2008 Silver Eagle Shortage Saga Continues

For much of 2008, there has been an ongoing shortage of 2008 Silver Eagles. Demand for the coins has been intense, leading the Mint to briefly suspend distribution and ultimately ration the quantities supplied to authorized dealers. This post will take you through the major developments of the past few weeks...

A little over two weeks ago, the problem went mainstream when the Wall Street Journal covered the story:

The government rationed food during World War II and gasoline in the 1970s. Now, it's imposing quotas on another precious commodity: 2008 dollar coins known as silver eagles.

Following the exposure generated by the article, Michael DiRenzo, the Executive Director of the Silver Institute, wrote a letter to US Mint Director Edmund Moy, urging him to stabilize the program and requesting a meeting. From the letter:

Reports that the U.S. Mint is limiting the amount of coins its authorized buyers are allowed to purchase concerns the Institute, primarily because at the end of the supply chain awaits a customer, who is being inconvenienced and possibly shut out of the purchase of these coins.

We strongly believe there are immediate remedies at your disposal to increase the production and delivery of blanks to the Mint for production that would provide the coins in sufficient supply to the authorized dealers and ultimately to the customers. We further believe the Mint should be looking at methods to streamline the current process and offer safeguards through planning and a concerted shift in current strategy for the second half of 2008, and beyond.

The US Mint responded to the letter with a brief statement explaining the "exponential" demand for the coins along with indication that the Mint would attempt to increase its silver acquisition efforts to meet demand. From the statement:

By law, the United States Mint's American Eagle silver bullion coins must meet exacting specifications and must be composed of newly mined silver acquired from domestic sources. The United States Mint will continue to make every effort to increase its acquisition of silver bullion blanks that meet these specifications and requirements to address continuing high demand in the silver bullion coin market.

During the same week, US Citizen Bix Weir wrote an open letter to US Secretary of the Treasury Hank Paulson and US Mint Director Edmund Moy. The letter claimed that the US Mint's rationing of Silver Eagle coins was illegal and demanded that the rationing end immediately. The letter cited US law law which stipulates that Silver Eagles must be minted and issued in "quantities sufficient to meet public demand." From the letter:

The law is clear that the silver coins must be supplied to the US public in "quantities sufficient to meet public demand" EVEN IF it means the US Mint drives up the price of silver bullion on the open market in order to obtain the silver needed to produce the US Silver Eagles. That rise in price should, theoretically, decrease the current voracious demand for US Silver Eagles and allow for the true price discovery of silver bullion. That's how our freely traded markets are supposed to function in order to determine the “fair market value” of any asset.

So far, I have not seen any response from Hank Paulson, Edmund Moy, or the US Mint regarding this letter or its claims.

At the end of last week, the US Mint sent a memorandum to authorized purchasers of American Silver Eagles. The Mint is expecting that their next incoming shipment of silver blanks will be less than half the amount shipped the previous week. From the letter:

The quantities [silver blank vendors] will ship to us during the week of June 9 are expected to be less than half the quantities they shipped to us during the week of June 2. Our vendors, however, expect to be able to make incremental increases in supplies each week thereafter. In the mean time, the significant reduction in the number of blanks they supply to us will, of course, directly affect the quantity of coins we can make available for allocation to our Authorized Purchasers.

This latest development does not seem particularly encouraging. It appears that despite the Mint's efforts to increase acquisition of silver for the program, the supply available to them is decreasing. Will these problems persist and if so, what will be the result?

I think we will definitely see further outcry from individuals and interested organizations along with some additional mainstream news reporting. There might be more scrutiny over the Mint's silver acquisition process which seems to be at the root of the problem. Investors and coin collectors looking to invest in silver may re-visit old methods such as junk silver or silver bars. Alternately, other government issued silver bullion coins such as the Canadian Silver Maple Leaf may start to see an increase in popularity.

Any other thoughts? Comments are welcome below: