The Phaserl


Why Government Coin Sales ARE Meaningful

by Chris Marchese, GoldSeek:

Many Internet discussions of government coin sales conclude–“Those are meaningless amounts because they account for such a small percentage of total supply (Primary + Secondary Supply).” But only part of this statement is correct, that is they account for a relatively small percentage (~14%) of total supply.

However they are not meaningless, for several reasons. The first is that demand for silver coinage can increase very sharply. When the 2008 financial crisis took place demand for silver eagles doubled. After the financial crisis of 2008 the demand doubled AGAIN! That is correct; prior to 2008 the demand for US mint silver was about 10 million ounces per year. Financial crisis doubles the demand- interesting?

And post 2008 many more people “woke up” to the idea that precious metals are a nonrecourse way of owning real money without interference. Even with the “recovery” the demand for silver of this type (government minted coins) has not abated—again interesting?

Could demand double again? Certainly if you consider the global economy is in a more dangerous place relative to 2008. More debt that cannot be serviced based on oil prices that no longer exist, monetary inflation going to the banking sector, and the rampant debt accumulation across the board.

Thus if government issued silver coinage were to double over 2014, it would increase total demand to over 140m oz.[1] This is a significant increase and could cause prices to increases at least in a market absent of intervention.
Furthermore, because we don’t know how tight the silver market actually is, otherwise the demand needed for the physical market to overtake the paper market, could be a modest amount. All markets move at the margin and the last ounce sold at a given (low) price could be enough to see the price of silver gap up significantly. If we follow the logic an investment by a modest size fund could potentially trigger the price of silver to skyrocket.

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