Is the Silver Bullion Shortage Ending?

World mints have struggled to keep up with the booming demand for precious metals. The situation has been ongoing for more than a year and frustrated physical silver investors with suspensions, rationing, and delays. There are finally some signs that the shortage may be coming to an end, in particular for the American Silver Eagle bullion coin.

The Silver Eagle shortage first began in February 2008. The US Mint became so overwhelmed with orders for the popular silver bullion coin that they were forced to suspend taking new orders. The suspension was only in place until March 2009; however, sales were resumed on a rationed basis. Authorized purchasers were limited in the number of coins that they could order. Early suggestions indicated that the rationed amounts covered only a fraction of the overall demand.

More than one year later, there are some indications that the situation may finally be abating. As I mentioned in my post on the US Mint's March 2009 Bullion Sales, sales of silver and gold reached extremely high levels. Sales of silver coins were actually the highest monthly total since 1986. Since these are rationed sales, the high level was more of an indication of reduced supply constraints than increased demand.

Recently, there have been more indications at the dealer level that the shortage may be ending. One dealer has reported that delays for delivery of Silver Eagles are shortening, and premiums for the coins is declining. At the height of the shortage premiums were as high as $4.50 over the spot price of silver. Premiums have now pulled back to around $3.00 over spot.

Disclosure: Long physical silver.

Comments

[kohalakid:]

The Mint did not "suspend taking new orders" in Feb 08. They have been on their allocation program since then...rationing their production to their distributors.
But the Mint works a bit differently from private businesses. If a private business sees larger demand, they increase staff, buy more equipment and add a second or third shift to increase production. The US Mint has never seemed to have a desire to "go the extra mile" to help their customers.
Let's face it..the Mint charges wholesalers $1.25 over silver. After their manufacturing costs, how much can they possibly make??
So they can sell 10 million ounces and make maybe $5 million. Big deal. They do better cranking out state quarters and all the other crap that gets sold on late night shopping channels.

And anyone buying a silver Eagle at a couple bucks over spot (or more) should have an IQ test anyway. It's a terrible way to invest in silver.

May 05 01:27 PM

[5142152-337:]

kohalakid: I tend to agree with your comments on the MINT! But, to say that one needs to have their head examined for buying AE's "a couple bucks (or more) over spot" is just plain wrong. Here's why: I agree the AE's ARE expensive (premiums), BUT, they can be bought AND sold at a MOMENT's notice ANYWHERE! Try SELLING the generic pieces of junk currently flooding the market. Oh yes, I forgot, those generic rounds are often HIGHER premiums than AE's. Personally, I am very skeptical of any government enterprise. But, I have NEVER found any problem with AE's. I have thousands, and that is about 15% of my silver accumulation. My preference is Engelhards. Now, there is silver! And I can find them for a much lower premium than AE's or the generics. Reason I am not too enthused about the generics is because one has to QC every round/bar to ensure what your getting IS silver. Not so with Engelhard, and thus far, the AE's.
Sorry for the long winded reply,but thought you may be enlightened.

May 06 04:32 PM

[lildynamite209:]

I tend to agree with you regarding the A.S.E. The A.S.E. is recognized everywhere as being Ag999 NO DOUBT. If or more likely WHEN the world finally realizes Ag. is money (as opposed to those fancy Twenty dollar bills) then the 3-4 buck premium won't matter much. The investors I don't understand are the ones who willingly pay obnoxious premiums for 90% AU/BU Morgans/Peace dollars... When Ag. is once again money & the Fed. is history, mint marks, low mintage, error coins will have no meaning (other than personal) What will have meaning is the recognizable Ag. Bullion such as A.S.E. as opposed to generic rounds that "may" be silver or silverlike... I'm long winded too. A.S.E. .999 Ag $16.25 per coin vs. $19- $22 bucks per A.U.- B.U. 90% common date Morgans??? I have $2200 face Roosevelt dimes, $1700 face Franklin halves and a few hundred F-XF Morgans. I now only buy 10 oz./100 oz Academy and ASE monster.. (When I can afford to) Everyone knows what Pre-65 90% junk silver is. I think I'd rather have 90% junk silver than generic rounds/bars

May 06 06:43 PM

[REBEL:]

To the first 3 Posts; If the gov'ment wasn't so intent on propping up this dying economy, your AG would put you in the uber-rich category.
Unfortunately, tyrants are in control of our gov'ment and they will suppress AU and AG forever - if they can get away with it.

May 06 09:23 PM

[kohalakid:]

My objection to the high premiums on silver eagles is that the premium tends to evaporate when silver does exactly what you want it to do and rallies. So you paid $3 over at $11 silver..and you get spot or maybe less at $21 silver. You gave up 30% of your profit on the spread. That's just silly.

I like 1000 oz COMEX good delivery silver bars. You can buy 'em at reasonable rates and any of the "big boys" know they are good silver.

For the end-of-the-world crowd, I think the 90% dimes, quarters and halves..and even the 40% halves, are a better deal than silver eagles. But again, their premium drops off as silver rallies.

The best trade is to buy physical when prices are high and premiums are low, hedge the metal by shorting a COMEX contract or SLV and then cover the short at lower spot and be long the bullion at a nice cheap premium.

Been doing it for 30 years.....

May 06 10:19 PM

[lildynamite209:]

How's it going (Rebel) ? I agree with you regarding these TYRANTS who artificially control the price of Silver/Gold but the truth of the matter is.... When the EMERGING NATIONS spread their wings and grow and prosper. Terrible as it sounds.... They will call the shots. Currently China is our biggest foreign creditor, with just about one trillion bucks... LET ME SAY THAT ONE MORE TIME, ONE TRILLION DOLLARS!!!!! With each new dollar printed by the Feds. the dollar becomes worth less and being worth less makes that one trillion dollar debt even greater.... What I'm saying (Rebel) is, (terrible as it my seem) China and any other strong emerging nation will call the shots. These TYRANTS will not be-able to convince these emerging nations that a piece of paper that reads "Federal Reserve Note" The United States of America is more valuable than the silver that will be needed to aid these emerging nations to SPREAD THEIR WINGS and take their best shot at becoming the country we had become. They will need Ag for all their electrical needs across their country, They will need clean purified water and again SILVER will be needed... Silver will be needed for hundreds of industrial uses let alone it's monetary use.... Silver has been, silver is and silver will always be money.... Don't allow these up and down volatility's discourage you.... On a daily basis if you watch Bloomberg, or better known as comedy central.... On a daily basis someone is asking another: So, would you say we have found the bottom and now see light at the end of the tunnel? Sure as you're reading this someone will say; YES, We have found bottom and this is the rally to be marked as monumental and historical!!!! Who do they think they are fooling? Be very patient, hold you Ag. buy Ag. any form of silver... Junk silver, bars, bullion coins... It is so CHEAP right now, these TYRANTS WHO ARE ARTIFICIALLY HOLDING BACK THE CURRENT PRICE OF Ag. is making it available at bargain basement prices.... Buy it at the lowest price you can,,, just buy and hold it. If you don't buy silver or gold that you can see or touch, than you don't really own silver or gold. In other words if you by certificates reading you are the owner of X amount of Ag or Au than you may as well just keep and pile up the federal reserve notes. Anyone who tells you not to worry they will keep your metals in a secure vault for you... Chances are great that they told hundreds of others the same thing.... Possession is 9/10 of the LAW!!! If you don't have physical possession, there is a great chance that you hold a piece of paper, not much different than the piece of paper that reads Federal Reserve Note.... Let's beat them at their own game............

May 07 04:18 PM