Silver and Gold Looking to Make a Turnaround

Silver soared by over $1 an ounce on Monday, September 12, rising from $18.80 to $19.85, touching $20 at one point. Gold also rose Monday, as the U.S. dollar finally took a dip, with investors waiting for the release of the Consumer Price Index (CPI). On Tuesday morning, the CPI came in “hotter” than expected, which sent both stocks and gold down, since that implied more rate increases down the line.

Last week, gold rose for the first time in four weeks, on hopes that next week’s interest rate increase would be the last. The U.S. Dollar Index (DXY) hit a 20-year high last week, up 15% this year and +19% in the last 12 months. Without that strong rise in the dollar, gold would be up significantly this year, while as of last Friday, gold was up 7% in euro terms, 10% in the British pound and +15% in the Japanese yen. Gold’s value remains stronger related to foreign currencies.

“Core” Consumer Price Inflation is Double the Rate Expected

Inflation came in much higher than expected Tuesday morning. Consensus expectations called for the Consumer Price Index (CPI) to decline 0.1% (month over month) with the core reading (subtracting food and energy) rising 0.3%, but the actual numbers were a monthly gain of +0.1% with a “core” reading of +0.6% (a 7.5% annual rate, compounded). This was double the consensus expectation of the experts. The 12-month CPI increase is 8.3%, only slightly down from 8.5% in July and a peak of 9.1.% in June.

The CPI news came out an hour before the stock market opened, so market futures were hit hard first. Then the Dow Jones Industrial Average fell by 800 points in the first five minutes of trading and remained down 900 points at noon. After high inflation numbers like these, the Fed will find it increasingly difficult to say that inflation has “peaked” or is “transitory” or has been “solved.” The Fed is expected to continue raising rates after September 21st, and that is probably the reason why gold also declined.

Congressman Alex Mooney Looks into the Mint’s Chronic Silver Shortages and Delays

U.S. Mint sales of gold bullion coins declined in August but they were up for the year-to-date.

By contrast, silver bullion coin sales continue to decline, year-over-year, due to the shortage of silver “blanks” for minting new coins. This has caused Congressional Representative Alex Mooney, R-WV, to write a letter to Treasury Secretary Janet Yellen and U.S. Mint Director Ventris C. Gibson. Mooney is asking why they have allowed such long delays and high premiums for Silver American Eagles. In his letter, Mooney claims “a long-running production slowdown has led to shortages and dramatically higher market prices for this iconic silver coin as compared to its peers worldwide.”

Mooney alleges that Secretary Yellen is in violation of Chapter 31, Section 5112(e) of the United States Code that directs the secretary to ensure the minting and sales of quantities to meet public demand for the 1-ounce .999 fine silver bullion coins.

U.S. Code Ch. 31, Sect. (e) further 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). (2) BULK SALES.The Secretary shall make bulk sales of the coins minted under subsection (e) at a reasonable discount.”

Americans have sought to hedge their assets against the high rates of inflation caused, in large part, by excessive government spending.

Mooney continued: “According to reports, overall market demand for bullion coins, bars, and other items, has thus risen to higher levels than seen in recent years, if not ever. Yet the U.S. Mint has only made 11.6 million ounces of its silver American Eagle bullion coin available to the public this year — half of what was supplied through the first seven months of prior years when demand was similarly strong. This shortage in U.S. Mint production has apparently led to extremely high market-based premiums on silver Eagles — as high as 70 percent over the silver melt value — even as comparable items produced by other sovereign mints and private mints were not beset by such shortages or historically high premiums. The high costs resulting from the U.S. Mint production shortage directly harm U.S. citizens wishing to avail themselves of a U.S. legal tender means of protecting their financial security from effects of inflation.”

Mooney’s August 25 letter specifically asked the following questions of Secretary Yellen:

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

➤ Why is only a single supplier currently allowed to (or willing to) provide the U.S. Mint with silver blanks for its silver American Eagle program?

➤ Given its statutory mandate to amply supply these coins to the public, why doesn’t the U.S. Mint have a policy to build a reserve of silver blanks during periods of slower demand in order to create a buffer for periods of higher demand? ➤ Has the U.S. Mint examined the practices of other sovereign mints, such as the Britain’s Royal Mint, Australia’s Perth Mint, the Austrian Mint, and the Royal Canadian Mint, to learn from their relative success in meeting high public demand for their own silver coins? If so, what were the resulting findings or recommendations?

➤ What actions are currently being undertaken to address the Mint’s production problems (which reportedly extend beyond the American Eagle silver coin program) and when will the U.S. Mint once again be able to fulfill its mandate to meet public demand?

Most of the world’s government-run mints that issue silver bullion coins manufacture their own blanks for production after securing, refining and alloying the proper metals to execute those blanks. However, the U.S. Mint uses blanks from contracted vendors. The U.S. Mint does not and has never produced blanks for their silver American Eagle program and the Mint currently has no refining capacities.

We await a response from the Treasury Secretary and Director of the Mint to Rep. Mooney’s inquiries.

Meanwhile, we received a letter from Gibson, the Mint Director, which stated in part, “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.”

This response is, at best, inaccurate given the Mint’s own numbers showing sales numbers for the 2022 Silver American Eagle in significantly lower quantities than in previous years, while demand is at its highest.

To get the best value in precious metals available, whether it be silver or gold, contact your professional account representative, today.

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