Gold coin shortage likely to become chronic
Ned
* In 2008, with the world embroiled in an unprecedented
economic crisis and once again under the strain of record
gold demand, the U.S. Mint produced only 710,000 1-ounce
American Eagles and 189,500 1-ounce American Gold Buffaloes
-- just under half its 1999 production.
* all the 1-ounce gold blanks purchased by the Mint now
come from one refiner in the western United States.
* with global refiners already running at capacity, Mint
officials' attempts to line up additional blank
manufacturers are likely to be rebuffed.
Mike Marotta
Thanks for the pointer, Ned.
From that feature --
"A historical precedent can be found in the gold market of the late
1960s. At that time gold was pegged at $35. As the dollar crisis of
the late 1960s and early 1970s unfolded, investors globally began
moving into gold coins like the U.S. $20 gold piece, the British
sovereign, the German 20 mark, Swiss 20 franc, et al. Though the gold
price itself was fixed, premiums on gold coins were not. The demand
drove premiums on these coins to unimaginable levels -- in some case
four to five times melt value.
"We got a whiff of that sort of thing when contemporary gold coins
briefly reached premiums of 12 to 15 percent at the height of the gold
rush in 2008. (Pre-1933 gold coins went to premiums in excess of 20
percent.) Once the market settled down, though, a base premium 2
percentage points above normal remained."
A couple of sidelights to all of this.... I am not sure that I
remember the 1970s the same way as the author of the GoldSeek
feature. While US$20 Saints and Liberties did commant premiums of
60%, the reason was primarly because US buyers demanded US objects and
foreign gold was under-demaded. The assertion of
common gold coins selling for four or five times of is just not
consonant with my record.
Also, if demand is so strong, why is the price so low? If people are
afraid of inflation, etc., and are bidding up the premiums on coins,
why does the price of gold remain below $1000 (well below), even as
goldbugs claim that prices two or three times that "are just around
the corner" .... (as in fact, they always seem to be...)
The way I see it, the price of gold is what it is becuase the supply
meets the demand. The premiums on coins are a result of dealers not
being willing to sell now, preferring to hold now and hoping to sell
for more later. Basically, the actual retail price of gold is,
indeed, over $1000 per ounce, but that is achieved by selling at a
large premium over spot.
Bullion Coin Margins
Liberty Coin Service, :Lansing, Michigan
(For lots of 10 coiins or more)
*Austria 100 Corona 5.1%
*U.S. 1 Oz Gold Eagle 8.7%
*U.S. 1/10 Oz Gold Eagle 37.0%
*U.S. 1 Oz Gold Buffalo 10.7%
*U.S. Medallion 4.7%
*S. Africa Krugerrand 7.2%
*British Sovereign 20.0%
*Canada 1 Oz Maple Leaf 6.8%
*France 20 Franc 20.0%
*Swiss 20 Franc 20.0%
*Mexico 50 Peso 5.7%
*China 1 Oz Panda 8.7%
$20 Liberty BU 59.6%
$20 St Gaudens BU 59.6%
*$20 Liberty EF 50.0%
*$10 Liberty EF 51.7%
$10 Indian EF 69.7%
*$5 Liberty EF 61.8%
$5 Indian EF 69.9%
$2.50 Liberty EF 108.6%
$2.50 Indian EF 117.6%
*U.S. 90% Silver Coin 18.0%
*U.S. Silver Eagle-34.4%
*Canada Silver Maple Leaf 34.4%
Again, small US coins are the most demanded. People want something
familiar and convenient for retail. At $1000 per ounce, $150 is a
fair price to pay for 1/10 of an ounce.
There is a feeling within the numismatic community that the publicly-
announced spot price of gold is a mere press release and not
reflective of the actual price.
Videos to watch here.
http://www.gata.org/node/20
Papers and articles on the homepage, of course.
Mike M.
Michael E. Marotta
Always collecting FRNs