Dollar’s Rally Pushes Gold Down

Gold is back under $1,700, mostly due to the dollar’s rally back to 113 on the U.S. Dollar Index vs. 110 a week ago and 97 at the start of the year. Last Friday, a “stronger than expected” jobs report pushed interest rates and the dollar up and gold and stocks down. Although the unemployment rate dropped to 3.5% that number is almost meaningless since it represents just the tip of the iceberg of unemployed people – those actively looking for work. It doesn’t include the nearly 100 million Americans age 15 to 64 who are Not in the Labor Force or who are not looking for work, which is up over 45% from 68+ million at the end of 1999.

The Mint Gives an Unsatisfactory Answer to Rep. Mooney’s Inquiry Over Silver Eagles

On September 21, 2022, U.S. Mint Director Ventris C. Gibson answered the August 25 letter of inquiry by West Virginia Republican Rep. Alex Mooney to her and Treasury Secretary Janet Yellen about certain irregularities in the timely and affordable delivery of American Silver Eagles – the most popular silver bullion coin in the world today. Deliveries have been delayed and premiums have risen to 70% above silver spot prices. In her response, the Director addressed five questions, the first being:

Does the Secretary believe the Silver American Eagle coin is being produced in “qualities and quantities that . . . are sufficient to meet public demand”?

In essence, she blamed the “currently limited availability of silver blanks” due to “disruptions in the silver blank vendor capabilities that resulted from the crippling effects of the pandemic,” but that seems to be an old story, with even President Biden saying, “the pandemic is over.” In this and another question, she notes “with pride” that the Mint stayed open while other Mints closed in the pandemic but most other Mints have managed to keep their silver bullion coins flowing and at far lower premiums over spot prices.

What Director Gibson may not have realized is that in her response she included what could be considered an admission to violating federal law regarding whether American Silver Eagle coins were being produced to support the current demand. Her response clearly stated the Mint made decisions on where to allocate its silver blanks in regard to bullion versus numismatic production. This contradicts the U.S. Mint’s previous policy and procedure. For example, the Mint stopped making numismatic proof American Silver Eagles to meet American Silver Eagle bullion demand because both utilize the same silver blanks

In her reply to Rep. Mooney, Director Gibson stated, “Given the limited supply of silver blanks, the United States Mint must judiciously consider how to divide those blanks among its various silver bullion coins and numismatic products.”

U.S. Code Ch. 31, Sect. 5112 (e) states, “(e)Notwithstanding any other provision of law, the Secretary shall mint and issue, in qualities and quantities that the Secretary determines are sufficient to meet public demand, coins which (1) are 40.6 millimeters in diameter and weigh 31.103 grams; (2) contain .999 fine silver; (3)have a design (A) symbolic of Liberty on the obverse side; and (B) of an eagle on the reverse side; (4) have inscriptions of the year of minting or issuance, and the words “Liberty”, “In God We Trust”, “United States of America”, “1 Oz. Fine Silver”, “E Pluribus Unum”, and “One Dollar” and (5) have reeded edges. (f) Silver Coins. (1) Sale price. The Secretary shall sell the coins minted under subsection (e) to the public at a price equal to the market value of the bullion at the time of sale, plus the cost of minting, marketing, and distributing such coins (including labor, materials, dies, use of machinery, and promotional and overhead expenses).

In a letter to our offices in September, Mint Director Gibson wrote, “This year, we significantly increased production quantities of one of our most popular coins, the American Eagle One Ounce Silver Dollar, which will lead to broader availability for our customers.” As we have shown in recent reports, that is patently untrue. Whether you compare current months to previous months, or to the same months last year, Silver American Eagle production is down, and down substantially when measured year-over-year.

In the first 9 months of 2021, the Mint sold 25,675,000 Ounces of Silver American Eagles. In the same nine months of 2022, the Mint sold 13,239,500 1-Ounce Silver American Eagles, a 48.4% decline. If you look at 2022 as a whole, there are fewer and fewer Silver American Eagles sold almost every month:

Where was the “significantly increased production quantities of one of our most popular coins, the American Eagle One Ounce Silver Dollar” this year, Director Ventris? In which month – May alone?

The Mint can blame a lack of blanks or silver supply but any global market in commodities is liquid enough that bidding up the price draws in the supply and silver prices are down in 2022.  Newly-mined supplies are rising, according to the Silver Institute, but demand is rising faster, so why isn’t the price rising? The answer, once again, is in the strong dollar. The silver price is rising in terms of most other currencies in 2022.

In regard to the Mint stating there is a shortage of blanks, their sales numbers show there was twice as much supply available from their suppliers in 2020 and 2021 – during the pandemic. One supplier provides the overwhelming majority of the blanks to the U.S. Mint. Enquiring minds want to know what made the difference this year in the number of blanks that they could provide.

Silver Fundamentals in the Pandemic Years (in Millions of Silver Ounces)