by TraderStef via CrushTheStreet (connect with TraderStef via Twitter or at TraderStef’s website)
Imagine if the U.S. Mint temporarily or permanently closed the doors of one of its remaining branches due to unexpected circumstances, rather than announcing a temporary sellout of gold or silver bullion coins. Quite a situation could unfold for the price of gold and silver if political upheaval prompted chaos in the streets, a natural disaster struck near a facility, or mining supply issues impacted the availability of raw bullion. After a fall in the price of gold in 2014 as the nation attempted to crawl out of the Great Financial Crisis while the Federal Reserve was running a full-throttle printing press with multiple versions of stimuli and quantitative easing (QE), the following occurred outside the Denver Mint due to limited availability of a JFK gold coin.
- The “Ye Olde Mint” was the first authorized operation, which was located in Philadelphia just a few blocks away from where the founding fathers signed the Declaration of Independence in 1776. The facility opened in April of 1792 to produce its first copper, gold, and silver coins beginning in 1793.
- Closed: The New Orleans Mint opened in March of 1835 and produced its first coinage in 1838, but it halted operations at the onset of the Civil War in 1861 and then reopened in 1879 following the Reconstruction period after the war, and it went on to produce coinage until 1909.
- Closed: The Charlotte Mint was located in North Carolina and purposely opened in the south, where the nation’s first gold rush produced more of the yellow metal until the California Gold Rushbegan in 1848. It opened as a private mint from 1831 to 1857 and President Andrew Jackson authorized the facility to be an official branch of the U.S. Mint in 1835. Its first official gold coins were struck with a “C” mint mark in 1838. The facility closed its doors forever in 1861 because the building was converted to a Confederate headquarters and hospital during the Civil War. The remaining coins are extremely rare and coveted by collectors of numismatic coinage.
- Closed: The Dahlonega Mint in Georgia minted its first Liberty gold coin in 1838, with limited mintage until 1861. It only struck gold dollars, quarters, and half-eagles. Less than 1% of the “D” mint mark coins have survived their extremely low mintage and are now coveted by numismatic collectors.
- The San Francisco Mint opened in July of 1852 and produced its first coinage in 1854. The facility converted to an Assay Office in March of 1955 but reverted to producing coinage in 1965.
- Closed: The Carson City Mint in the Sierra Mountains of Nevada was authorized in 1858 to serve local gold mining operations during the California Gold Rush. Coins were minted from 1870 to 1893. Numismatic collectors covet any remaining coins with a famous “CC” mint mark.
- The Denver Mint opened its doors in April of 1862 as an Assay Office, which closed in 1906 when the facility converted to producing coinage and a bullion depository.
- The West Point Mint, built in 1937 on a 4-acre tract of land that was formerly part of the West Point military reservation, initially served as a storage facility nicknamed “The Fort Knox of Silver,” but it also stored gold. It produced pennies from 1973 to 1986, and in 1980, it began striking gold medallions. Since it acquired official status in 1988, it minted gold and silver commemoratives and American eagle bullion coins. In 1997, the very first Platinum Eagles were struck.
Late in the day on February 21, 2019, the U.S. Mint announced that inventories of 1-ounce American Silver Eagles are temporarily out of stock.
“Market fluctuations have resulted in a temporary sellout of 2018 and 2019 silver bullion. Production at the Mint’s West Point facility continues and when sales resume, silver bullion will be offered under allocation. The Mint is working closely with its suppliers in order to meet the demand of its authorized purchasers.”
The sale of silver bullion coins surged earlier in the day to 775,000, boosting the February total to 2,057,500, which followed the 4,017,500 sold in January. A start of over 6 million sold year-to-date is the fastest pace in 2 years. The increase in sales comes after a dismal 2018, with the lowest coin sales in 11 years. The U.S. Mint sells American Silver Eagles in bulk to “authorized purchasers” that include major coin dealers, brokerage companies, and other intermediaries. Purchasers pay a $2 premium per coin plus melt value and have a minimum order requirement of 25,000 ounces. Bullion coins in the secondary market are generally priced a few percentage points above the latest over-the-counter (OTC) spot market price of silver on FOREX.
There is confusion abound regarding the U.S. Mint’s responsibility in meeting consumer demand for bullion coins. In Title 31 of the U.S. Code, the U.S. Mint is required to supply “in quantities sufficient to meet public demand, one dollar silver bullion coins of specified size, weight, and design.” Former legislation also required that bullion be purchased from domestic sources to meet demand. On July 22, 2002, Public Law 107-201 changed the equation by “authorizing the Secretary of the Treasury to purchase silver on the open market when the silver stockpile is depleted, to be used to mint coins.”
The current shortage of silver bullion coin is likely due to the same reasons that the more recent sellouts occurred at the U.S. Mint. Those events were caused by a bargain price per ounce, a failure of the U.S. Mint to foresee a surge in demand for bullion coins, and a depletion of just-in-time inventory replenishment of blank planchets. This is in contrast to an actual supply issue originating from the mining side of the equation. The temporary shortage will cause an increase in demand for other silver bullion coins at competing sovereign mints and may create a domino effect increase in premiums near-term across the board. How long the current shortage lasts is anyone’s guess because the Mint indicated that purchases are to be strictly allocated, and from my recollection, the amounts in the past averaged one-million ounces per month.
For a quick view of the current spot price per ounce and premiums charged at popular retail dealers online, visit CompareSilverPrices. If you missed my buying guide, have a look at “Taxes and Risk – Gold and Silver Buying Guide for Savvy Metalheads.” As a reminder, never purchase coins with a promise to deliver many weeks or months into the future. Here is a chart of U.S. Mint silver coin sales in millions of ounces from 1987 to January 2019.
Here is a brief mini-documentary on the process of minting a silver coin from raw silver to final strike as presented by Endeavor Silver.