Buying Silver: Hot Trend of 2013

Buying silver has been one of the biggest trends at the U.S. Mint so far in this year. Demand for physical silver from smaller investors in the form of coins has shown a remarkable increase with a record 7.5 million ounces of silver coins sold in January.

On January 17, the U.S. Mint suspended sales of its American Eagle Silver Coins in order to replenish supplies after just ten days of availability. Sales were resumed on an allocation or rationing basis during the week of January 28.

The results of the U.S. election coincided with the end of the year fiscal debates to produce a strong safe-haven environment prior to the January sales figures for silver. The 2012-dated American Eagle Silver coin sold out in mid-December. UBS said with the U.S. Mint reporting notable sales volumes last November—when the U.S. held elections—and again this month when the U.S. fiscal issues are at the forefront, it is easy to infer that some element of the fear trade may be at play.

However, the strong sales figures that continued into January was in all likelihood unrelated to those political concerns affecting the markets as directly.

UBS did add in its not that it is important to keep an eye on U.S. coin sales in the coming months to see if volumes remain elevated. While the debt ceiling will play out over the coming months, the coin sales in the U.S. have certainly remained elevated, bringing new questions to the fundamentals behind the market.

HSBC, a major bullion bank, just this week raised its price forecasts for silver in 2013 and 2014, citing growing industrial demand and investor appetite for the metal. James Steele, an analyst with HSBC, said in a note that steady investor appetite for hard assets, strong coin and bar purchases and a bottoming out of jewelry demand makes the case for a rise in silver in the coming two years.

The bank raised its 2013 average silver price forecast to $33 per troy ounce from $32 per troy ounce and it also increased its 2014 forecast.

Steel said that while silver may be subject to many influences, we believe ongoing accommodative global monetary policies will be the single most important factor in ushering in higher prices.

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