Filtering through the Noise Concerning 2014 Silver Eagle Demand
Every year in January, precious metals enthusiasts tout the "record demand" for Silver Eagle Coins. The US Mint released 3.1M Silver Eagle coins this week to much fanfare. Occasionally, the demand is the result of consumer interest, but sometimes the demand is not correlated to mass market interest at all. We will attempt to dispel the hype and hone in on the facts:
1. The spike in volume should come as no surprise when you consider that collectible companies sending first-strike coins to grading agencies purchase in large volume in January to "slab" coins. Sales volume for silver eagle coins is always highest in January. As a point of reference, the US Mint released 7.5M coins in January 2013.
2. The US Mint has been producing 2014 coins since early December in anticipation of the annual early year spike, consequently shutting down 2013 production and limiting supply the end of December. This is the earliest the US Mint has shut down year-end production in recent memory, which naturally pushes demand forward.
3. It is a common practice among precious metals dealers to "pre-sell" the new coins in December (TexMetals does not pre-sell, but nearly all other dealers engage in this practice). This year, many of our competitors began pre-selling 2014 coins as early as November. The net effect of this practice is to create embedded demand during the initial release which reflects the prior two months of sales, thereby inflating sales numbers.
Lastly, it is always noteworthy to define what is meant by "demand". For example, in January 2013, silver traded at ~$31 per ounce. Therefore, for silver demand in dollar terms to remain flat YoY with a current silver price of $20.50, the US Mint would need to produce 33% more coins. The point: a small spike in silver coins is not necessarily reflective of growing silver demand.
We will be offering 2014 silver eagles for sale on Friday, January 17th, and we will begin shipping coins on Monday, January 20th. Barring a large move in the price of silver or an exogenous global event, silver eagle premiums should return to normal levels following this initial thrust.
Note: We intend to release a more exhaustive primer on coin production, premiums, and precious metals demand in the coming weeks.