Rare Coin Investor

By Tatyana Shumsky

NEW YORK—U.S. Mint gold-coin sales are on track to exceed last year’s totals as worries about the stability of the federal government have attracted buyers back to the market.

The Mint has sold 752,500 troy ounces of American Eagle gold coins this year, just shy of last year’s total sales of 753,000 ounces, according to the Mint’s data.

The Mint sells gold and silver coins to authorized dealers, who in turn distribute the coins to the public. Dealers buy coins from the Mint to meet or in anticipation of demand from individual investors.

Coin sales got a boost in October, when the federal government was partly shut down for 16 days over a budget standoff in Congress and the U.S. neared the brink of a debt default. The Mint sold 48,500 ounces of American Eagle gold coins last month, more than triple the 13,000 ounces sold in September but less than the 59,000 ounces sold in October 2012.

“We saw our peak order volumes right before the government shutdown, and then again right before the deadline for the debt-ceiling increase,” said Mike Getlin, executive vice president at Merit Financial Inc., a bullion dealer based in Santa Monica, Calif. “The debates in Washington spooked people about holding dollars, and that drove up demand for bullion coins.”

Congress was able to resolve the budget standoff and temporarily raise the debt ceiling, but the debt debate is expected to resume early next year. Retail investors are also worried about the Federal Reserve’s continued stimulus efforts, and the long-term risks the program holds for the value of the dollar, he said.

But while demand for gold coins is climbing, investors are cutting back on their holdings of gold futures and other gold-linked financial instruments as they seek higher-yield investments, analysts said.

Gold prices are down 22% this year. Comex futures for November delivery closed at $1,313.10 an ounce on Friday, down 2.9% for the week.

Coin buyers tend to have a more long-term investment horizon, analysts said.

“People are just still very uncomfortable about the financial situation worldwide,” said Terry Hanlon, president of Addison, Texas-based Dillon Gage Metals, an authorized dealer for U.S. Mint gold, silver and platinum coins. “We still see very brisk sales when there are [price] drops in the gold market.”

October is also the month when many dealers restock their inventory, as the summer lull typically gives way to renewed interest, said Michael Haynes, chief executive at Oklahoma City-based Apmex Inc., one of 12 Mint-authorized purchasers of American Eagle silver coins.

“September sales picked up at the retail counter, but not a lot was bought from the Mint,” Mr. Haynes said, so dealers needed to buy more coins in October to replace what they sold.

Demand for silver coins has been even higher than for gold, in part because silver is less expensive. Silver for November delivery fell to $21.804 an ounce on Friday, down 3.6% for the week.

The Mint has struggled to keep up with silver-coin demand for much of 2013. It ran out of the coins in January and imposed limits on coin sales to its authorized dealers. Those limits remain in place.

The Mint sold 3.087 million ounces of American Eagle silver coins, up from 3.013 million in September but below October 2012 sales of 3.153 million ounces.

“We buy silver product every week, and we didn’t used to buy product from the Mint 52 weeks a year. The demand is there,” Mr. Hanlon said.

Posted on November 4, 2013 at 3:06 pm in Uncategorized   |  RSS feed |   Reply   |   Trackback URL