From time to time, the bullion division of
the US Mint suspends sales of one product or another, usually
due to some production glitch or shortage of blanks. This
week word came out that one-ounce gold Eagles would temporarily
be unavailable. (At this time, we have plenty of Eagles in stock,
with more coming to us through distribution channels next week.)
Somehow, the coin publication “Numismatic News” picked
up this story and sent it out to their email subscribers. No US Mint sources were cited for the story,
but instead they quoted an ‘explanation’ provided
by Chris Powell, still holding forth under the banner
of the Gold Anti-Trust Action Committee. Remember GATA?
the headline, “U.S. Mint suspends gold coin sales:
futures price is a fiction,” Chris
Powell of GATA wrote yesterday
(Friday 8/15, 12:15 am ET):
“The U.S. Mint has suspended sales of American eagle gold
coins and is refusing orders from dealers, two coin and bullion
dealers confirmed Thursday.”
Mr. Powell goes on to say that:
“The suspension is overwhelming evidence that the futures
contract price of gold on the commodities exchanges is substantially
below the physical market price and that, indeed, the commodities
exchanges are being used as GATA long has maintained -- as part
of a massive scheme of manipulation of the precious metals,
currency, and bond markets.”
In order to separate fiction from truth, let's start with the
fact that the US Mint did not suspend all gold coin sales, or
even all bullion gold coin sales, but is only temporarily suspending
sales of one size (1-ounce) of one product (the gold Eagle).
Word is that the Mint is temporarily out of planchets (round
gold blanks of proper coinage weight and .917 fineness), and
that more information will be provided by Tuesday 8/19/08
as to when sales of the 1-ounce gold Eagle will re-start.
In the meantime, gold bullion is available in many forms of
coins and bars from all over the world, at prices based
on, yes, commodities futures trading. Even the US Mint
is offering some, including the .9999 pure gold 1-ounce “Buffalo” bullion
coin (a product the Mint first launched in 2006), and
the .917 fine gold Eagles in half-, quarter-, and tenth-ounce
So what really happened? How does an institution such as the
US Mint run out of the gold raw materials from which it strikes
the most popular size of its most successful bullion coin
In this instance, the Mint is the victim of its own success.
Demand for gold Eagles has skyrocketed lately, and some
287,500 1-ounce gold Eagles have been sold by the US Mint
since January. This year the Mint's average monthly sales of 1-ounce gold Eagles is some
36,000, compared with a little over 12,000 coins
a month in 2007. When the Mint temporarily suspended sales
of gold Eagles on 8/14/08, some 60,000
coins had already been delivered in the first two weeks
of August alone.
This latest glitch by the US Mint is hardly
evidence that “the commodities exchanges are being used
as… part of a massive scheme of manipulation of the precious
metals, currency, and bond markets.” In fact, the
US Mint is turning out Eagles at a pace not seen since 1999. See
U.S. Mint Sales
It’s no wonder that the Mint would run out at
that rate. Gold blank production is outsourced by the
Mint, and the Mint orders them ahead of time according
to expected demand. But when sales triple in a few weeks
time, some delays can be expected.
When the Mint places an order, gold strips are prepared,
blanks are punched out, then weighed, finished, packaged,
and shipped via secure carrier to the Mint’s facility
at West Point, New York, where they are struck into gold
Eagles, then inspected, tubed, counted, and boxed.
This process can take a few days. It’s not like running
out of chocolate chip cookies at lunchtime, and going
to the store for more chocolate, butter, and flour, so
you can have another batch ready in time for dinner.
It cannot be unknown to Chris Powell and GATA that billions
of dollars worth of physical gold are bought, sold, and exchanged
every week, all over the world, in the form of finished
bullion, coins, jewelry, mine bars, and recycled gold
scrap, based on the very futures prices which Mr. Powell
calls a “fiction.”
Not to be too hard on GATA – they stood up for gold in
the days when no one cared much about the shiny yellow
metal one way or the other. Around the turn of the last century,
when gold was $255 per ounce and The Powers That Be were putting
on that gold was just an obsolete metal, an anachronism from
days gone by, GATA uncovered and published a lot of factual
evidence that gold prices were being held down intentionally
by the US Treasury and the Fed, in cahoots with central bankers
the world over
Back then, no organization was more loved and respected by
the then-tiny US gold- bug community than the Gold Anti-Trust
Action Committee. The organization’s self-aware ‘tilting
at windmills’ image had a sort of charm to it, and
their noble protests of gold price manipulation had a certain
resonance and underdog appeal.
Today, Mr. Powell’s pique is understandable, coming
during one of the worst weeks for precious metals in modern
memory. For the week just past, gold lost 8.39%, silver tumbled
22.9%, platinum was down 10.8%, and palladium shed some 16.7%,
all in five days time. These sorts of number suggest a washout
in the current downdraft in precious metals prices.
Why? There is fairly universal agreement that the credit
crunch that celebrated its first birthday this month is a slow-moving
train wreck that will take at least a couple of years to come
to its ugly end. This has helped tip the US into a recession, Europe
is heading there fast, and oil and most commodities are down
sharply over the past few months. All these factors have helped
to relieve inflationary pressures on prices. In a nutshell,
the prospect of potential deflation is the current ‘story’ behind
the past few months’ swoon in the precious metals.
The loss in value this week of All the Gold in the World (AGIW)
came to some US$300 billion. Total losses to AGIW since March
17th’s London fix of $1011.25 now exceed US$1.049 trillion
dollars ($1,049,000,000,000.00). That’s probably nowhere
near the aggregate world-wide loss in real estate value over
that same time period, but a big chunk of change nonetheless.
This is how free markets work, and no one, including Mr. Powell,
is obligated to sell his gold when prices don’t suit him.
In fact, the beauty part of these ‘manipulative’ commodities
exchanges is that they make it possible for he, or anyone else
in a free country, to buy gold for some 28% less than it would
have cost on March 17th. To label that reality a ‘fiction’ is
either disingenuous nonsense or a sign of deep denial about
how the world works.
Buck up, Mr. Powell. Gold obviously seems cheap to you, so I invite you to act on that impulse. If you’re in the United States, give
me a call at 800 800 4485 and I’ll sell you some.
August 16th, 2008