Silver is capturing more and more headlines as record demand sends the spot price skyward. Since early February, silver is up about 20%, outpacing a coinciding rise in gold by nearly double.
According to Jeff Clark, Senior Editor of Casey’s Gold and Resource Report, 1Q sales by the U.S. Mint hit record highs with 9,023,500 coins sold, the highest volume since the coin was introduced in 1986. According to Clark, that kind of volume is creating a potentially explosive situation as U.S. Mint sales are now approaching parity with annual domestic production of 40 million ounces.
According to Clark, "This is especially explosive when you consider that roughly 40% of all silver is used for industrial applications, 30% for jewelry, 20% for photography and other uses, and only 5% or so for coins and medals." If we develop a dependency on foreign silver as we have on foreign oil, watch out! Prices could really take off.
Clark theorizes that silver’s rise in demand can be attributed to more people seeking the same kind of protection gold provides against inflation, loss of buying power and economic uncertainty, in general. Let’s face it! There are more people who can afford to add a few $20 coins to their retirement account than there are people who can add $1200 coins. It only stands to reason then, that the greater the fear becomes of hyperinflation, the more people there are that will try to hedge their retirement accounts against it.
If gold is an inflation hedge, so is silver. The only difference is, right now you can buy $100 worth of silver and feel like you have a pocketful of protection. Does this mean gold demand will whither? Don’t count on it. Both gold coins and coins like the American Silver Eagle Coin are poised for explosive moves and neither has ever been worth zero.