Saturday, January 22, 2011

Silver Eagle Sales vs Silver Price: 2003 - 2010

By now I'm sure any regular readers would have picked up that I love numbers & constructing charts. While numbers can be manipulated to tell a story, by themselves they are unbiased and without emotion, so even if someone presents a set of data or chart skewed for their benefit, as long as you can go back to the original source and see the figures in their original form then you can interpret them yourself and draw your own conclusions.

Today I've used two sets of data to produce the following charts.

The first set of data is from the US Mint and represents ounces of Silver sold. The US Mint only sells American Silver Eagles in one size variety (1 ounce), so each unit of sale is an ounce. The reason I mention this is that the Gold Eagle comes in a variety of sizes. The data I've used for the charts is available on the US Mint website: HERE. I had to compile it myself as saw no option to download the data.

The second set of data I used is available on the Perth Mint website: HERE. I used the monthly figures (London Fix Average, USD) for the Price of Silver (POS).

The first chart is both the POS and ASE coin sales on the one chart (click the picture for a much larger view):

There's some interesting anomalies in the chart.

The first few years of the bull market show sharp increases in sales every December (this pattern also flows through earlier years all the way from the 1980s), I suspect this is either buyers increasing orders for last supply of each year or putting in orders for the following years coin, perhaps those more familiar with the release dates of the earlier ASEs could comment below. Regardless, when sales started to increase from 2008 onwards this seasonal buying hasn't been so prevalent (infact December 2010 saw the lowest monthly number sold since September of 2009).

One of the most interesting things I found was that the spikes in earlier years of the bull were to around the 2 million ounce mark and that figure is now almost acting as support as the sales spike downwards from even higher numbers (what were high points for early years are now lows for today).

We are currently seeing higher highs and higher lows, the signs of a healthy trend. The chart begs the question though, are ASE sales causing so much demand that the POS is being driven higher or are sales increasing due to a the rising POS and increasing investor demand due to this? It's a bit of a 'chicken before the egg' conundrum!

The second chart shows the annual tallies of ASE sales (for the past 10 years). It's pretty incredible how they have simply taken off since the onset of the GFC. The sales in January 2008 are where things really heated up. The previous two January's (in December 2006 & 2007) had recorded only sales of around 1 million per month, January of 2008 saw over 2 million sold.

With January 2011 ASE sales already at over 4.5m ounces it's looking likely that this year will continue the trend to an even higher number of ounces sold over the year.

Silver has broken down through support at $28, but with manic buying like we are seeing presently I'm just not sure that I see the price heading much lower from here.

I do believe we are heading into the third phase of the bull market as I discussed in another recent post.

I did talk about downside targets for Silver a couple of months ago after the initial peak ($29.33) and pull back, however I will need to revise these figures given the price peaked higher after this. I will try and find some time this weekend to do update these targets.

Personally I wouldn't try and time pullback buying, we are already closing in on a 15% correction in price from the peak. This is a significant correction already, although I wouldn't discount the possibility of seeing low 20s again (if only briefly).


Disclosure: Position held in Silver. Not investment advice. Do your own research.

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