The new gold rush: Supply of coins tight at Tucson stores
Arizona Coin Collector
There is and interesting photo on the link below
showing Gold Coins.
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FROM:
http://www.azstarnet.com/sn/business/265218.php
Business
The new gold rush: Supply of coins tight at Tucson stores
Oddly, demand is up, supply is down, but price is dropping
By Dan Sorenson
arizona daily star
Tucson, Arizona
Published: 11.02.2008
Your college Econ 101 course may not help you understand
the latest gold coin rush.
Banks have been on wobbly knees, the stock market has
been plunging, and 401(k)s are as deflated and sad as
four-day-old party balloons.
Your college Econ 101 course may not help you
understand the latest gold coin rush.
Banks have been on wobbly knees, the stock market has
been plunging, and 401(k)s are as deflated and sad as
four-day-old party balloons.
But, oddly, gold has been both falling in price and
in short supply for those looking for a safe haven
during the stock market storm. Some Tucson dealers
say gold coins are scarce at best, even as gold - and
silver - prices are falling.
There is even more complexity within that scenario,
local dealers say.
Retail gold coins generally sell for the current price
of the metal they contain, plus a "premium" - the
dealer's fee - on each coin. Of late, the premiums
have risen significantly to reflect the shortage of
supply of some denominations, the dealers say.
"I get 10 to 20 calls a day, 'Do you have any gold
or silver?' We don't have any, and we can't get any,"
said Peter Spooner, a coin expert at American Stamp
& Coin, 7225 N. Oracle Road.
"There are people who are selling their stocks to get
into gold and silver because they fear we are going
into a tremendous depression," said Spooner. Yet,
he noted, the "price of paper (futures contract)
gold is dropping while the price of owning actual
hold-in-my-hand gold is going up" when the seller's
premium is added.
Historically, it would be cheaper to buy an ounce
of gold in one coin than to buy an ounce as four
quarter-ounce coins. But the price for an ounce of
gold is actually cheaper if you buy it as four
quarter-ounce coins than in a single 1-ounce
coin - if you could find one, said Brett Sadovnick,
owner of Tucson Coin & Autograph, 6470 N. Oracle Road.
In this case, a classical supply-and-demand
situation is at work: There's more demand for the
1-ounce coins than the quarter-ounce and other
smaller coins, so it's driven up the price of the
1-ounce coins.
Buyers might be newcomers
Sadovnick isn't quite sure why buyers are fixated
on the 1-ounce coins. Gold is gold, purity
being equal.
It could be that the buyers driving the demand
for the 1-ounce American Eagle coins are
newcomers fleeing the wild uncertainty of the
stock market for the relative calm of the world's
longtime favorite precious metal. Maybe they feel
better about owning the hefty full-ounce
American Eagle, rather than a handful of smaller
gold coins - half-, quarter- or tenth-ounce - that
weigh just as much. Sadovnick isn't sure.
"I've been a coin dealer in Tucson since 1998, a
professional since 1974. I haven't seen a
situation quite like this," said Sadovnick. Not
even the crazy precious metals roller-coaster
days of early 1980 - when gold hit $850 an ounce
for one day - compares, Sadovnick said.
And it's not just gold, he said.
"I placed an order a month ago, 1,000 1-ounce
silver bars. I paid him spot (the spot price),
plus $2.50 an ounce premium," Sadovnick said.
That order might not arrive till January.
"Three months ago I could have bought it from
them for the price of silver, plus $1.50 an
ounce, and I would have had delivery in a few
days."
Even Jim Ganem, owner of the venerable Arizona
Stamp & Coin, 4668 E. Speedway, is baffled.
The shop is the only Tucson dealer mentioned on
the U.S. Mint's Web site as dealers of American
Eagle coins, and Ganem says he can't get any
Eagles, or anything regularly. He said the U.S.
Mint sent out a notice saying it isn't making
the coins because even they can't get the gold
blanks to stamp.
"40 buyers to one seller"
Ganem said hedge funds are dumping billions of
dollars worth of gold contracts they hold,
driving down the price of gold. But to actually
get gold, not just a contract, buyers are
having to pay a premium - a higher premium than
he can recall in the past.
Some of those contract holders are asking for
the gold they represent, instead of just trading
in the paper. But that gold is disappearing in
an instant on the spot market, said Ganem. He
said he gets a few chances a day to buy gold
that becomes available, but that it disappears
in a matter of minutes.
"Typically," he said, "we're running 40 buyers
to one seller right now coming into the store
to purchase. People don't want to be in the
stocks, real estate, and they don't trust the
banks - three typical havens for large amounts
of money; the other one is metal."
One would think the skidding stock market and
real estate decline would be driving up gold
and silver prices. And while it did initially,
in September, the price of precious-metal
futures plunged in October.
An industry expert in Phoenix said the gold
market isn't behaving in a traditional manner.
David Henry of Arizona Coin Exchange Inc. in
Phoenix is a wholesaler who sells to coin and
precious metals retailers. He said most people
who buy paper gold, contracts, never
physically possess the gold, choosing instead
to resell the contracts, hopefully for more
than it cost them.
"You can get it, physically, but it's
complicated," Henry said.
Physically possessing gold is an entirely
different mechanism, Henry said, something
that is done for security - a way to safely
hold value, often for a very long time.
Unfortunately, he said, this is an occasion
for a "Perfect Storm" scenario.
The price isn't high enough to bring sellers
into the front door of coin and precious
metal shops, and the main source of new
gold, the federal government, can't deliver.
Spooner said the vagaries of the current
gold market don't change his view of gold.
"I don't present gold as an investment,"
said Spooner. "Buying a half- to 1-ounce
piece of gold every month is like
insurance . . . like portfolio insurance.
In economic turmoil, it's a flight to safety."
? Contact reporter Dan Sorenson at 573-4185
or dsor...@azstarnet.com
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