Jeff Clark, Senior Precious Metals Analyst, GoldSilver
FEB 25, 2019
One of the regular questions we get from investors here at GoldSilver is if they should buy gold and silver now, or if they should wait. The fear, of course, is that prices will decline after they buy, for whatever reason.
If you’ve watched any of Mike’s videos or read any of our articles, you know we’re definitely not waiting to buy. In our view, the risk of buying prior to a short-term price decline is far outweighed by the risk of being without meaningful exposure to gold and silver given the fundamental flaws embedded in the world financial system. And if prices do fall before they soar? Well, that’s why you have some cash set aside, in case they have one last big correction.
But in addition to all the usual reasons we’re not waiting to buy, here’s another one, and it might make you rethink any strategy that involves waiting any longer…
We were surprised when the following public announcement was issued by the US Mint on February 21:
This is to inform you that we have temporarily sold out of our inventories of 2019-dated American Eagle Silver Bullion Coins. In addition, all remaining 2018-dated inventories have been sold too. The West Point Mint is busy producing additional 2019-dated American Eagle Silver Bullion Coins. We hope to be able to re-launch the 2019-dated coins in a few weeks. - Jack A. Szczerban, Branch Chief, Bullion Directorate, United States Mint
We’ve seen temporary suspensions from the Mint before, but they’re usually in the fourth quarter of the year, as they ramp down production of that year’s coin and begin to prepare minting the next year’s design.
So why the sellout in February? And they have no more 2018 silver Eagles, either? What gives?
What’s curious about this is that the Mint ran out of Eagles just six months ago, too.
Has demand really been that overwhelming that the Mint can’t keep up?
Here’s a view of Silver Eagle coin sales from the Mint over the past 14 months, along with the occasions when it ran out.
Demand for silver Eagles did rise last August, but in the grand scheme of things it was not a big month; it wasn’t even the biggest month of the year. Demand last month was high, too, but strong sales in January are normal since that’s when the new-year Eagle is released.
But these levels of demand were enough to drain the Mint’s available inventory. Within six months of each other.
Is this level of demand really that high historically?
You can see that last-year demand for Silver Eagles was at a 10-year low. It was almost half what it was in 2009, and almost one-third of 2015 levels. Sales are stronger this year so far, but certainly not at a pace that would eclipse those previous banner years.
While the Mint did gear down production due to lower demand, this paints a picture of an agency unprepared to meet any future spike. Which is exactly what we think will come, once the next crisis hits.
The bottom line is, if you want Silver Eagles, your purchase will be on backorder. They’ll eventually come, but you’ll have to wait.
Because the availability of Silver Eagles is suddenly tight, premiums have risen. That’s right: even though you can’t get a 2019 Silver Eagle right now, premiums have already been pushed up. Like it or not, we’re all forced to pay more.
It's Economics 101: crimped supply + rising demand = higher premiums.
A few investors have asked if they should wait to buy because they assume gold and silver will crash when the markets do. If so, I’ll get my bullion a lot cheaper!
Will you? Silver crashed in late 2008 when the stock market did. So yes, spot prices were significantly lower. But demand soared and premiums shot through the roof.
Here’s a comparison of the total cost of Silver Eagles in February the year before the financial crisis hit and the year after it hit:
Because demand was so high and the Mint couldn’t keep up, premiums skyrocketed. In this instance, your total purchase price was not much better, despite spot prices being 30% lower. And importantly, you didn’t have your metal, since everyone was forced to wait one to two months for delivery (obviously not ideal – what if you needed it during that time?).
Mike and I also recall a dealer who for a short time in 2009 was able to sell Silver Eagles at a 90% premium. Uneducated investors who shopped at that dealer paid a whopping $23.50 per ounce in February 2009, when spot was $12.37. And they still didn’t have their metal.
This reality highlights the fact that bullion purchases consist of two functions: the spot price, and the premium. If you assume you’ll get a better deal if prices fall, you could potentially find yourself in a situation where premiums spike and your total cost is actually not lower. Or the metal is not available for immediate delivery. Or prices don’t fall. You have to ask yourself A) if you’re comfortable with these risks and B) what, really, is the quantifiable, material upside to the “waiting” strategy?
To be clear, the current suspension is temporary, and the Mint says Eagles will be available next month. Though keep in mind we are dealing with a government agency, and the increased frequency in outages does not exactly inspire confidence.
But what if you want to buy silver now?
You can place an order for 2019 Silver Eagles on our website, but shipping is on a five-week delay as I write. And again, you’ll have to pay the higher premium. On multiple fronts, this is far from ideal.
There is a solution. And not only is the solution available now, but its premium is also low – even lower than the Eagle before the outage.
It’s the one-ounce Silver Bull Round, created by Mike Maloney.
Mike created the one-ounce Silver Bull Round to offer investors a super-low premium option when buying silver bullion. It gives you the most silver for your dollar and has a striking and meaningful design that sets it apart from all other low-premium rounds. It embodies Mike’s belief in the tremendous opportunity owning physical silver offers and in the freedom it provides.
As Mike said in our most recent firm-wide meeting, when he heard silver Eagles were out: ”Buy the Bull!” Maximum silver ounces for your currency. Maximum bang for your buck.
At a time the US Mint can’t sell you their product for immediate shipping at any price, you can get ours right now for a far lower premium that the US Mint has ever offered. And it ships as soon as your payment clears.