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Outlook 2016

Weaker Gold & Silver Prices To Continue To Push Coin Sales To Record Highs In 2016

(Kitco News) - After seeing surging coin sales throughout the year, particularly with silver coins, the U.S. Mint is reporting weaker demand so far in December.

According to the mint’s latest data, American Eagle and Buffalo gold coin sales have reached 2000 ounces so far this month, while silver coin sales are at around 2.33 million ounces.

But, analysts do not attribute the lower numbers with customer fatigue, and actually expect retail demand to pick up next year as metal prices continue to hover at lower levels.

In a research report released Monday, analysts at Barclays said lower demand in December could be simply related to depleted stock.

In late November, the mint announced that it sold out of its 2015-dated American Eagle one-ounce gold bullion coin, with no plans to produce additional ones. Earlier in the year, the mint also ran out of the one-tenth and one-fourth ounce sized coins. The mint has only been offering its one-half ounce American Eagle bullion coins and its one-ounce buffalo bullion coins for sale.

“The slow sales pace in December was supply driven, in our view,” Barclays said. “We expect strong demand at the start of next month once new supply comes from the U.S. Mint, due to lower prices,” the bank added.

Gold coin sales are stronger year over year, particularly during the second half of the year as prices continued to struggle. Gold futures are down roughly 10% on the year, with most of the consecutive negative daily closes occurring in July and November.  During those months, American Eagle bullion gold coin sales jumped 123% and 185% month over month, respectively.

According to the data, a total of 801,500 ounces of the gold American Eagle coins were sold so far this year, up 52.8% from total sales in 2014.  The same can be seen with the gold Buffalo coin, which experienced sales of 220,500 ounces so far in 2015, up over 87% year-over-year.

After hitting a high of near $1,400 in 2014, gold prices are now at levels last seen in 2011. Based on the London Bullion Market Association’s gold price fix, the average gold price is down roughly 8% so far from last year’s average price of $1,265.47 an ounce.

According to Peter Hug, Kitco Metals’ global trading director, these lower prices pushed retail demand higher. He said that the primary surge in coin sales occurred in the summer of 2015, when lower prices accentuated retail demand.

This surge, according to Hug, “caught the U.S. Mint in a shortage of blanks to produce coins.”

“As a result, premiums doubled for most U.S. Mint product during that time-frame,” he added.

However, the better gold coin sales data was overshadowed by silver coins’ record-breaking sales. For the third consecutive year, the mint broke its annual sales record of silver coins on November 30.

“Once again, global demand for the American Eagle Silver Bullion Coins drove sales to a record high, this year reaching 47,000,000, surpassing the 44,006,000 ounces sold in 2014 and the 42,675,000 ounces sold in 2013,” the mint said in a press release mid-December.

Silver coin sales surged as the metal’s price hit multi-year lows, falling below $14 an ounce. According to the mint’s sales data, silver coin sales were highest during the months of January and July.

As metals prices continue to struggle heading into the new year, analysts expect retail demand to pick up once stocks are replenished.

Last month, the mint reported that it will begin taking orders for 2016-dated American Eagle gold and silver bullion coins on January 11.

In the World Gold Council’s year-end gold market commentary released in December, the organization noted that retail demand is strong globally as well.

“Global bar and coin demand is more than double its pre-crisis levels and the strength of bar and coin demand in Europe is now well established, having been non-existent prior to the financial crisis,” the WGC said.

“Retail investors are looking for lower entry points and should the US dollar continue to gain strength in 2016, a gold price in the low $1,000’s and silver under $13 should again accelerate retail demand,” Hug said.  

By Sarah Benali of Kitco News; sbenali@kitco.com
Follow me on Twitter @SdBenali

 

 

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 precious metal products, 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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