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Demand for physical silver is surging and the U.S. Mint can't keep up

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(Kitco News) - The U.S. Mint announced Thursday that it has temporarily sold out of American Eagle Silver Eagle Bullion coins.

“Our rate of sale in just the first part of March exceeds 300% of what was sold last month,” the Mint said in a press release Thursday. “West Point is working diligently to produce additional inventory and once additional inventory is produced, we will again begin allocations.”

Data from the U.S. Mint shows that it has sold 2.32 million one-ounce silver coins so far this month, up significantly from February sales of 650,000 coins.

Year to date, the U.S. Mint has sold 6.816 million ounces of coins, down about 1% compared to sales in the first three months of 2019. However, March is seeing its best sales pace since 2016.

Some analysts have noted that silver is becoming more attractive to investors as its significantly undervalued compared to gold. Thursday, the gold/silver ratio hit its highest level in history at 101, meaning it takes more than 100 ounces of silver to equal one ounce in gold.

Analysts have noted that the ratio has only hit 100 a few times in history and prices are due to fall back to historical average ratio around 50 or 60 points.

For many analysts silver ’s price drop has been a major buying opportunity. Silver has seen significant selling pressure as market volatility has risen. May silver futures last traded at $15.72 an ounce, down more than 6% on the day.

“The long-term quarterly chart illustrates that both price momentum and relative strength indicators are barely above neutral reading with plenty of room to move higher,” said Andrew Hecht, creator of the Hecht Commodity Report. “Over the past months, buying silver during price corrections has been the optimal approach to the market. Silver continues to try the patience of investors who are waiting for it to follow gold and break above its 2016 high.”

However, other analysts aren ’t convinced that silver is so undervalued. Some analysts have said that they are bearish on silver because of its strong industrial demand. If the spreading coronavirus continues to weaken global growth expectations than silver demand could drop.

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.