GOVERNMENTS
CAN'T HANDLE GLOBAL RUN ON GOLD COINS By
John Crudele - NY Post - November 18, 2008
There's
a worldwide run on gold coins.
Even as the price of the precious metal itself
comes under pressure along with commodities like oil and copper,
people around the world are demanding so many of the valuable
coins that government mints are having difficulty filling
orders.
A spokesperson for the US Mint tells me that
gold coins in this country, for the past month, "are
being allocated because of an increased demand."
And the price that the government charges
coin dealers has recently been increased by as much as 10
percent for a 10-ounce coin.
Robert Mish, a coin dealer in Menlo Park,
Calif., says customers who want to purchase 200 gold coins
often have to wait up to two weeks. Six months ago, he said,
a purchase that size could have been filled immediately.
Someone who recently tried to purchase 100
one-ounce American Eagle gold coins in the New York City-area
was turned away, even though he'd uneventfully made purchases
before through the same dealer.
And even when gold coins are available, dealers
report that customers are paying a bigger premium than they
would have just a few months ago.
Previously, American Eagle coins were going
for 5 percent over the market price of gold on the Commodity
Exchange (Comex). Now the premium can be anywhere from 10
percent to 15 percent, even though the US Mint raised its
price to dealers by just 3 percent for an ounce coin.
In one sense, the attraction for gold coins
isn't surprising. Since ancient times, gold has been considered
the safest investment to hold in times of uncertainty.
With fears of future inflation rising and
concern about the value of paper currency and government-debt
increasing with each new recovery plan announced in Washington
and in foreign capitals, the desire to hold gold grows.
That part makes perfect sense. But there's
another more puzzling aspect to the recent gold rush.
Even as the demand for gold coins such as
the Canadian Maple Leaf or the Krugerrand of South Africa
has grown, the market price of the precious metal itself is
off its highs.
In early October, the price of an ounce of
gold on the spot market was about $930 an ounce. With the
commodities bubble bursting in recent months, gold declined
into the upper $600 range. Spot gold closed yesterday at $739.90,
down $2.60.
Bill Murphy, chairman of the Gold Anti-Trust
Action Committee, says the price of spot gold is even more
perplexing given the demand for coins and the fact that central
banks in Europe have stopped selling gold into the open market.
"Gold should be moving up," Murphy
says. "How could there be such a dichotomy between the
historic high premium for coins all over the world and the
low Comex price?"
His answer? "Today the public is buying
gold like crazy, but the US government and the banks that
hold bullion are intentionally keeping the price down."
Ah, but that column will have to wait for
another day.
Finally, someone in Washington is complaining
about the coziness between the government and Goldman Sachs
- which, incidentally, has been going on unfettered for the
greater part of two decades.
If you've been reading this column for any
length of time, you already know I have been griping loudly
about the obvious inappropriateness of this Washington/Wall
Street liaison and have spent considerable energy outlining
my suspicions.
Now, Iowa Sen. Charles Grassley, the senior
Republican on the Senate Finance Committee, is asking the
inspector general of the US Treasury to investigate whether
some government officials who formerly worked at Goldman let
their "relationships" cloud their judgment during
the merger of Wells Fargo and Wachovia.
In case you aren't up on the Goldman-to-govern
ment express train, cur rent Treasury Secretary Hank Paulson
is a for mer Goldman chairman, as was Robert Rubin who headed
the department during Bill Clinton's presidency.
And more Goldman execs are being mentioned
for the Treasury job in President-elect Barack Obama's administration.
Specifically, Grassley is concerned about
a tax code change that paved the way for the acquisition of
Wachovia by Wells Fargo. An ex-Goldman executive was leading
Wachovia at the time of that deal.
Here's the answer he'll get from Treasury
and Paulson: these are dangerous times and anything that was
done was for the good of the country. In other words, they'll
drag out the old national security argument.
Grassley will become a minnow in the next
Democrat-controlled Congress. But the Democrats need to take
up the baton, turn it into a club and see just what Paulson
has been up to.
As I've written before, Paulson has admitted
that part of his job was to keep in touch with "market
participants." Calling his friends on Wall Street - and
especially at Goldman - would be an odd extension of the role
of Treasury secretary and I certainly would like to know what
he felt compelled to tell these folks.
Like - did Paulson leak to Wall Street last
August the fact that the Federal Reserve was about to begin
interest-rate cuts?
All Grassley or the Democrats need to do is
subpoena Paulson's phone records and meeting minutes of his
secretive President's Working Group on Financial Markets.
But I don't think anyone in Washington has the nerve.