Sales of silver coins by the U.S. Mint are on track for their best year since statistics began being kept, according to data on the mint’s website. Bloomberg reported in June that sales had already reached $24.03 million ounces. The mint set a one month record with sales of 7.5 ounces in January. Sales had to be suspended that month for over a week. Acting director Richard Petersen said that demand for gold and silver coins remains at an “unprecedented level.”
The brisk sales reflect both bargain prices and investor confidence in paper currencies. Silver has led the way in spot price declines over the past year. Silver futures are down 28 percent in 2013. Gold also remains well off its one year highs with spot prices in the 1300s, down from $1,790.30 in September 2012.
The correction has occurred despite ongoing monetary inflation by central banks around the world. The U.S. Federal Reserve Board of Governors announced on July 31 that it will continue to purchase long-term Treasury bills and mortgage-backed securities totaling $85 billion per month. Japan also recently announced that it would continue monetary easing measures. Other central banks have followed suit.
The combination of bargain prices and ongoing monetary inflation has presented itself as an enormous buying opportunity for hard money investors. That demand could drive precious metals prices higher over the next few months. August and September are traditionally strong for metals.
Societe Generale sees gold and silver rising to $1,400 and $22, respectively, through the end of the year, before falling back below present price levels in 2014. HSBC looks for silver to trade in the $17 – $23 range for the remainder of the year, while Morgan Stanley sees gold trading between $1,200 and $1,350 for the foreseeable future.
If spot prices consolidate as expected, it could mean an extended buying opportunity for physical metals. Import quotas in India and other traditional precious metals importers may also contribute to a stable spot price even as physical demand continues to set records.
Meanwhile, persistent economic malaise has prevented central banks from setting any expectations of monetary tightening. Along with an extended consolidation, that could mean gold and silver are building a solid foundation for another bull run.
Republished with permission from M2