So far in 2013, buying silver coins has been one of investors’ favorite ways to profit from a climb in the white metal’s price.
The demand for physical silver from small investors in the form of coins is really remarkable. A record 7.5 million ounces of silver coins were sold in January.
In mid-January, the U.S. Mint was forced to announce that it was forced to suspend sales of the 1-ounce American Eagle silver bullion coins because, after just two weeks, it was sold out of its entire inventory.
Silver bullion coin sales were strong going into the close of last year as investors became concerned over the state of the U.S. economy with Congress debating the fiscal cliff and the debt ceiling.
UBS noted, "With the U.S. Mint reporting notable sales volumes last November – when the U.S. held elections – and again this month when U.S. fiscal issues are at the forefront, it is easy to infer that some element of the ‘fear trade’ may be at play."
UBS was skeptical of the fear trade, but added "Nevertheless, it is important to keep an eye on U.S. coin sales in the coming months to see if volumes remain elevated as the debt ceiling showdown plays out."
Famous investor Jim Rogers is also a fan of buying silver coins.
"You can’t get [silver coins]. They sell out," Rogers, who owns a rare 2013 silver coin, said on Yahoo! Finance’s"The Daily Ticker" earlier this month. "Several mints have run out of coins because everybody’s worried about the future of the world."
Buying Silver Coins Not the Only White Metal Play
Since silver requires much less capital than other precious metals such as gold and platinum, it has become the preferred metals investment for smaller investors.
It is also a favorite of Money Morning’s Global Resources Specialist, Peter Krauth. He called silver "gold on steroids" and is forecasting the price to rise to $54 an ounce sometime in 2013.
If the early demand trends for silver this year continue throughout 2013, that forecast has a very good chance of being realized.
And buying silver coins isn’t the only way investors have shown their love for the white metal.
Investors were also busy purchasing silver-backed exchange traded funds.
Earlier this year, the biggest silver ETF – the iShares Silver Trust – saw its assets climb by the most in five years. According to data from iShares as reported by Bloomberg News, holdings jumped 572 metric tons, or 5.9%. This was the largest rise in assets since December 2007.
The leap in silver held, worth approximately $579 million, brought the total silver held by SLV to 10.735 metric tons. That is the highest level since May 2012.
Of course, there are other silver-backed exchange traded products in addition to SLV. Examples include the ETFS Silver Trust and the Sprott Physical Silver Trust.
Worldwide investment into all such silver-backed products is at a record 19,114 metric tons, according to data compiled by Barclays and Bloomberg. That is the equivalent of about nine months of global mine output.
Mark O’Byrne, executive director of GoldCore Ltd., a Dublin brokerage that that sells and stores bullion coins and bars, told Bloomberg "[Investor] allocations to silver remain very small, which suggests that the holdings could go higher, resulting in higher silver prices again in 2013."
Analyst data compiled by Bloomberg in December suggests that higher silver prices are indeed in the cards for 2013. The average among 49 analysts polled by Bloomberg forecast a price of $40.25 an ounce for silver, a 28% rise for the year.
With continued physical demand from investors searching for a safe haven, and the high number of investors buying silver coins, it looks like the journey higher for silver is far from over.
Reprinted with permission from Money Morning.