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Silver Eagles update, early Monday 4/21/08

As noted in today’s earlier post, the U.S. Mint is allocating Silver Eagles to its distributors. Also as noted in the post, I speculated that the Mint may find that it does not have to allocate because demand may be much lower than it was in March. Still, premiums were up as renewed trading in Silver Eagles began.

One distributor kicked premiums .55/coin; another increased premiums only .15/coin. The increase in premiums necessitates that CMIGS raise its premiums .15/coin on Silver Eagles. As long as we can get Silver Eagles at the lower premium, we will maintain the lower price increase. If premiums fall back to where they were before the Mint ceased production, CMIGS will lower its premiums.

The Mint did not raise costs to the distributors. However, the distributors raised premiums because they expect to sell out quickly. (The distributor that raised premiums .55/coin expects to sell his allotment today.) Indeed, if investors eagerly pay the jacked-up premiums, we may see two developments.

One, the distributors may decide to make their premium increases permanent. Two, the Mint may note what’s happening and increase its premium. (The Mint has increased premiums on Silver Eagles only once in about the last six years.) Either way, a lot of eager Silver Eagles buying this week may cause a permanent increase in the Silver Eagles’ premium.

Although today may see brisk trading in Silver Eagles, I still believe there is a good chance that demand over the next week or so will be a lot less than what it was in March, when the Mint ceased production. If so, we can expect Silver Eagles premiums back to where they were before the ceased production, or at least close to where there were.

Good alternatives to the 2008-dated expensive Silver Eagles are backdated Silver Eagles and 1-oz silver rounds. As this is written, we have a good supply of Engelhard Prospectors, generic silver rounds and even some circulated Silver Eagles. Circulated Silver Eagles are treated as are silver rounds, usually packaged in bags and are priced the same as Engelhard Prospectors.