Peak Silver: -US Mint Sells Out Of Silver-

Dear PGM Capital Blog readers,
In this weekend’s blog edition, we want to discuss with you the Peak of Silver production and the fact that US-Mint ran out of the American Silver Eagle coins. 

Of all the elements on the periodic table, Silver has been dubbed the first to go extinct, which will make it the resource investment opportunity. According to the United States Geological Society, Peak Silver will arrive by 2020. That is just 5-6 years away, and the question is what will happen when the last bit of silver has been mined?

Silver is really unique. It is harder than gold and has a much higher melting temperature. That is why it is being used in the following applications:

• Medical and food industries because of its antibacterial properties.
• Water purification systems.
• Catalytic converters for automobiles.
• It is an integral part of the cell phone, tablet and computer industry.
• The construction of solar panels, creation of circuits, RFID chips and in batteries.
• Windows in high rise buildings.

With silver approaching extinction, industry will need to find a way to replace or recycle it, which means that the price of silver will have to rise significantly in order to entice consumers to recycle it. There is a lot of silver available for recycling, and we suspect that certain industries will be required to pay the higher prices as silver becomes harder to find.

The question about replacing silver with platinum does not work well as a solution. Platinum is nearing extinction too and would be more expensive as a substitute. As the reserves of silver diminish the only logical action is recycling.

SILVER INVESTMENT DEMAND OUTLOOK:
CPM Group Managing Partner Jeffrey Christian wrote a report on silver investment demand. He is a true believer in the value of silver as an investment.

In their free 50-page report, “Silver Investment Demand: A comprehensive study report of the global silver investment market for the Silver Institute” the CPM Group outlined the results of their study regarding the global silver investment market.

It never fails: any time there is a dump in precious metals through their paper representation (GLD, SLV, or futures) typically as a hedge to a rally in the dollar, the demand for physical Precious Metals soars confirming yet again that any connection between paper prices and physical demand no longer exists.

Whether it is China buying every ounce of gold it can find or US consumer rushing into retail outlets, the surge in physical metal buying is there like clockwork. Such as US Mint silver orders. As reported on Friday November 14, 2014, sales of American Eagle silver coins by the U.S. Mint jumped 40 percent in October to the highest in 21 months as can be seen from below chart.

Sales surged in October to 5.79 million ounces, the most since January 2013, the month that set an all-time high at 7.5 million ounces.

Christian, of the CPM Group, estimated that investors may accumulate as much as 1 billion additional ounces of silver in various investment instruments over the next decade. This on top of the more than 860 million ounces of silver purchased for investment purchases since 2006.

US MINT OUT OF SILVER:
On Wednesday, November 5th 2014, the U.S. Mint said it has temporarily sold out of its American Eagle silver bullion coins, due to “tremendous” demand in the past several weeks and that they are in the process of producing more and will advise when additional inventory is available.

On Monday November 10, 2014, the United States Mint said that it expects to have over one million 2014 American Silver Eagle bullion coins for sale by November 17, 2014.

Since the U.S. Mint cannot produce enough Silver Eagles, the Mint sold out of them after weeks of explosive demand, sales of the 99.9% pure silver coins will resume on a rationed basis.

WHO BUYS SILVER:
Despite popular belief, silver is not “poor man’s gold,” the myth that a large number of investors buy silver because it has a lower unit price, the report observed.

A study shows that in most countries, including the USA, the largest volume of silver bars, coins and medallions appear to be purchased by upper income, college educated professionals between the ages of 40 and 65.

PGM CAPITAL COMMENTS:
We believe that silver supplies will tighten and demand to remain high for the next ten to twenty years.

It will take industry that long to redesign products, and find substitutions for silver. That means that silver will remain a resource investment opportunity.

On top of this the demand for silver as a storage of value is soaring.

As can be seen from below table the total amount of Silver Eagle sold up to November 5th 2014, when the mint ran out of Silver, reached 39.301 million ounces, which is very close to the all time record of 39,868,500 American Eagle Silver Bullion coins sold in 2011.

In its above mentioned report, CPM advised that currency markets are expected to remain volatile due to uncertainties related to economic and political conditions in various economies. “Investors are expected to continue using silver as a currency hedge, and this factor is expected to remain a strong influence on investor demand for silver.”

As can be seen from below chart, it appears that the US$15.50 level per troy ounce of silver, was the line that broke the camel’s back regarding physical inventories, as physical demand has simply EXPLODED on Friday, November 14 in the morning, after futures dipped below US$15.20. per troy ounce.

Due to this at approximately 1pm EST on Friday November 14, one of the largest Primary Dealers in the US issued a notice to all purchasers that premiums for

ANY PREVIOUSLY PLACED PURCHASES FOR SILVER EAGLES
ARE NO LONGER VALID!

This is simply unprecedented!

Before following any investing advice, always take your investment horizon and risk tolerance into consideration and keep in mind that the price of Precious metals as well as the stocks of their producers can be very volatile and that sharp corrections may happen in the short term.

Until next week.

Yours sincerely,