Silver too cheap to resist?

The Mint is out of silver American Eagles – Again.

What does it mean?

Other than the Mint seems to consistently underestimate its market, we should probably be cautious about jumping to conclusions.

Some think that the fact that the Mint sold more silver Eagles in October than in any month since January 2013 signals a coming silver price advance.

Certainly the fact that 5,790,000 silver Eagles flew out the door in October is impressive.

It is the best month since 7,498,000 were sold in January 2013, though the March 2014 sales total of 5,354,000 is a close third place.

It looks like if the Mint can produce the coins, it could outsell the 42,675,000 pieces it recorded in the full calendar year 2013 as the present running tally for 2014 stands at 39,096,000.

But it is still a big if.

Can the Mint secure enough blanks to do this?

Can it do this without jeopardizing the launch of the 2015 coins in January?

Lack of answers to these questions in the marketplace create the impression of a shortage and this seems to spur buyers to increase their activity.

If it is the Mint’s intention is to keep the secondary market premium on these coins at high levels, these periodic sellouts is a brilliant strategy.

Buyers seem to get more satisfaction on acquiring coins that others temporarily can’t get even if this increases the cost they must pay over actual melt value.

Back in April 2013 gold took a sudden $200 tumble from roughly $1,550 an ounce to $1,350.

The metal seemed cheap. Buyers scooped up massive numbers of gold Eagles.

Now a year and a half later, these individuals, if they still own the coins, have lost another $200 an ounce.

Will silver buyers who are scooping up silver Eagles because silver is dramatically cheaper face the same music a year and a half from now?

Obviously, they do not think so or they wouldn’t be buying.

But the April 2013 example should at least give pause to silver buyers to examine their real reasons for buying.

If they plan on holding the coins for five, 10 or 20 years, the risk is probably much less than if they might need the funds in a year or two.

That means following the old guidelines is a good idea. You might be making the right call in buying silver Eagles now, but you need to be in good enough shape to ride through a period where you might be wrong.

What if silver drops to $10 or even $5 on its way to the amazing $100 level forecast by some prognosticators?

When silver was $50 in 1980 the $5 level looked impossible. But it got there.

When silver was over $48 in April 2011, $5 silver again seemed impossible, but we are a whole lot closer now to that figure than we are to $50.

If you are a silver buyer, just make sure whichever way the market turns, you have the means to ride out the swings.

Even economist John Maynard Keynes was caught short and nearly bankrupted when he bet against Weimar Germany’s mark – the currency famously destroyed by inflation.

What everybody now thinks of as a no brainer speculation was not. The mark’s strength was temporary, but it lasted long enough to squeeze the finances of someone who should have known better.

Buzz blogger Dave Harper is winner of the 2014 Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper "Numismatic News."