US draws down silver stocks

In 1999, the U.S. Mint consumed nearly 10.3 million oz. silver for coins, dramatically reducing stocks of silver from the country’s reserve of strategic metals, the National Defense Stockpile, reports the Washington, D.C.-based Silver Institute.

Once this supply is exhausted, the U.S. Mint must purchase silver for coins on the open market. This will increase demand for the white metal, further widening the gap between overall silver supply and fabrication demand. Between 1990 and 1999, cumulative silver fabrication demand far exceeded mine production, resulting in the reduction of above-ground inventories by an estimated 1.3 billion oz.

Nearly 9.5 million oz. silver were used in American Eagle coins in 1999, while the manufacture of commemorative coins consumed roughly 460,000 oz. Approximately 360,000 oz. were used in the production of commemorative silver proof coin sets.

In December 1999, the Defense Department’s silver stockpile totalled 21.2 million oz, down from 139.5 million oz. in the late 1980s. The silver stockpile once posed a serious threat to the market, when government officials determined it was no longer needed and that domestic production, combined with imports, could sustain the U.S. in the event of an emergency.

In the early 1980s, the General Accounting Office recommended that silver from the stockpile be used to make coins rather than sold on the open market. The proposal, implemented by Congress in 1986, sought to eliminate price disruption by developing new demand to offset the increased supply.