Suspended, Halted, Out of Stock: The New Gold and Silver Supply Crisis

Posted: May 05, 2013 12:01 AM

In the long history of precious metals, the past few weeks have been one for the record books. Gold has plunged to some of its lowest levels in over two years and suffered its biggest one day decline in over 30 years. While conventional news outlets have been busy drafting the Last Will and Testament of the world’s most valued metal, gold has been busy breaking sales records.

Ironically, dwindling supplies have been the storyline of silver for the past few years but when the US Mint announced that shortages were forcing them to halt production of the one-tenth ounce American Gold Eagle, the marketplace took notice.

American Gold Eagle coins are among the United States’ only investment-grade bullion coins and the most highly sought after. According to the Mint demand for the one-tenth ounce coin has increased 118 percent over this same time last year. The smaller gold coin contains .1000 gold troy ounce and like all American Eagles is backed by the US government for weight and gold content. The American Gold Eagle series is an investment benchmark that is known around the world and widely traded in global markets.

Silver holds a unique position as both an investment and an industrial metal and current demand is also staggering. Silver is prized for its many uses including jewelry, artwork, medicine, tableware, photography and, of course, currency. A critical conduit of the digital age, silver is also a vital component of smart phones, computers, robotics, circuit boards, solar panels, and satellites. In the last 60 years, our insatiable appetite for electronics has consumed 5000 years of silver pushing world inventory to its lowest level in 200 years. Twice already in 2013, the US Mint has also halted production of the American Silver Eagle due to inventory shortages.

So where have all the precious metals gone? Gold is clearly being acquired and held. Its recent price drop has resulted in a flood of seasoned investors looking to improve their position in gold as well as new investors seeking to own the world’s most tangible asset for the very first time. Amazingly, two tons of gold was sold on April 17th alone and demand remains at unprecedented levels.

Silver is quite simply disappearing. Some estimates claim that 95% of all the silver ever mined is now gone, having been consumed by man’s pursuit of industry, technology and communication. With endless, critical uses and ever-increasing demand, experts estimate that the world’s silver supply could be exhausted as soon as 2021.

With both metals suddenly in crisis, a new narrative has emerged as a concurrent run on gold and silver has triggered product shortages around the globe. Bullion dealers across the US are reporting colossal silver sales and depleted private mints. India’s jewelry sector is abuzz with gold shortage chatter. Gold dealers in Hong King and Bangkok are reporting massive buying and zero inventory. The Germans are hoarding silver; the Swiss are holding gold and so it goes when we underestimate the world’s most beautiful element and civilization’s most useful metal.

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