As demand jumps, Mint runs out of one-ounce gold coins

Gold-market bulls couldn’t buy publicity much better than this: The U.S. Mint says it has run out of one-ounce American Eagle gold coins amid rocketing demand.

Today, that strange turn of events may have helped fuel a sharp rebound in gold futures prices, although the metal also got plenty of help from rising U.S.-Russia tensions, a falling dollar and renewed buying of commodities across the board.

The Mint told coin dealers a week ago that its inventories of one-ounce Eagles had been temporarily depleted because of "unprecedented demand." The Mint sells only to a small number of dealers, which then distribute the coins to other sellers, such as coin shops.

The government has sold 60,000 one-ounce gold coins this month, up from 47,500 in all of July and just 13,000 in June. (See historical sales data here.) Sales of U.S. silver Eagle coins, meanwhile, have been hot all year, which has led to rationing of those coins by the Mint.

The announcement on gold Eagles last week wasn’t widely circulated in mainstream media until it reached the Wall Street Journal today. But some coin dealers confirm that they’ve been swamped with orders over the last month as gold dived from $977.70 an ounce on July 15 to $786 last Friday, the lowest since December.

The recent sell-off was fueled by a plunge in other commodities and by a rebound in the dollar.

Small investors apparently saw the price drop as a great chance to buy -- which is the opposite of what normally happens, said Ken Edwards, a partner at California Numismatic Investments in Inglewood.

"Usually we see increasing buying activity as we go up and increasing selling activity as we go down," he said. "Not this time."

Today, near-term gold futures in New York soared $22.70 to $833 an ounce. That's still well below the record closing high of $1,004.30 reached on March 18.

Gold’s fans say the metal -- which has risen every year since 2001 -- is shining again as a haven amid the financial system’s ongoing turmoil, surging inflation and concerns about increasingly rocky U.S. relations with Russia.

The Mint, however, obviously wasn’t planning on a spike in demand. Now it’s losing gold coin sales to other countries, including Canada, which makes the one-ounce Maple Leaf.

"We are working diligently to build up our inventory and hope to resume sales shortly," the Mint said.

By running out at a time like this, the government could just stoke demand on the part of potential gold buyers who’ve been on the fence.

"It’s human nature," said F. David Breahm, director of marketing at precious-metals dealer Blanchard and Co. in New Orleans. "When something’s not there, people tend to want it."

Image: American Eagle gold coin. Bloomberg News

Comments

[vijay]

The raise in demand is primarily due to festive season in India coupled with cheaper gold prices. It was told that the Gold shops in India are running out of Gold, and importing huge amounts of Gold to meet the customer demands. India is the world largest importer of yellow metal.

[Ryan]

Of course-- if gold doesn't rise today, it will rise tomorrow. If not tomorrow, then in a year. if not in a year, then 10. if not 10, then 20. But it will rise-- it is objectively a limited resource, and the subjective demand will not cease until the streets are paved with it. Buy when it is high, buy when it is low, it is a good investment. Gold will be the international safe haven in times of unsteady safety (like today), and the international standard in times of chaos (like "tomorrow"). Anything else is just paper and ink.

[James Monachino]

The beauty of a gold coin is timeless and it will always have some type of store value. However understand what you are doing. As an investment gold can be a real portfolio drag.

Issues to consider when Investing in gold:

Liquidity: Investment size sales can be costly especially during market stress because bid / ask spreads tend to widen significantly depending on who you are transacting with.

Commissions: On high profile coins such as the, Gold Eagle, Canadian Maple Leaf, South African Krug, etc.... they can be shopped and are reasonable.

Numismatic Coins: They are rich with high commissions and all types of potential fraud. Commissions can run as high as 30% plus and liquidity during heavy market selling periods can often default to gold metal value only.

Timing: Please refer to the link below showing a 37 year chart of the London PM gold spot price. You will find periods of over 20 years that gold stayed in a tight trading range earning no interest or price appreciation.

Link: http://www.gold-eagle.com/charts/35yeargold.html

Finally, their is no gold shortage but the demand is high for the American Eagle because it is a excellence choice for folks who want to purchase an American gold coin.