By Everett Millman – GainesvilleCoins.com….
It’s been a frustrating few months for retail silver buyers and silver stackers of all stripes. In virtually every corner of the planet, access to government-issued silver coins has been stuck in an unprecedented crunch. It’s not a development that has been isolated to one particular region or one particular mint. From Australia to Austria, and all across Asia and the Americas, government mints have had a difficult time churning out legal tender silver due to a lack of coin blanks. They can hardly keep pace with retail and investment demand—and, all things considered, it’s not even their fault.
You see, not every state mint can refine its own blanks on-site. (the Royal Canadian Mint is one noteworthy exception.) They must purchase them from reliable private minting facilities; chief among them in North America is Sunshine Minting, the company that produces the silver blanks used by the U.S. Mint for its American Silver Eagle coin.
Firms like Sunshine are in overdrive trying to pump out as many blanks as possible to meet demand.
Wholesale Supply Shortage
Even though it is touted across most of the headlines, there is not a silver shortage per se, at least not in terms of physical supplies. The shortage or supply crunch has hit wholesale suppliers, who must refine the silver to .999 purity and fashion the metal into circular blanks of exact size specifications.
It’s more efficient for the U.S. Mint to contract the silver blank production out to Sunshine Minting, allowing government facilities to focus on striking the coins rather than the first (and more labor-intensive) half of the process. At the same time, this means that any bottleneck or backlog on Sunshine’s end will inevitably lead to a silver shortage on the wholesale end of the business. The U.S. Mint is far from the only client of Sunshine (although it is likely the largest). As a result, even many privately minted silver rounds have been difficult to find in large quantities lately.
Sunshine’s main mint, headquartered in Idaho, as well as its branch facility in Las Vegas are both operating at full capacity (24 hours a day, 7 days a week) in order to meet the mounting demand. In addition to Silver Eagle planchets, Sunshine also produces the larger blanks for the 5 oz America the Beautiful (ATB) silver coins from the U.S. Mint.
A Note About the Silver Shortage
It’s true that government mints the world over have been forced into allocating supplies of their silver coins while waiting through delays from their wholesalers. In addition to small-sized 1 oz and 10 oz silver bars, even the bulk 1,000-ounce silver bars have also been in scarce supply.
The low availability of retail silver due to wholesale delays does not reflect vanishing silver ore or silver deposits, however. It can get confusing when the media conflates the current production crunch with an actual supply shortage. At the same time, this doesn’t rule out the possibility that actual silver stockpiles will become more difficult to find and mine in the future—but such an event is almost surely decades away, not months.
Bad News Is Good News for Silver
After weeks of stagnating with very little action or volatility, the precious metals seemed to “wake up” last week after a spate of bad news in the financial media. Weaker wage growth in the U.S. and abroad combined with chronically low inflation (disinflation) have spooked investors around the globe. In response to traders exiting equities, funds have steadily flowed into long positions on gold futures and silver futures. Meanwhile, traders cut net short positions on silver by the most (32%) since December.
Silver advanced 3.6% last week, and is managing to hold onto those gains as we progress through the fourth quarter. Spot silver traded at $16.18/oz on Wednesday afternoon, up about 1% on the day.