Will The U.S. Mint Run Out Of Silver?

In mid-January of this year, the U.S. Mint announced that it was forced to suspend sales of 1-ounce American Eagle silver bullion coins because, “after just two weeks, it was sold out of its entire inventory.”

The demand for silver from small investors in the form of coins has been dramatic – “a record 7.5 million ounces of silver coins were sold in January.”

Many retailers are out of American Silver Eagle coins currently.

There is a big problem; however, the U.S. Mint is not the limiting factor. Over the years, Silver Eagle bullion coins have been minted at various facilities, but for more than a decade they had been struck only in West Point.

After 2010, the San Francisco facility was added, and now both locations are minting silver Eagles, leaving the U.S. mint with a capacity to "strike between 50 million and 60 million American Eagle silver bullion coins annually to meet demand, but ongoing inability to secure sufficient planchets stifles full use of that capacity.”

A planchet is a “blank,” the input to the U.S. Mint pressed into coin. Deputy U.S. Mint Director Richard Peterson maintains that "the bureau is struggling with a lack of success in its efforts to find additional planchet suppliers.”

The mint did plan ahead, and increased production of the silver bullion coins "by 20 percent in January 2013 to meet projected demand, but the increase over January 2012 levels, when 6,107,000 coins were sold, was insufficient.” The U.S. Mint suspended sales of its 2013 American Eagle silver bullion coins following the quick depletion of inventory early on.

When sales resumed in late January, buyers were placed on an “allocation system” that limits the number of coins any retailer may obtain.

To allay fears that the U.S. Mint may be running out of silver, it’s important to note that, although industrial uses for silver are expanding, there are still tons of recyclable silver that could be melted down – that is, if the price offered is high enough.

Since we know silver coin blanks represent a real world limitation in supply, this teaches a very important reason why physical silver bullion under one's full control trumps synthetic paper-mâchés (Exchange Traded Funds, ETFs) and allocated precious metal investment models.

American Silver Eagle coins are valued higher than the spot price of silver ( the cost for the raw material, unwrought silver ). Current eBay prices on most government issued silver coins are hovering at prices around +50% over the spot price for silver, putting the retail physical price as high as the middle $30s per ounce.

Many holding physical silver are surely looking at prices and asking themselves: “What sell-off?”

Below is a screenshot from showing silver coin prices from eBay.