Is the U.S. Mint Running Out of Coins?
Is the U.S. Mint running out of coins? Surprisingly, the answer is, "yes!" As many collectors are aware, the Mint has had trouble keeping up with demand for the Silver Eagle one ounce bullion coins since March. In September, the Mint announced that it had run out of the one ounce Gold Buffalo coins. Today, the Mint sent out a notice to all of its Authorized Purchasers that the stock of Gold American Eagles had run out for certain sizes of coins. Here is the text of the notice the Mint sent:
October 6, 2008
MEMORANDUM TO ALL AMERICAN EAGLE AND AMERICAN BUFFALO AUTHORIZED PURCHASERS
SUBJECT: 2008-Dated Bullion Products
Due to the extreme fluctuating market conditions for 2008, as well as current market conditions, gold and silver demand is unprecedented and the demand for platinum is unusually high.
The United States Mint has worked diligently to attempt to meet demand, however, blank supplies are very limited and it is necessary for the United States Mint to focus remaining bullion production primarily on American Eagle Gold One Ounce and Silver One Ounce Coins.
For the remainder of 2008 bullion inventory, the following will apply:
American Eagle Gold Bullion Coins
One Ounce Coins will remain on allocation each week. Allocation amounts are based on available quality blanks each week.
One Half Ounce Coins: Inventory was depleted last week. No more coins will be produced for 2008.
One Quarter Ounce Coins: Inventory was depleted last week. No more coins will be produced for 2008.
One Tenth Ounce Coins: Inventory was depleted last week. More coins will be produced based on current blank supplies, however, once that remaining inventory is depleted, no more coins will be produced for 2008. You will be notified when these are available for sale.
American Buffalo One Ounce Bullion Coins
Inventory was depleted and sales were suspended in late September. More coins will be produced based on current blank supplies, however, once that remaining inventory is depleted, no more coins will be produced for 2008. You will be notified when these are available for sale.
American Eagle Silver Once Ounce Bullion Coins
American Eagle Silver One Ounce Coins will remain on allocation each week. Allocation amounts are based on available quality blanks each week.
American Eagle Platinum Bullion Coins
All denominations were depleted last week. More coins will be produced based on current blank supplies, however, once that remaining inventory is depleted, no more coins will be produced for 2008. You will be notified when these are available for sale.
We will keep you updated as more information becomes available.
Keep in mind that the updates the Mint promises will be sent to their Authorized Purchasers, not the the public as a whole, although the Mint usually does send copies of these notices to the numismatic media. Authorized Purchasers are the major dealers who place million-dollar orders with the Mint for bullion coins on a regular basis. When the bullion coin supply is not sufficient to meet demand, the Mint has a system of allocating the available coins to these dealers based on their past purchase volume and other factors. The coins under discussion are not the coins for sale to collectors on the Mint's Web site; this notice only applies to the so-called "generic" gold and silver bullion coins, not the Proof and Burnished types sold at a substantial premium over face value.
In a related action, effective October 14, the Mint will raise the surcharge that dealers pay on generic Silver Eagles. Since 1995, dealers have been paying market value plus $1.25 for each Silver Eagle. Now that surcharge will rise to $1.40. The Mint cites "recent price increases for the production of silver blanks" as the reason for the increase.
There's a very strange thing happening in the silver market right now. As I write this, all day long the spot price of silver has been bouncing around the $11.00 an ounce mark, even hitting $10.84 at one point. But try to buy some at this price! I called several coin dealers today, hoping to move four of our Krugerrands into bags of U.S. 90% silver coins (they're fun to search through, as well as being a great investment) but nobody has any they will sell! When pressed, one dealer I've known for years admitted he had them, but he wouldn't let them go below $15 an ounce. Part of the problem, he told me, was that he paid more than $11 an ounce for them, and since he "knows" (like everyone else) that the silver market will soon top $15 again, he's willing to sit on these coins and wait, unless somebody wants to pay this price. I declined, since I, too, feel that silver will rebound to at least $15 very soon, which is why I'd like to move our Krugerrands at this price.
The logical question is, "why is the spot price of silver around $11 an ounce, if nobody will actually sell at this price?" Well, that is the big mystery everyone would like to solve! Some say that the U.S. government is manipulating the market, desperately trying to save the dollar from utter destruction. Others claim that certain large banks are trying to corner the market. There are plenty of bizarre theories around, but no real answers. If you'd like to learn more about these theories, I've tracked down a couple of sites that have arguments for and against bullion market manipulation. I don't think either one really answers the question of why I can't find any silver for sale at or near the spot price (plus a reasonable commission.) For an interesting history lesson about the most spectacular attempt in history to manipulate the silver market, check out this account of the Hunt brothers' attempt to corner the market in early 1980.
This answer is probably easy to find. When did the mint switch to partially silver coins in each coin? I have the chance to look thru the registers every day at a large chain store where I work. I think people are spending some of their money saved up in “cookie jars” for years. I found a 1954 S nickle yesterday! Thanks for the info.
Better yet, since the mint increased their prices by a couple of cents for silver, the margin (Sellers cost vs Sellers selling price) has also increased in the last year. The margin is now $4.50 an ounce, whereas last year the margin was roughly $2.50 an ounce.
I think the answer to your dilemma of demand outstripping supply but the price not rising may come in your second post. As with the bubble in the real estate market, when the price of housing falls what falls even further is the number of transactions. People who bought million dollar condos now “valued” at 800k do not wish to sell at that price and lose money, and those wishing to buy a condo do not want to pay 800k because they are afraid that next year it will only be worth 700k. So nothing sells.
The same goes for silver. Those who bought at the $18 do not wish to sell at a loss, and those who wish to buy but are told that the price is $12 do not wish to overpay when the market may fall further still. In the end you have a few estates, etc. who sell to big dealers at the $12 price, but most of the big players sit on the sidelines waiting for the market to stabilize.
Could be the new found wealth of third world countrys playing into the buying spree. Leaving no supply, with a large demand. If these countrys buy to hold, supplies will dry up. Then there are the hold outs looking to sell for more than they paid through the short term.
What about supplys comeing from the mines? Not all old mines came back online, even after the rise in PM. Alot of old abandoned mines liter the country. This is a finite material. Sooner or later supplys run low, or run out.
coiny
GDNP,
I think you’re absolutely right. Tom DeLorey over at Harlan J Berk just explained pretty much the same thing to me. After listening to his common-sense explanation, I went ahead and placed an order for 3 Krugerrand’s worth of 90% U.S. silver, in the smallest possible denominations, at something around $17.50 an ounce (I’ll know the exact price after they do all the math and such. It’s based on 12.5 times face value, which is the wholesale price right now. (Silver has gone up almost $1.50 since I wrote the blog post here where I found it for $15, and now that guy is sold out!) I rate the wholesale price from HJB because my fiance is employed there in the ancient coin division.)
I know this makes me sound a little like a kook perhaps, but the driving force behind this transfer of assets is that JUST IN CASE the U.S. economy suddenly goes south in a very big way, small silver coins just might buy food and necessities. I know the chances of this are pretty remote, but I’m sure the people in the early 1920’s in Germany felt the same way before their currency went completely under. This deal will give us about $225 (face value) worth of small silver coins. Plus I’ll have fun searching them for scarcer dates, varieties, etc. Regardless of what I find in the bag, I am prepared to sit on these coins indefinitely, at least 20-30 years (unless their use becomes necessary for survival.)
I hope I am not the only “survivalist-thinking” person here.
I’m not normally given to this sort of paranoia; I don’t stockpile food or anything like that. But silver… it just seems real smart right now.
Someone could arbitrage this discrepancy. They could buy a gold or silver future and take physical delivery. The “official” price *SHOULD* match the actual market price.
However, you need $100k or more to open a futures trading contract, pay for delivery, and take delivery. A single trading unit for gold is 100 ounces, and 1000-5000 ounces for silver. Only a big dealer could afford to do this.
Low prices and no inventory is a symptom of stagflation/hyperinflation.
Most gold and silver buyers appear to be “buy and hold until after the State collapses” investors.
# 6. That is true. If the arbiters can get actual delivery. As it’s been stated, getting delivery is the problem. I still think it’s going into foreign countrys who’s people could afford it. That’s where it’s staying. Just a thought.
coiny