Friday, January 6, 2012

Silver American Eagle Sales Go Parabolic

In the previous post the yearly mintage volume of American Eagle bullion coins was shown. Today, the 'sales value' is presented based on the average yearly price of silver and gold. The sales value of silver has always been much less than that of gold...until recently. There's been a significant acceleration in silver investment relative to gold that hasn't been seen since the inception of the American Eagle program in 1986. Whether the US mint can keep up with demand in 2012 remains to be seen, but the trend is nothing less than striking.

As of this writing (the first week of January 2012), there has already been 3.37 million ounces of silver American Eagle coins sold. If that rate were extrapolated to 52 weeks, it would amount to over 175 million ounces (over $5B worth of silver at $30/oz). Of course I don't expect that number to be achieved, nor could the US mint satisfy such demand, but it illustrates the unabated investment interest going into the New Year. Please keep in mind that this is only for US Mint issued American Eagle coins and does not include industrial or other Mint demand. Needless to say, something substantial is occurring in the physical market.

Figure 1: American Eagle sales value based on average yearly price of gold and silver. Not adjusted for inflation.

Wednesday, January 4, 2012

U.S. American Eagle Mintage Chart 1986-2011

Below is a simple graphic depicting the annual mintage of U.S. gold and silver American Eagle bullion coins from 1986 through 2011. A passing glance reveals that silver eagle demand has continued to grow at an extremely robust pace, closing 2011 with a mintage of nearly 40 million ounces. Depicted another way, that's more than the entire 2010 US silver mine production, which was estimated to be 38.6 million ounces by the Silver Institute. Said yet another way, every ounce of silver that comes out of the ground in the United States is put into the hands of someone trading paper currency for silver bullion money.

Figure 1: Gold and silver American Eagle mintage from 1986-2011.

Monday, January 2, 2012

2012-2015 Outlook: It's on Like Donkey Kong

There are two dominant forces that tend to dictate future events, the first is the fundamental interactions between parameters, and the second is the widely-held belief that certain events are likely to occur. It is the difference between fundamentals driving reality, and perspective driving reality, where people and their actions couple the two. Fundamentals and peoples' widely held views don't always have to be divergent, but often they are for the simple fact that the system is sufficiently complex that the majority are easily led astray. Think of it this way, few people are going to get it 'right', most are going to have a 'wrong' view of the future, and thus the 'wrongs' outweigh the 'rights' and the overall trajectory is skewed. In addition, everyone wants to paint their own picture of reality, which creates a hodgepodge composition that affects peoples' actions, alters reality, and influences the underlying fundamentals. That is one avenue of divergence, but another centers on the simple fact that unpredictable things occur, they simply happen. Call them Black Swan events that can't be predicted with a reasonable degree of certainty. With all of that said, fundamentals always win in the long run. It's the equilibrium solution, like a ball resting at the bottom of a hill. When the ball rolls down the hill it may hit bumps sending it skyward, but ultimately it's headed toward the valley where it will find its equilibrium.

So what does all of this mean for the upcoming year? It simply implies that the ball has not changed course, the fundamentals are not better, in fact they're worse. In addition, the widely-held perception that things are getting better has vanished from the minds' of anyone who is even remotely in tune with reality. At best the economy is on life support, which I suppose is better than cardiac arrest, but it's still not as glamorous as many would lead you to believe.

Let us not forget the conditions still in play:

  • MF Global has gone bankrupt, stealing over a billion dollars of clients' money
  • Nearly 100 US banks failed in 2011
  • The Federal Reserve has effectively bailed out Europe an unknown number of times
  • The national debt has surpassed $15 trillion, like a boss:
  • The infamous NDAA Bill was passed, allowing US Citizens to be locked up indefinitely... just because
  • SOPA, the internet censorship bill is being proposed
  • As the US winds down the war in Iraq they ratchet up the rhetoric on Syria and Iran
  • The people are restless, all over. Let's get a refresher on the current state of dissidence: The Tea Party Movement, Occupy Wall Street, Arab Spring (Egyptian Revolution, Yemeni Uprising, Syrian Uprising, Saudi Payoff, Iranian Protests, Tunisian Protests, Bahraini Protests etc.), Jasmine Revolution, Greek Riots, London Riots, Russian Election Protests, etc.
Predictions for 2012

I have none. I've always said that the capitulation of the 'Great Recession' will certainly occur before 2020, most likely before 2015, and possibly as early as 2012. To put that into a more quantitative form represented by pseudo-statistics, 95% by 2020, 90% by 2015, 50% by 2012 end. So what does capitulation look like? It will be the height of poverty, the pinnacle of unrest, and the definition of uncertainty. The world that exists on the other-side will be foreign, and a new era will emerge, for better or worse. 

Though capitulation could have occurred at any time up until now, it hasn't, even with significant strains on the system. With that said, time creates exponential results and the more time that passes the greater the likelihood of a significant event occurring. The time frame between 2012 and 2015 is the 'moment of truth', and yes, it's only a moment. A snapshot that will define all generations to follow, again, for better or worse. Should the people stand up and assert themselves, the outlook could be very bright, but they must be willing to do so, they must rise and seize the day.