The Eagle Has Been Grounded By IANTHE JEANNE DUGAN
August 21, 2008
Mint Halts Gold-Coin Sales
After Supply Depleted Amid Price Drop
As
gold prices tumbled from their highest level ever, investors
and collectors loaded up on one-ounce "American eagle"
gold-bullion coins. The buying spree came to an abrupt halt
this week after the U.S. Mint stopped selling the coins for
the first time since production began 20 years ago.
"Due to the unprecedented
demand...our inventories have been depleted," the Mint
-- part of the U.S. Treasury Department -- told its dealers
Friday. "We are therefore temporarily suspending all
sales of these coins."
The move shocked sellers and collectors of
the coins, which are the most widely traded in the U.S. Suppliers
became angry as they turned away customers. Theories about
the decision's underlying cause ran rampant -- from investors
in gold futures to Russia's invasion of Georgia.
"This whole thing started about the time
the Ruskies made their move," a collector noted in an
Internet chat room called goldismoney.info. "It may very
well be that the USGovt is preparing for the real financial
meltdown by hoarding all remaining gold flows."
The Mint says it simply was wiped out. It
has sold 311,000 ounces of the coins this year -- about 50%
more than in all of 2007. In the first few weeks of August
alone, buyers snapped up 63,500 ounces.
The
United States Mint The U.S. Mint has stopped selling American
eagle gold-bullion coins.
"We are working diligently to build up
our inventory and hope to resume sales shortly," the
Mint wrote in a memo to dealers.
The American-eagle bullion program was launched
in 1986 with the sale of gold and silver bullion coins. One-ounce
coins have a face value of $50 and $1, respectively, although
the coins trade close to the market value of the underlying
metal. After the 2008 silver coins, known as silver eagles,
surged in popularity earlier this year as silver prices rose,
the Mint began rationing them. Dealers were upset by the latest
blow. "If I don't have something to sell, I lose business,"
says Rand LeShay of A-Mark Precious Metals, a Los Angeles
dealer.
The Mint announced the suspension Friday,
the day prices of gold-futures contracts -- bets on what gold
will cost later -- finished below $800 an ounce for the first
time this year. The drop accelerated a buying spree among
investors. Gold began bouncing back and late Wednesday traded
at $810.30. In March, gold futures hit a high of $1,003.20
an ounce.
American-eagle gold-bullion coins are made
from 22-karat gold mined in the U.S. The front side's design
was inspired by August Saint-Gaudens' $20 gold piece, minted
from 1907 to 1933. On the reverse side is a nest of American
eagles.
The coins are sold by the Mint to 10 dealers
world-wide for a premium above the price of gold. These dealers
resell the coins, which now fetch about $815.
The American Precious Metals Exchange, an
online gold dealer, posted an alert about the Mint's move,
generating confused and angry responses. Many customers said
they were mystified because the silver-coin rationing followed
a price surge, while the gold suspension followed a drop.
"The situation is strange and doesn't
fit the 'normal' supply & demand economic model,"
the firm wrote to customers.
The Gold Anti-Trust Action Committee, an advocacy
group, said the Mint's move proved financial institutions
are colluding to set prices.
"The suspension is overwhelming evidence...that
the commodities exchanges are being used...as part of a massive
scheme of manipulation of the precious metals, currency and
bond markets," the group wrote on its Web site.