Investment demand for gold and silver fired on all cylinders in 2020 as the U.S. Mint data shows that demand for bullion gold and silver coin reached its highest level in four years.
According to its latest sales numbers, the U.S. Mint sold 884,000 ounces of gold in various denominations of its American Eagle gold coins. Physical gold demand saw a more than five-fold increase, up 455% compared to 152,000 ounces sold in 2019.
Sales of gold coins reached their highest level since 2016 when the mint sold nearly 2 million ounces of gold that year.
Looking at the silver market, the U.S. Mint saw its silver sales more than double compared to last year. According to the numbers, the U.S. Mint sold 30.01 million ounces of silver, up 101% compared to 2019.
Not only did demand for gold and coin sales reach a four-year high, but mints around the world struggled to deliver their products as supply chains were significantly disrupted due to global lockdown measures enacted by governments to try and slow the spread of the deadly virus.
According to the U.S. Mint, the busiest month was March. It sold 151,500 ounces as the world economy was devastated by the COVID-19 pandemic. According to analysts, investors raced into precious metals as a safe-haven asset as equity markets saw unprecedented selling pressure in March.
Peter Hug, global trading director at Kitco Metals, said that he is not surprised that investors jumped into gold and silver in March. He added that premiums for gold and silver coins reflected the rise in demand as supply dropped sharply. He noted that with silver trading around $12 an ounce, premiums for American Silver Eagles went as high as $12 an ounce.
“There was a lot of fear out there and some investors thought that the best way to protect themselves was with physical metal,” he said.
Hug added that improving investor sentiment has helped to push premiums for gold and silver back down to around pre-COVID-19 levels.
The second biggest month for gold coin sales came in August, which was another historical period for the precious metal. Investors bought physical gold as prices pushed to new record highs above $2,000 an ounce.
The U.S. Mint said that it sold 121,000 ounces of gold in August.
Looking ahead, Hug said that he expects gold and coin demand to continue to remain strong through 2021.
He added that gold could be sensitive to sharp corrections in equity markets as investors sell their precious metals to raise liquidity. However, despite any short-term selloff, the macro picture looks strong in 2021.
Not only will gold and silver coin demand benefit from further stimulus measures, but in the second half of the year, the precious metals should be driven by inflation pressures.
“I think one more stimulus deal is required to get us over the bridge and where the economy starts to normalize,” said Hug. “Once the economy starts to normalize, the amount of pent up demand will be so massive that you have to make the case that inflation will pick up significantly. Central banks will be behind the inflation curve and that will be good for gold and silver.”
Hug is not alone in his bullish outlook for gold and silver. Many analysts are expecting gold prices to push well above their recent all-time highs. Some banks are calling for prices to average $2,300 an ounce this year.
Silver is also expected to outperform gold, with many analysts have said that they look for prices to push well above $30 an ounce. A few analysts see silver rallying past its all-time highs above $50 an ounce.
By Neils Christensen