(Kitco News) - U.S. Mint sales of gold and silver bullion coins soared in January, which analysts say was not only because of the usual strong start to a new year, but also part of a trend in which investors have been seeking more coins since late autumn.
A spokesman for the U.S. Mint said silver-coins sales were the most for any month ever, currently listed by the Mint’s Website at 7.498 million ounces. The record was hit even though the Mint announced on Jan. 17 that it had ran out of blanks and discontinued the sales until later in the month.
January silver-coin sales were up from 1.635 million in December and 6.107 million in January 2012. Meanwhile, January gold-coin sales by the Mint rose last month to 150,000 ounces from 76,000 in December and 127,000 in the same month a year ago. Last month’s gold tally was the strongest for any month since July 2010.
Several dealers and analysts said January typically is a strong month since freshly minted coins for a new year are sought by collectors and investors.
“People in the United States are date conscious,” said Michael Kramer, president of Manfra, Tordella & Brookes Inc. “At the beginning, there is always huge demand for the new coins.”
Yet, this year, in addition to the record silver-coin sales, Mint gold-coin sales had their strongest January in 14 years.
“Yes, the sales are as strong as the data implies,” said Terry Hanlon, president of Dillon Gage Metals. “We believe it is a combination of factors causing this high demand. Primarily, continued weakness in worldwide economic conditions but especially instability in (the) U.S. economy. Sales of precious metals have continually increased since the recent U.S. election. We believe this indicates a lack of faith, perhaps a fear, in the future of the U.S. economy.”
Dealers and analysts pointed out demand was already picking up as 2012 wound down. “You already had a lot of buying, and now you have even more,” said Jeff Clark, senior precious-metals analyst with Casey Research. This trend began in November, apparently after the re-election of President Obama.
Full-year 2012 Mint sales of 753,000 ounces for gold and 33.7 million ounces for silver were lower than full-year 2011 sales of 1 million ounces of gold and 39.9 million ounces of silver. However, November sales of 136,500 ounces of gold coins were more than double October’s tally and the most in more than two years. The December sales of 76,000 were stronger than any month in 2012 other than November and January. In the case of silver, Mint sales for September-November were around 3.2 to 3.3 million monthly, up from over the summer, before dipping December.
“January has been runaway buying the entire month,” Clark said. And, he said, there could be ramifications for the market if Mints keep running out of blanks, since premiums could rise sharply.
The January suspension of U.S. Mint sales came when gold and silver prices were range-bound, Clark said. “So what’s going to happen when we see the consequences play out for our debt levels and deficit spending and money printing?” he asked rhetorically. Prices will likely rise and there will be even greater demand for metals, meaning more bottlenecks, he continued. “The implications are you’re going to see dramatically rising premiums and you’re going to see availability dry up with delivery delays,” Clark said. “You’re probably going to see rationing.”
Some of the strength in early-year coin sales comes about because dies are fresh, so coins made first have a high quality and are sometimes sold at a premium, said David Morgan, independent precious-metals analyst with Silver-Investor.com.
“The other half is that there is a big demand for silver,” Morgan said. “If you go back to the inception of the Silver Eagles in 1986 and look over 10-12 years, the average amount of silver sold in that program was about 10 million ounces a year. Now, we have 7 million ounces in a month. So, obviously the trend over the last several years is up. Last year, 2012, was not as robust as 2011, but nevertheless was over 30 million ounces.”
Further, Morgan said, demand has been strong for “constitutional” silver, or regular coins using silver that were circulated prior to the mid-1960s. Premiums for these have risen lately, a sign that this market is tightening, he said. And, Morgan added, more investors are becoming aware that they can use precious metals for individual retirement accounts, although they must follow certain rules for custodianship.
“So I think the coin market is rather robust to start 2013,” Morgan said. “I think this is a year that will be good for both silver and gold but not fantastic. I think there are more people who will be looking at alternative investments besides the conventional stock market and bond market.”
Silver coins, in particular, may be more prone to supply bottlenecks from strong demand, Clark said. He recounted a recent conversation with a nurse whose interest in gold was piqued, yet she felt she could not afford coins with gold more than $1,600 an ounce. When such people eventually do buy precious metals, they are likely to turn to silver as a cheaper alternative, Clark related. “So you’re going to see a greater rush into silver,” he said.
Investors Hanging Onto Coins, Necessitating New Buying From Mints
Meanwhile, dealers and analysts say it appears that investors who already own coins are hanging on to them, which they also said is supportive for the demand picture. This is the case for not only U.S. minted coins but others such as the Krugerrand, Kramer said.
“We see activity in the secondary market but to a much lesser degree than what we are seeing regarding ‘source’ material, meaning demand is so great that it requires buying directly from world mints to accommodate all the buyers,” Hanlon said. “This indicates that there are not as many sellers as there are buyers, either first-time or repeat. Again, this generally reflects skepticism in the U.S. economy.
