Silver Eagle Sales Hit Their Second-Highest Ever

We knew it would be a record… But the question remained: by how much?

The US Mint sold 6,422,000 Silver Eagles in January 2011 – half as many as were sold in the previous record-setting month of November 2010.

There are a few nattering nabobs who say the figures are skewed because the Mint credited some December sales to January. So what? If you add up December and January sales and average them, you still get the second-highest monthly total ever…right behind November 2010.

Fact is demand is intense.

After just one week, Canada’s biggest bullion bank sold out its limited stock of 100-ounce silver bars. Now ScotiaMocatta has no silver bars to sell in any size. One ounce, 5 ounces, 100 ounces and the kilobars – all gone.

For its part, the spot price of silver remains in “consolidation mode” – down this morning to $28.35. Gold is fetching $1,337 this morning.

For the second time this year, we’re hearing reports of high premiums for gold bars in Hong Kong – the highest since 1994, by one account.

Dealers attribute it to the advent of Lunar New Year in China and wedding season in India. “There’s a lot of interest from India,” a Singapore-based dealer tells Reuters, “but it’s just that we can’t meet their demand. Everybody is snatching the available stocks.”

That’s what Vancouver favorite Frank Holmes calls “the love trade” in gold – the traditional affinity for gold in emerging-market cultures. Then there’s the “fear trade.”

“The fear trade drivers,” says Frank, “are negative real interest rates and deficit spending to support social welfare programs. The Federal Reserve reaffirmed last week that real interest rates will remain negative for the long haul.”

Meanwhile, Frank reminds us that at $14.13 trillion dollars, we’re getting perilously close to the congressionally mandated national debt ceiling of $14.29 trillion.

“Since the mid-1980s, the US has raised its debt ceiling hand in hand with the country’s economic growth, even faster, in some cases.”

US Debt Ceiling Higher than GDP

Bottom line: “The only thing keeping gold prices from skyrocketing has been money supply, which has been slow to rise. The correction in gold appears to be over for the reasons cited above. We’re near the 200-day moving average, which is a key psychological support level.”

Addison Wiggin
for The Daily Reckoning