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Mints cash in on surging silver coin sales

By Jack Farchy in London , Financial Times,

17 Nov 2010

Silver coins are selling at a record pace as investors – especially in the US – seek to limit their exposure to the dollar.

The world's top mints have seen their silver coin sales jump to record or near-record levels, and they and coin dealers are working overtime to meet the surge in demand from investors.

"The phones are ringing off the hook," said Jonathan Potts, managing director of FideliTrade, a US coin dealership that is one of a few authorised to buy silver American Eagles directly from the US Mint.

The rush has been driven by a loss of faith in paper currencies in the wake of the Federal Reserve's decision to pump new money into the US economy. "We've all grown up with this total blind confidence in paper. Now we look and see there are cracks appearing," said Edward Ennis, head of commodities at Rothschild Private Bank.

Further, holdings of silver in exchange-traded funds have risen to a record, helping to drive the metal's price to a 30-year high of $29.33 an ounce last week.

While the price of gold is now well above the nominal record it touched in 1980, silver remains below the $50 an ounce it hit that year. Dealers said investors were buying silver in expectation that the so-called "poor man's gold" could soar in price.

David Madge, head of bullion sales at the Royal Canadian Mint, said sales of silver Maple Leaf coins had been "extremely strong". The mint had its best month for silver coin sales in October, and Mr Madge expects sales for the year to be at least 50 per cent higher than in 2009 – itself a record.

The US Mint is on track for its strongest monthly sales yet of silver American Eagles in November, selling 1.8m coins in the week up to Monday alone – twice the rate seen during its strongest month on record, December 1986. And the Austrian Mint is producing silver Vienna Philharmonic coins at a record pace after doubling output last week to keep up with demand, according to Andrea Lang, marketing director.

While the interest is primarily from retail investors, private bank clients and sovereign wealth funds have begun to increase investing in silver, bankers said. Although prices are largely driven by investor sentiment, silver – unlike gold – is also being helped by buoyant industrial demand.