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FOCUS: Retail Investors Continue To Want Silver Even As Prices Drop

By Neils Christensen of Kitco News
Monday April 15, 2013 5:20 PM

(Kitco News) - Silver demand from retail customers remains strong even as prices are down 23% for the year with the current slump in prices.

On Monday Comex May futures closed shed almost 11% and closed at the session at $23.43 an ounce, its lowest close since October 2010. A market is considered in a bear market when prices are down 20% or more.

Despite the selloff, retail buyers are clamoring for silver and private mints are having problems keeping up with demand for smaller-sized denominations.

The demand for U.S. silver coins was robust in the first quarter of 2013. The U.S. Mint said year-on-year sales of U.S. silver coins surged by 32%, to 3.36 million ounces.

The strong demand for silver coins means the U.S. Mint has been selling on a set allocation, said Tom Power, president and chief executive officer of Sunshine Minting Inc. The U.S. Mint sells coins to authorized purchasers, who then sell them to the public. In times of high demand, the Mint will limit how many coins each authorized purchaser can receive.

Power said Sunshine Minting is seeing such demand and the firm is working at near capacity to keep up. Sunshine Minting is a leading domestic and global supplier of precious metal and base metal mint products. The company’s customer base includes governments, financial institutions, and corporations.

“We are working 24 hours a day and are looking for ways in increase our production,” he said. “If our customers see another strong push for bullion, they could have problems meeting that demand.”

The retail physical demand is has been at odds with the activity in the futures and exchange-traded fund markets. The futures market has seen speculative short positions rising, while the ETFs are little activity or at least outflows. It’s the weakness in those markets that has pulled down the price of silver.

Power said the smaller retail business is acting completely differently. “This doesn’t really impact the demand for smaller investors because they typically aren’t buying 1,000 ounce bars. Retail investors are buying one ounce, 10 ounces and 100 ounces,” he said.

Jim Pavlakos, president of Golden State Mint said, that some dealers have definitely seen an increase in demand for silver and are even willing to pay a premium to get a faster delivery time to meet the growing demand. Golded State Mint has produced millions of rounds for very large coin and bullion dealers.

Pavlakos said that they work with both dealers and retail investors and these people tell him that they are buying silver and other precious metals because they want to protect their wealth.

“Demand from retail investors has steadily increased over the years,” he said. “Concerns for all currencies continue to build and people just want some security. They know that sooner or later that silver is going to be worth more than what they paid for it.”

Pavlakos said that investors have been taking advantage of the selloff on Friday and Monday to lock in lower prices.

“Friday was our biggest days in 30 years,” he said. “Monday has surpassed Friday’s sales and the office is still open and we have no shortage of physical metal.”

By Neils Christensen of Kitco News nchristensen@kitco.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 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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