-- Posted 3 November, 2011 | | Discuss This Article - Comments:

The US Mint released its silver sales figures, relaying to investors what was already known—investors want silver, and silver only.

The Mint ran into problems during September, taking more orders for coins than it had available in uncirculated condition. As of October 21, the problem in supplying the market with uncirculated coins has been smoothed out, and the market remains hungry for silver coins of all types, except those closest to numismatic coins.

The American Silver Eagle proof coins proved best in the most recent tally. Suspended during September, the coins boasted a 2% increase in sales as investors flock to anything silver. To see such incredible demand for a proof coin shows that there may be a fundamental change in the silver market.

Silver for Retirement

Silver investors aren’t picky when it comes to their silver. Seeking to preserve their purchasing power or profit on a rising silver price, investors seek out the coins that provide the most possible silver for the smallest cash outlay. Traditionally, proofs and other coins have been slow sellers with collectors because they offer some of the highest premiums.

The rise in sales for American Eagle proofs also contrasts in light of weak sales for another mostly numismatic coin, the 9/11 commemorative silver medal produced by the US Mint. The coin launched into a market that wasn’t exactly ready to buy with open wallets as it was willing to purchase silver Eagles.

These two data points may show a growing rift in the market. The commemorative proof coin can’t seem to find the volume that the silver eagle finds, even on a percentage basis. Eagle proof demand rose, while 9/11 coins couldn’t find enough traction to avoid a sales decline.

This should lead careful analysts of the silver market to think that silver coins may be going institutional—economically institutional, that is.

There are only a few choices for bullion investments in retirement accounts. Through the tax code which unfairly punishes bullion investors, the US government also makes certain that retirement savers don’t get their moneys’ worth in bullion purchases.

Modern IRAs, which can be invested in just about anything, cannot be invested in physical metals outside of a few choice silver bullion pieces—American Eagles, Canadian Maples, and Austrian Philharmonics—as well as bars from approved mints.

Knowing that most every coin dealer has a special selection of IRA approved products mostly filled with proof US Mint coins, it appears that IRA buyers are finally picking up steam. If it weren’t for the IRA, demand for all proofs would likely be constant—the market gives us numbers large enough that we would see a normal distribution in silver purchases. Proofs are proofs, and silver is silver.

When one proof coin sees improving demand while another falters, one must think that it is retirement savers that are driving the market. Coin dealers rarely add temporary silver medals or coins to their IRA stock, as there’s no way to be certain that supplies will exist for orders. Production is usually limited.

While IRAs may not be the best investment account to hold silver, it is encouraging to see more people rely on the savings power of metals to fight an inflationary climate. Past the numismatic premium, expensive silver is still better than expensive paper.

Dr. Jeffrey Lewis

www.silver-coin-investor.com