Commodities & Metals

Despite Low Prices, Silver Demand Off the Charts

The prices of gold and silver have literally cratered from their highs. When most commodities get hammered, investors tend to lose interest if they own the commodity much higher. So, how and why is the U.S. Mint saying that 2014 has been a record breaker for sales of American Eagle silver bullion coins for the second consecutive year? Investor demand is apparently off the charts!

24/7 Wall St. wanted to look for silver demand issues outside of the U.S. Mint. We also looked at the key silver ETF (or trust) and included a very fresh report from The Silver Institute expecting strong silver demand from the industry out to 2018. The long and short of the matter is that silver is called the devil’s metal for a reason.

The United States Mint American Eagle Bullion program dates back to 1986, and it is a congressionally authorized program that gives investors an easy way to add precious metal coins to their investment portfolios. The iShares Silver Trust (NYSE: SLV) has performed horribly this year. Even after a 0.5% gain to $16.40 on Wednesday, the silver exchange traded fund’s 52-week range is $14.64 to $21.30, and the year-to-date performance is down 12%. Keep in mind that this ETF (or trust) was up above $40 when silver when ballistic in 2011.

The U.S. Mint said on December 9:

Driven by investor demand around the globe, sales of American Eagle Silver Bullion coins on Monday, December 8, 2014, were 495,500. That brought the annual total to date to a record 42,864,000 for Calendar Year 2014, beating the previous record of 42,675,000 coins sold in 2013.

Where is that demand coming from? You know that industry is not buying silver from the U.S. Mint as coins and then melting them for industrial use. You can thank investors for the continued demand. U.S. Mint Deputy Director Dick Peterson said:

Our American Eagle Gold and Silver Bullion Coins remain the coin of choice for investors around the world. We are proud of our role as a leader in the global bullion coin market.

The U.S. Mint also plans to keep selling the remaining inventory of 2014-dated coins until inventory is depleted. The Mint anticipates having enough coins to offer allocations through the week of December 15.

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24/7 Wall St. wanted to see what else is out there to support (or refute) the silver demand story. It turns out that The Silver Institute has given a fresh outlook to 2018. The group, which is obviously pro-silver, signaled the following:

Total silver industrial demand is forecast to grow 27 percent, adding an additional 142 million ounces of silver demand through 2018 compared with 2013 levels. Half of this growth is expected to come from the electrical and electronics sector, but additional demand will be due to growth in other industrial applications.

Silver tried to make a run back above $20 in February and March of 2014, and then again in June and July, but the crushing blow to commodities this fall has been very hard on silver. That being said, silver went just under $15 per ounce briefly at the end of November and start of December — only to find that the devil’s metal is back above $17.