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Soar with Eagles Hoot With Owls

As a general rule, the most successful man in life is the man who has the best information

In World War I severe material shortages played havoc with production schedules and caused lengthy delays in implementing programs. This led to development of the Harbord List – a list of 42 materials deemed critical to the military.

After World War II the United States created the National Defense Stockpile (NDS) to acquire and store critical strategic materials for national defense purposes. The Defense Logistics Agency Strategic Materials (DLA Strategic Materials) oversees operations of the NDS and their primary mission is to “protect the nation against a dangerous and costly dependence upon foreign sources of supply for critical materials in times of national emergency.”

The NDS was intended for all essential civilian and military uses in times of emergencies. In 1992, Congress directed that the bulk of these stored commodities be sold.

American Silver Eagle

The American Silver Eagle is the official silver bullion coin of the United States. It was first released by the United States Mint on November 24, 1986 and is struck only in the one troy ounce size.

American Silver EagleThe Bullion American Silver Eagle sales program ultimately came about because the US government wanted, during the 1970s and early 1980s, to sell off what it considered excess silver from the Defense National Stockpile.

"Several administrations had sought unsuccessfully to sell silver from the stockpile, arguing that domestic production of silver far exceeds strategic needs. But mining-state interests had opposed any sale, as had pro-military legislators who wanted assurances that the proceeds would be used to buy materials more urgently needed for the stockpile rather than merely to reduce the federal deficit." Wall Street Journal

The authorizing legislation for the American Silver Eagle bullion sales program required that the silver used for the coins had to be from the Defense National Stockpile. By 2002 the DNS stockpile was so depleted of silver that if the American Silver Eagle bullion sales program was to continue further legislation was required.

On June 6, 2002, Senator Harry Reid (D-Nevada) introduced the Support of American Eagle Silver Bullion Program Act to “authorize the Secretary of the Treasury to purchase silver on the open market when the silver stockpile is depleted."

  • 2002 - 10,539,026 Bullion American Silver Eagles were sold.
  • 2003 - 8,495,008 Bullion American Silver Eagles were sold, silver averaged $4.88 an ounce for the year.
  • 2004 - 8,882,754 Bullion American Silver Eagles were sold. For 2004 the average cost of an ounce of silver was $6.67.
  • 2005 - 8,891,025 Bullion American Silver Eagles were sold. Silver averaged $7.32 an ounce.
  • 2006 - 10,676,522 Bullion American Silver Eagles were sold. Silver averaged $11.55 an ounce
  • 2007 - 9,028,036 Bullion American Silver Eagles were sold.
  • 2008 - 20,583,000 Bullion American Silver Eagles were sold. Silver averaged $14.99 an ounce and almost 80% more Bullion American Silver Eagles were sold then in any previous year.

The US Mint suspended sales of the silver bullion coins to its network of authorized purchasers twice during the year.

In March 2008, sales increased nine times over the month before - 200,000 to 1,855,000.

In April 2008, the United States Mint had to start an allocation program, effectively rationing Silver Eagle bullion coins to authorized dealers on a weekly basis due to "unprecedented demand."

On June 6, 2008, the Mint announced that all incoming silver planchets were being used to produce only bullion issues of the Silver Eagle and not proof or uncirculated collectible issues.

The 2008 Proof Silver Eagle became unavailable for purchase from the United States Mint in August 2008.

2009 - 30,459,000 Bullion American Silver Eagles were sold

On March 5, 2009, the United States Mint announced that the proof and uncirculated versions of the Silver Eagle coin for that year were temporarily suspended due to continuing high demand for the bullion version.

On October 6, 2009, the Mint announced that the collectible versions of the Silver Eagle coin would not be produced for 2009.

The sale of 2009 Silver Eagle bullion coins was suspended from November 24 to December 6 and the allocation program was re-instituted on December 7.

Silver Eagle bullion coins sold out on January 12, 2010.

The average cost of an ounce of silver in 2009 was $14.67

The Silver-Gold Eagle ratio was 20:1. meaning investors purchased 20 Silver Eagles for every Gold Eagle in 2009.

2010

No proof Silver Eagles were released through the first ten months of the year, and there was a complete cancellation of the uncirculated Silver Eagles.

Production of the 2010 Silver Eagle bullion coins began in January instead of December as usual. The coins were distributed to authorized dealers under an allocation program until September 3.

In 2010 the US Mint sold 34,700,000 Bullion American Silver Eagle Coins.

2011

According to the USGS’s Silver Mineral Industry Survey, silver production fell to 37 tonnes in October - compared to 53 tonnes year over year (yoy).

In 2011, the United States produced approximately 1,054 tonnes of silver – down from 2010’s production of 1,154 tonnes and down from 2007’s production of 1,163 tonnes.
 
Silver ChartThe US imported 6,600,000 oz of silver for consumption in 2011 – up from 2007’s imports of 4,830,000 oz.
 
In 2011 the US Mint sold 39,868,500 Bullion American Silver Eagle Coins.

2011 was the first year in which official coin sales surpassed domestic silver production.
  
The US Mint is required by law to mint the bullion Silver Eagles to meet public demand for precious metal coins as an investment option. The numismatic versions of the coin (proof and uncirculated) were added by the Mint solely for collectors.

The U.S. Mint sold 39.8 million Silver Eagles in 2011, doubling the Silver-Gold Eagle ratio to 40/1.

2012

United States Mint Authorized Purchasers (AP’s) ordered 3,197,000 Bullion American Silver Eagle Coins on January 3rd, the first day they went on sale.

That opening day total catapulted January Bullion Eagle sales higher than half of the monthly totals in 2011.

As of January 25th 2012, 5,547,000 Bullion American Silver Eagle Coins had been sold.

Bullion Silver Eagles are guaranteed for weight and purity by the government of the United States and because of this the US government allows bullion Silver Eagles to be added to Individual Retirement Accounts (IRAs).

2013

The US Mint shut down production of 2013 Silver Eagles three weeks earlier than normal but an all-time sales record was set at 42,401,000 oz. This beat the previous annual sales record of 39.8 million oz set in 2011.


Top 5 years for Silver Eagle sales

2014

Sales of American Eagle Silver Bullion coins reached 44,006,000 ounces in 2014 breaking the sales record just set in 3013. December 2014 sales were up 104% year-on-year.

The U.S. Mint was forced to stop selling the Eagles on several occasions in 2014 and had to institute a policy allocating American Eagle Silver Bullion coins only to its authorized purchaser distribution network.

US Law: 31USC5112(e) clearly states that "the silver coins must be supplied to the US public in 'quantities sufficient to meet public demand' even if it means the US Mint drives up the price of silver bullion on the open market in order to obtain the silver needed to produce the US Silver Eagles."

2015

On Tuesday, Dec. 15, the United States Mint sold the last of the year’s American Eagle silver bullion coins. The Mint ended their 2015 annual sales with yet another record - 47,000,000 ounces. This despite a production halt in July and restrictive allocations to Authorized Purchasers (AP) in the second half of the year.


Top 5 Sales Years

10.5 million American Eagle silver bullion coins were sold in 2002.

47,000,000 American Eagle silver bullion coins were sold in 2015.

The Silver-Gold Eagle ratio climbed to 58.6:1 from 40:1 back in 2011 and from 20:1 in 2009.

Sales of American Silver Eagles set a record for the third year in a row.

According to the Silver Institute global silver coin sales reached a record 130 million troy ounces in 2015.

Silver has a special allure to Indians who use it in everything from jewelry to edible silver foil they call Vark.

2016
The U.S. Mint’s American Eagle silver bullion coins scored a January sales total of 5,954,500 million coins, the most for any month in three years.
Just three other months rank better:

  • January 2013 at 7,498,000 coins;
  • January 2011 at 6,422,000 coins; and
  • January 2012 at 6,107,000 coins.

More of the 1-ounce Eagles could have sold but the U.S. Mint rationed their distribution because of silver planchet shortages.
Q: How many U.S. Mint employees does it take to stamp a US Silver Eagle?
A: Two. One to turn on the machine and one to claim there are no blanks!
For the month the Silver-Gold Eagle ratio was 66.9:1.
What’s going on with silver, why is the silver eagle coin so popular with investors?
Gold:silver ratio
In this author’s opinion, as a much cheaper precious metal then gold, silver is winning market share from gold buyers.
Investors are also buying silver because they think silver’s price will rise substantially.

Today the gold:silver ratio stands at 78.2:1
Gold $1173 oz/silver $15.01 oz = 78.2
Historically the ratio has been 15:1
Since silver made it’s nominal high in 1984 the gold:silver ratio has held fairly steady at 45:1 - with the current ratio at 78.2:1 silver will have to rise to $US26.06 in order to get the numbers back in sync with 45:1.
To get back to the historical average ratio of 15:1 silver would have to rise to $US78.20 an oz.
Silver, like gold, performs its function as a precious metal – acting as a storehouse of value and a safe haven in times of turmoil. Although, and herein lies the opportunity, silvers asleep on the job what with the historical gold:silver ratio being so out of whack.

Debt based fiat
The history of fiat money has always been one of failure (most paper money economies downfall can be linked directly to the costs of financing out of control military growth and its wars). Every fiat currency since the Romans started diluting the silver content of their denarius has ended in devaluation and eventual collapse of both the currency and of that particular economy.
For the very first time in our history, all money, all currencies, are now fiat - the US dollar use to be gold backed and it was the rock all the worlds currencies were anchored to - when the US dollar became fiat, all the worlds currencies became fiat.
The Federal Reserve first issued its debt based paper money in 1913. Since then the US dollar has lost 95% of its value.
Silver and gold have stood the test of time, as a medium of exchange, a storehouse of value and a safe haven in times of turmoil.
"The major monetary metal in history is silver, not gold." Milton Friedman, Nobel Laureate
Juniors

Your Author believes junior resource companies offer the greatest leverage to increased demand, and rising prices for precious metals.

There is also a very real and increasing trend for Mergers and Acquisitions (M&A) in one of the few bright spots available for investors – precious metals.

Juniors, not majors, own the worlds future mines and juniors are the ones most adept at finding these future mines. They already own, and find more of, what the world’s larger mining companies need to replace reserves and grow their asset base.

Junior resource companies, the owners of the worlds next mines, are soon going to have their turn under the investment spotlight and should be on every investors radar screen.
  
Remember, our junior resource companies, the same ones who today are so oversold and undervalued, are the present owners of the world’s future silver supply.
Conclusion

Resource stocks are not well understood by the general investing public, but at least two things are soon going to become very apparent to most -  precious metal prices are rising as the U.S. dollar collapses, and that the best way to leverage yourself to rising silver prices is owning the shares of a silver junior.

Savvy, sophisticated ahead of the herd investors are buying silver focused junior resource companies because they offer the greatest leverage to increasing demand and rising prices for silver.
Back in the day when your author was working for a living there was a saying, ‘if you hoot with the owls you had better be able to soar with the eagles the next day.’ Meaning of course, if you were up late partying and drinking you had better be prepared, and able, to work hard and get the job done the next day. To paraphrase a bit, we need to invest smart and soar with the silver eagles. And then hoot with the celebratory owls.
Silver orientated junior resource companies are soon going to have their turn under the investment spotlight and should be on every investors radar screen.

Are they on yours?

If not, maybe they should be.

Richard (Rick) Mills
www.aheadoftheherd.com
 rick@aheadoftheherd.com 

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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