Silver Price Surges More Than 2%

October 5th, 2015 by

silver_bullEven with the stock market rallying mightily on Monday morning, the spot silver price spiked in early morning trading before easing back somewhat. Silver was 40ยข higher (+2.5%) to $15.75 per ounce, notching a fresh 6-week high. At the same time, the other precious metals were essentially flat: the platinum price was idle at $915/oz while spot gold was just 0.11% lower (-$1.30) to $1,138/oz.

Treasury Trades

Demand for U.S. Treasurys, whether short-term T-bills or the longer-term T-notes, has been fairly robust of late. While the 10-year Treasury note has been seeing its yield flirt with the lower bound of 2.00% over the last two weeks (far lower than this year’s average), the 3-month Treasury bill was actually offered for zero-interest by the government at this month’s bond auction. These bonds were sold (in total, $21 billion worth of them) with a yield of zero. This is an all-time low for the 3-month yield; you’ve heard of risk-free return? Well, these T-bills are actually a “return-free risk” for buyers. Since then, effective 3-month yields have actually fallen 2 basis points into the negative.

U.S. stock indices rallied even with strong demand for Treasurys and precious metals. The three major indices (Dow Jones Industrial Average, S&P 500, and Nasdaq) were about 1.75% higher on Monday afternoon, with a resurgence in the commodities sector and for energy companies.

Silver Coin Shortage Abating?

Without a doubt, there has been a severe delay on orders for silver coins, as well as a general lack of availability for new government-issued silver coins. This silver coin shortage is actually less about the amount of available above-ground silver supplies, but more about the limitations of production and government mints’ access (or lack thereof) to quality silver blanks.

Reverse American Silver EaglesThere are limits to how fast the mints can run the presses and strike coins. With silver blanks in short supply all across the globe, even major mints like the Royal Canadian Mint and the U.S. Mint have had to put caps on their production numbers. It’s been less of a problem regarding silver and more a matter of production scale: unless these mints want to disrupt other operations (such as circulating coin production) or endure losses by paying high premiums for its silver blanks, they simply don’t have the production capacity to pump out as many silver coins as the public is demanding.

This trend may be easing up, however. The U.S. Mint has finally increased its weekly allocation of American Silver Eagle 1 oz silver coins from 750,000 up to over 1,000,000 coins. This is a cause for celebration for silver stackers, as the mint had been selling out of its weekly allotments in a matter of hours after cutting the maximum limits. WIth some 36 million Silver Eagles sold already through 2015, the U.S. Mint’s flagship silver coin continues to outpace last year’s sales numbers, when an all-time annual sales record was set (for the third straight year) with more than 44 million coins sold.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.