric derivatives and even expensive gold are usually out of reach for most individual investors. Silver is cheaper and therefore more affordable than gold, which is appealing to smaller individual investors.
Silver has become a speculative investment because the silver-to-gold ratio is out of whack. The historical ratio in the modern economic era is 50 ounces of silver to buy one ounce of gold. Today, it takes 74 ounces of silver to buy one ounce of gold. Either gold is overpriced or silver is underpriced. Given that silver prices are at five year lows, speculative investors are betting on the higher probability that silver is underpriced.
It is a definitive fact is that the record breaking demand for American Eagle bullion coins cannot be met by all the 440,555,000 ounces minted and issued by the United States Mint since the program began in 1986.
This demand has required the Mint to break manufacturing records each year, only to continue to have supply fall short of demand. This trend is likely to continue until individual investors are convinced that the U.S. economy has fully recovered and is stable.