Low Sentiment, Record Sales: The Paradox of AG
Sentiment has not been so low in silver since the beginning of the bull market ten years ago.
So, is now an excellent time to buy?
The first half of 2013 has seen the US Mint sell a record high number of silver coins amid lower bullion prices. Thus far into 2013, with two weeks of June left, the Mint has already moved 23.3 million ounces of silver coins.
The Mint sold record high number of silver coins in January and April; that is, 7.5 million and 4.1 million ounces of silver respectively. Recently, however, sales of silver coins fell off, with 3.5 million ounces sold in May and merely 1.6 million ounces thus far into June.
In January, the Mint temporarily sold out of the 2013 American Eagle Silver Bullion coins due to high demand.. In April, after silver prices fell 16% over two trading days, demand picked up yet again.
Due to the April price drop, the US Mint put sales of one ounce American Eagle Silver coins on an allocation basis. 4.1 million ounces of silver were sold in April.
“The authorized purchases cannot buy what they need in order to fill the demand that’s reaching them,” said Michael Hayes, chief executive at Apmex, one of 12 authorized purchasers of American Eagle Silver coins.
Silver American Eagle bullion coin premiums climbed in April. Whereas premiums were generally around $1 to $3.50, the premium increased to between $5 and $8 per coin by May.
In recent weeks, demand and sales volume have slowed.
The Mint’s previous first-half sales record of 22.3 million ounces was set in the first six months of 2011. During that period, silver prices soared to a 31-year high of $48.59 a troy ounce.
Despite stalwart demand, hedge funds have increased considerably their short position in silver futures since the beginning of February. This past week the short position in silver for large speculators reached a record 31,806 contracts.
On a net basis, hedge funds are still long. Their short position is approximately 159 million ounces.
WIth the nosedive in mid April, demand for bullion-priced physical coins soared, and through the end of May bullion dealers exceeded in one month what they had done the entire year.
In April and May of 2013, gold demand in China and India outpaced worldwide supplies from mining output and scrap, while some central banks even purchased gold during the months.
Although silver has remained an intriguing purchase throughout this consolidation period of the past two years, now might be as good a time as ever.
But, there is still a looming market top which could have considerable implications for gold and silver. Still, with the Syria conflict, one can see an impetus for the next leg up.