Record gas prices and climbing food costs combined with the eroding the value of the dollar, have pushed the American Silver Eagle $1 bullion coin to more than $20.

Demand for the Silver Eagle, which is one ounce of 99 percent-pure silver, has become such a popular option for investors that the U.S. Mint can’t keep up with demand and has limited sales.

The mint has already sold about 7.6 million of the ASE coins in the first quarter of 2008 alone. Typically the annual mintage is between 8 million and 9 million coins per year.

“I think the 2008 Silver Eagles aren’t going to be scarce, they’re just going to be expensive because everyone wants one,” said one bullion dealer.

Despite the large number of silver coins in the market, the mint, a bureau of the U.S. Treasury, sent a memo to dealers last month stating that it would limit allocations to distributors.

The letter said: “The unprecedented demand for American Eagle Silver Bullion Coins necessitates our allocating these coins on a weekly basis until we are able to meet demand.”

Silver closed Wednesday down 45 cents to $17.38 per ounce on the New York Mercantile Exchange. But prices have doubled in three years and a case of 500 coins now sells for close to $10,000.

The mint has authorized only 13 buyers worldwide who can directly purchase the coins. The mint charges the going price of silver, plus a small premium, to this select number of brokerage companies, wholesalers, precious-metals firms, coin dealers and banks. One of those buyers, Coins ‘N Things Inc. in Bridgewater, Mass., said it has seen demand double compared to last year.

However, some distributors have complained that they’re losing serious money because of the mint’s rationing of the silver coins.

Mark Oliari, Coins ‘N Things Inc. owner, last week told the Wall Street Journal that the mint would sell him only 100,000 coins per week despite having demand from customers for about 500,000 coins per week.

Part of the demand here in the US is due to a rush by investors who are allowed to add the coins to Individual Retirement Accounts, however ultimately, demand has outstripped supply all over the world for silver. Mints in Australia and Canada have also had to limit supplies of each country’s silver bullion products.

Expect to see continued upward pressure on prices so long as supplies get smaller and bullion buyers appetites grow larger.