Silver Investment in the United States

In the United States, physical investment in silver is dominated by the purchase of oneounce bullion coins and 100-ounce bars. The bars are almost entirely produced locally. However, the surge in demand during 2008 saw a number of other institutions start to produce their own bars, including private mints and industrial manufacturers. The coin market is dominated by the US

Mint’s Eagle one-ounce bullion coin. A number of overseas bullion coins have also proved popular in the United States, particularly the Canadian Maple Leaf, although for example the AustrianVienna Philharmonic and Australian Kookaburra, Lunar and Koala coins have all

achieved some success.

The silver Eagle, first introduced in 1986, saw sales remain broadly stable during much of

the 2000s, averaging 9.4 Moz during 2000-2007. However, since 2008, minting has increased substantially, with total coin output in both 2008 and 2009 achieving successive records of 19.6 Moz and 28.8 Moz. Furthermore, 2010 is on course to post a new record high, with combined January-to-July sales up 27% year-on-year. Demand for these coins is so strong that the US Mint has at times struggled to keep pace. At the heart of the problem is the difficulty in sourcing sufficient planchets (or blanks). The growth in silver investment demand during 2008 pre-dated the collapse of Lehman Brothers, although the ensuing credit crisis led to heightened retail demand. This surge also led to heightened retail purchases of 100-ounce bars. Again, demand was so marked that shortages emerged in the bar market, which encouraged a number of new entrants to begin their own production. In 2010, although US bar demand has fallen noticeably, US coin minting has continued to grow, driven by firm demand at home and overseas, principally inWestern Europe,encouraged by Europe’s sovereign debt crisis.

Silver Demand in US Vs India

The United States has a rich history of silver mining and investment. American investors have long had a predilection for physical silver, favouring coins and bars to stash investment cash. On the retail side, many smaller investors like the portability of coins and smaller bars,and the discretion that comes with such investments. More sophisticated investors have sought to leverage silver investing with mining shares and mutual funds and more recently with exchange-traded funds (ETFs).When examining current silver investment in the United States and India, it is important to look at the global picture. Over the course of the last three years, world investment has more than tripled, rising from 61.7 Moz (millions of ounces) in 2007 to 215.6 Moz in 2009.From 2008 to 2009, global silver investment leapt by
a staggering 184%.Perhaps one of the most important developments in the silver investment market in the past 50 years was the advent of precious metals ETFs in 2004. These investment products, which trade like stocks, have served to ‘democratise’ global silver investing by making it convenient for retail investors who might otherwise have eschewed silver investing because of the difficulties of storage, insurance and assaying. That convenience, coupled with a global financial crisis and greater shifts toward portfolio diversification, has pushed the silver
price higher in recent years. Examining ETFs more closely, total holdings in 2009 rose by 132.5 Moz, ending the year at 397.8 Moz. The growth was the product of increased holdings of the three funds that were active at the beginning of 2009, and the launch of new silver ETFs in Australia and United States last year. On the whole, between 2005 and year-end 2009, the silver price increased a staggering 141%.
Turning to global silver coin and medal fabrication, this segment of investment demand grew by a hearty 21% to a new record of 78.7 Moz in 2009, driven by a spike
in retail demand. This increase was led primarily by the United States andWestern
Europe. Looking at the table below, silver coin and medal fabrication increased nearly 60% between 2000 and 2009.

Silver Demand in India

Indian silver demand, like gold, is largely fuelled by rural investors, mainly farmers who seek to convert some of their income into savings in the form of bangles, other jewellery and decorative ornaments. Shifts in demographics are slowly changing investment patterns in India, as increasing numbers move to urban areas. The June-to-September monsoon season remains an important factor in silver demand and bountiful rains are often the harbinger of upticks in investment.