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US Silver Coin and Bar Demand
This Year Set for the
Lowest Total Since 2010

The latest release of US Mint silver Eagle sales data confirms our feedback from market participants, of a sector that is still exceptionally weak and shows no sign of a turnaround.

Looking at the other key silver bar market, India, this is also on course for a weaker performance this year, albeit not as pronounced as in the US (in this article Charles de Meester, founding partner of Metals Focus, the independent precious metals consultancy focuses on the US). Overall though, global physical investment could drop by some 20% this year to around 167Moz (5,185t), by far the lowest total this decade. As a result, this adds to the downward pressure facing silver. To some extent, this helps to explain why the gold:silver ratio has remained stubbornly high, at around 75:1.

Returning to the US market, the reasons for the slump have been documented in previous Metals Focus reports, including our One-Year and 5-Year Silver Forecasts. (In turn, these themes have contributed to the ongoing rise in Comex silver stocks.) These include the interplay between largely range-bound silver prices and successive record highs for US equities. Understandably, the latter has garnered significant media coverage, making the US stock market almost irresistible for retail investors. These two factors help explain why selling back emerged (not only for silver, but also gold) in 2016 which significantly, has remained a near constant feature for US coin and bar dealers this year.

Another factor concerns the massive level of physical silver demand in recent years. Between 2010-16, these purchases totalled a combined 756Moz (23,523t). This suggests that the US market may have become saturated, which may help explain the apparent lack of investor response (at times) to weaker prices.

One final point concerns the level of historical buying. Set against this tremendous demand, the extent of selling back (although difficult to quantify) over the past two years has still been modest. This can be interpreted in two ways. First, the retail stocks that have been liquidated, represent just the start of what may continue for an extended period. Alternatively, as the selling back represents just a small fraction of retail stocks this suggests that relatively few investors have reduced their (silver coin and bar) holdings. We would tend to support this second view, in part because the decline in silver ETP holdings, where retail investors are also very active (more so than institutional investors who tend to dominate buying of gold ETPs), has been fairly modest this year.

Furthermore, the ETP liquidations need to be seen in the context of a record level for global holdings that was achieved in July. It is also worth stressing that the weakness in the US has not been limited to the Eagle coin. Our proprietary quarterly silver bullion coin survey reveals that sales in the US (of the world’s leading bullion coins, including the Eagle) over the first nine months have fallen by 43% y/y. Furthermore, as touched on above, the overall US retail market has remained poor, reflected in a more than halving of gold coin sales over the first nine months. Returning to silver, the above themes confirm both the overall weakness in the US and also the likelihood that we may not see an improvement before year-end. As a result, 2017 could see US silver coin and bar demand fall by roughly one-third to around the 60Moz mark, compared with an average of 108Moz over 2010-16.

Source: Charles De Meester writing in Precious Metals Weekly, a newsletter published by Metals Focus, www.metalsfocus.com, one of the world’s leading precious metals consultancies. The Metals Focus team specializes in research into the global gold, silver, platinum and palladium markets producing regular reports, forecasts and bespoke consultancy.


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