When it comes to market fundamentals, no two factors are more important than supply and demand. Market prices for any item move up when demand exceeds supply or when demand stays the same and supply shrinks. Likewise, declining supply in the face of increasing demand will push prices up. This is currently the case in the silver market, as illustrated by market desire for and U.S. Mint supply of American Silver Eagle Coins. 1
Supply and Demand Analysis: Silver Eagles
The U.S. Mint began producing American Silver Eagle Coins in 1986. These coins are the only investment-grade silver bullion coins produced by our country. Their beauty and design are one reason they are so popular. Silver Eagles are seen as one of the most desirable bullion coins by silver investors and those seeking to diversify their assets with bullion.
Many market observers hold that these factors combine to make this coin a good barometer of both investor sentiment and the demand for silver. If that is the case, the recent purchases of Silver American Eagles indicate record demand and decreasing supply. 2 In fact, the U.S. Mint has faced shortages of physical silver blanks and in turn limited minting of the coin on several occasions. 3
Additionally, this type of demand has been reported at other national mints, such as those of Australia and Canada. While there are many drivers that are creating additional silver demand, its position as a favored purchase 4 for small retail investors is well known.
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Why Silver Eagles Are so Popular
Purchasing American Silver Eagle Coins is a satisfying endeavor on several levels. First, the coins are very affordable, and they can be purchased in small quantities. Secondly, Silver Eagles are beautiful coins, especially the American Silver Eagle proof coin, making them ideal for holding personally or for giving as special gifts.
Foremost in many investors’ minds, however, is the coin’s liquidity and its ideal role for a backup in times of emergency. It doesn’t take a doomsday scenario to create situations where silver coins of this quality could be used to replace paper currency or non-working ATMs.
This sense of security comes along with some excellent financial advantages. Precious metal coins are a superior hedge against inflation. This makes these silver coins an excellent way to diversify while having the potential for significant appreciation in value as the demand for silver continues to rise. 5