Wait Gets Longer for Bullion Coins By Patrick A. Heller,
September 30, 2008
the past week, the U.S. economy has been hit with the two
largest bank failures in history (Washington Mutual, Inc.
and Wachovia Corporation with total combined assets in excess
of $1 trillion), a collapse of efforts by the federal government
to try to destroy the value of the U.S. dollar through a so-called
$700 billion (which I think would actually cost at least double
that amount) bailout of Wall Street firms. As I write this,
the Dow Jones Industrial Average is near its lowest level
in the past year, and not far from the last time it was under
10,000 on Oct. 26, 2004.
Late last week, the U.S. Mint announced that it was suspending
sales of the gold one-ounce Buffalo because it had run out
of inventory. This news was widely reported by the general
Although the Mint said it would resume sales when more coins
were fabricated, the announcement added further urgency to
buyers wanting to buy physical gold and silver.
Late last week and so far this week, our store and coin bullion
dealers have been besieged by visitors and callers hoping
to purchase gold and silver they can obtain for immediate
delivery. Demand has been so strong for the past 10 weeks
that virtually nothing can be picked up on a cash-and-carry
When the Mint halted Buffalo sales, that shifted more demand
to American Eagles. Now, American Eagles are no longer available
as the Mint is unable to supply more than a minuscule quantity.
South Africa Krugerrands, British sovereigns, Australia Kangaroos,
China Pandas, and several other coins were already just about
impossible to purchase in quantity.
Physical gold supplies are so tight that Monday afternoon
a trader at A-Mark Precious Metals, Inc., a major wholesaler
who is also a primary distributor for the U.S. and other mints,
told my head trader that they literally had no gold available
to sell and were unable to take any orders for any gold coins
for future delivery.
With higher demand and lower supply, premiums have risen
further on the coins that you can still obtain - if you can
find them. As you would expect in such circumstances, premiums
are up sharply if you can find a wholesaler or dealer to quote
prices. On Monday afternoon, one major wholesaler was willing
to take orders for slow delivery of American Eagles and Buffaloes
at a price that was 9 percent above gold spot (compared to
a normal wholesale premium around 3.75 percent).
The silver market is almost as gridlocked. On Monday afternoon,
we could only locate one wholesaler willing to sell 90 percent
silver coin - at a price that was 29 percent above silver
value. You can purchase silver ingots for a lower price, but
you will have to wait 1-3 months after making payment for
the bars to be fabricated.
As a coin and bullion dealer, it is frustrating to turn away
throngs of new customers coming to buy gold or silver. When
the rare customer comes into our store to sell gold or silver
coins or bullion, the would-be buyers in our store hang around
to see if they might be able to snap up the live inventory.
Unfortunately, in most instances that fresh purchase is set
aside to fill earlier customer orders.
The attitude of many customers so far this week has bordered
on panic - and I expect it to get worse before it gets better.
About the only gold coins you can purchase for reasonably
quick delivery now are Canadian Maple Leaves and Mexican 50
In silver, U.S. 90 percent silver coin can be acquired in
sizable quantities and U.S. 40 percent silver coin can be
found in limited quantities. A week from now, I wouldn't be
surprised if I had to report that even these coins had become
almost unobtainable, no matter how high the premium a buyer
is willing to pay.
I do not expect supplies of physical precious metals to become
plentiful again until gold is solidly established well above
$1,000 per ounce and silver at least $22 per ounce. If you
want to buy physical metals at today's much lower spot prices,
you are going to have to pay significant premiums and be prepared
to wait for delivery.