by Louis Golino for Coin Week
Within hours of the publication on August 11 of my column on exploding gold prices (https://coinweek.com/bullion-report/the-coin-analyst-the-explosion-in-gold-prices-and-the-gold-coin-market/), the U.S. Mint removed the $5 gold commemorative coins that I recommended to readers from its web site (http://www.usmint.gov) for repricing.
The spot price of gold had reached the point that the Mint was receiving almost no premium over melt value for the coins. The coins contain almost a quarter ounce of gold (.2419 ounces), and there is a $35 surcharge, which is given to non-profit organizations that assist the groups commemorated on the coins.
The Mint announced the next day that it is implementing a new pricing structure for gold commemorative coins. Those currently include the U.S. Army and Medal of Honor coins.
On August 12 I received the following statement from Michael White, who is the U.S. Mint’s spokesman: “The United States Mint has suspended sales of commemorative gold coins for re-pricing. Due to the current market volatility, we will be placing these coins on a “pricing grid” similar to the structure we use to price America Eagle, American Buffalo and First Spouse gold coins. A new grid specific to these coins is being developed and will be posted when complete.”
For information on the pricing grid that was instituted in 2009, and which since then has been used to set prices for collectible gold and platinum coins sold by the Mint other than commemoratives, see http://catalog.usmint.gov/wcsstore/ConsumerDirect/images/catalog/en_US/GoldCoinGrid.pdf.
Price changes for gold and platinum coins are generally implemented on Wednesday mornings. They do not, as of now, apply to silver coins, though at some point rising silver prices will probably necessitate their inclusion in the grid. Presumably the Mint must have had authority to do this on its own, especially since the Congress is in recess and the decision came very quickly.
Gold continued to retreat at the end of last week after hitting a new nominal high of $1819 on August 10. It then declined to the $1740 range, which is not surprising given recent moves and the 22% increase in margin requirements for futures traded on the COMEX. For the week gold rose 5.5%, or $91.40, settling at $1740.20.
APMEX (http://www.apmex.com) CEO Michael Haynes said his company had its best day ever for sales the day gold hit a new all-time high. He noted that rising prices resulted in many first-time buyers. APMEX is one of the largest precious metal companies in the world and is one of only eleven U.S. Mint Authorized Purchasers. Other bullion dealers pointed out that more advanced buyers flocked to silver, which seems to be the better value at the moment, as prices have remained in the $38-40 range during gold’s meteoric run.
The correction in gold is a good sign for future strength because it helps build support at higher price levels. Experts say that the increased margin requirement may or may not have lasting effect. It is more likely to suppress prices if further increases are made to margin requirements.
According to KITCO (http://www.kitco.com), a majority of precious metal experts expect gold to continue to trade down next week, especially if the financial and stock markets continue to stabilize. Next week a substantial amount of new data about the U.S. economy will be revealed, and that will also play a major role in shaping gold prices.
Rising gold prices always bring our more buyers, especially new buyers, but since gold had its best week ever last week, I agree with the experts that further corrections are likely this week. It is highly advisable to buy on the dips as professional traders do, or you may have buyer’s remorse about your gold purchases. Buying better-date and scarcer coins will give you some protection against falling bullion prices.
Many mainstream analysts have said for years that gold is a bubble, but gold experts dispute that claim. The average American can not afford to buy gold and is far more likely to be selling than buying. In fact, most coin and bullion dealers reported last week that they broke records not for sales to customers but for purchases of gold jewelry and coins from the public. Moreover, less than 2% of world’s wealth is in gold, which does not sound like a bubble to me.
This week the ANA will hold the largest and most important coin show of the year in Chicago. I anticipate that recent gold price records will result in heightened sales of gold coins, especially of pre-1933 generics and better-date gold coins. The show will help to set the tone for the coin market heading in the fall, which is its traditional busy period.
Louis Golino is a coin collector and numismatic writer, whose articles on coins have appeared in Coin World, Numismatic News, and a number of different coin web sites. He collects U.S. and European coins and is a member of the ANA, PCGS, NGC, and CAC. He has also worked for the U.S. Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of newspapers and web sites.