The Return of Gold and Silver Eagle Rationing
In a return to the situation experienced during most of 2008 and the first half of 2009, the limited number of gold and silver bullion coins available from the US Mint are subject to rationing.
US Mint bullion coins are not sold directly to the public. These coins are distributed through a network of authorized purchasers, who resell the coins to other bullion dealers and the public. During times when demand for the bullion coins has exceeded the amount the US Mint was able to supply, the Mint has rationed coins at the authorized purchaser level through an "allocation program."
On November 25, 2009, the US Mint had announced the suspension of sales for one ounce American Gold Eagle and American Silver Eagle bullion coins. Sales of the Silver Eagles resumed on December 7, 2009, but sales were subject to rationing. Sales of the one ounce Gold Eagles will resume tomorrow December 15, also subject to allocation.
Separately, the US Mint offered fractional weight 2009 Gold Eagle bullion coins on December 3, 2009. On the first day of sales, the entire inventory of one-tenth ounce coins was depleted and the inventory of one-quarter and one-half ounce coins was reduced limited status. The remaining inventory of one-quarter and one-half ounce coins was rationed. Today, the US Mint will sell another batch of fractional Gold Eagles to its authorized purchasers. All available coins will be subject to the rationing process.
The US Mint used the allocation program for the first time during 2008. The one ounce Silver Eagle bullion coins had been subject to rationing from April 21, 2008 to June 15, 2009. The one ounce Gold Eagle bullion coins had been rationed from August 15, 2008 to June 15, 2009. Fractional weight gold bullion coins completely unavailable for most of this time. The long standing allocation programs had negative impacts for both precious metals investors and coin collectors.
On the precious metals side, higher premiums above the spot price of the metals developed due to the limited availability of coins. During the height of the 2008 Silver Eagle shortage, premiums for one ounce Silver Eagle bullion coins had risen as high as $4.50 above the spot price of silver. Before the era of shortages, normal premiums were around $1.75. Gold Eagle bullion coin premiums were similarly elevated. Higher premiums erode the gains experienced when the price of precious metals rises, since investors need to recoup the extra costs.
For coin collectors, the allocation programs resulted in the lengthy delay and eventual cancellation of many collectible gold and silver coins. For 2008, the US Mint was forced to cancel all collectible 2009 Silver Eagle and Gold Eagle offerings and delay the launch of the collectible Proof Gold Buffalo coin until October 29.
In the press release announcing the canceled coins, the US Mint stated:
All available 22-karat gold and silver bullion blanks are being allocated to the American Eagle Gold and American Eagle Silver Bullion Coin Programs, as mandated by Public Law 99-185 and Public Law 99-61, respectively. Both laws direct the agency to produce these coins in quantities sufficient to meet public demand. The proof and uncirculated versions of the American Eagle Gold and Silver Proof Coins are not mandated by law.These statements were provided before the US Mint was forced to revive their allocation programs. With the programs now in place, the US Mint is now apparently even further away from meeting public demand, calling into question the status of collectible gold and silver coins for 2010 and beyond.
2010 Silver Eagles
2010 Gold Eagles
Labels: US Mint