2011 Gold Commemorative Coins

There has been some recent discussion about which currently available US Mint products have the best potential for future price appreciation. At this time, I like the 2011 Army and Medal of Honor $5 gold coins, with a preference towards the uncirculated versions.

These coins are available during somewhat of a unique year, which may be contributing to slower sales and eventually lower mintages. As I have mentioned in another post, any previously issued $5 gold commemorative coin with a mintage of less than 10,000 has experienced a significant increase in secondary market prices once sales have concluded at the US Mint.

The most recent figures show sales of the 2011 Army $5 gold coins at 5,974 uncirculated and 15,735 proof coins. In the past week, the number of coins sold was 30 uncirculated and 13 proofs.

The 2011 Medal of Honor $5 gold coins are slightly lower at 5,604 uncirculated and 14,564 proof coins. In the past week sales were 55 uncirculated and 24 proof coins.

The slower sales are likely due to a combination of factors. The price of each coin is much higher than previous years, possibly putting the coins out of reach of some collectors. The 2008 Bald Eagle $5 gold coins (the last available gold commemoratives) were priced at $309.95 and $319.95 for uncirculated and proof versions, respectively. This year's $5 gold coins are priced at $444.95 and $454.95 for uncirculated and proof versions, respectively.

This year features two different $5 gold coins, which is an unusual occurrence in recent years. Under current law, only two United States Mint commemorative coin programs may be approved per year. Each of these programs may include one or more coins, most commonly $5 gold coins, silver dollars, or clad composition half dollars. The last time two commemorative gold coins were issued in the same year was 1997 (which happens to be the year of the low mintage uncirculated Jackie Robinson $5 Gold Coin). Having multiple expensive commemorative coins available in the same year may serve to divide collector interest and result in lower sales and mintages for each.

Besides the expanded number of commemorative coins available this year, there has also been an expansion in the number of other numismatic precious metals products available, especially for silver coins. This expanded number of options and the constant barrage of releases serves to divert collector attention and absorb collector budgets, which may have otherwise been spent on commemorative coins.

At minimum the second two factors will subside in coming years. Commemorative coin programs approved for 2012 and 2013 each include only one gold coin per year. The number of numismatic ATB silver coins should also decline, assuming all 2010 and 2011-dated issues are released in the current year.

Under the authorizing legislation, sales of the Army and Medal of Honor Commemorative Coins are required to conclude before the end of the year. The US Mint has typically ended sales at a pre-announced date in mid-December. Based on current sales trends, it seems likely that the uncirculated $5 gold coins for each of this year's programs will have sales of less than 10,000. It's also worth mentioning that the proof versions of the coins will have a historically low and possibly the lowest mintage for a $5 gold commemorative proof coin. The lowest mintage is currently held by the proof 1996 Smithsonian $5 Gold Coin at 21,840.

The counterargument to all of this is that low mintages may be the "new normal" in the current environment of escalating precious metals prices. In recent years, we have seen multiple First Spouse Gold Coins with final sales of less than 5,000. These issues have generally appreciated on the secondary market, but they have not experienced the five-fold price increases seen for some of the mid-1990's low mintage coins. I think the lower percentage appreciation is a result of the higher initial price and the prospect of future issues having even lower mintages. It is certainly possible that precious metals prices continue to rise and mintages for subsequent issues continue to decline. Of course in this scenario, the values of the gold coins would appreciate on the basis of the intrinsic value, if not for the low mitnage.

The final thing I wanted to discuss was the pricing for the 2011 gold commemorative coins. The prices were established by publication in the Federal Register dated December 29, 2010. At that time the market price of gold was $1,412 per ounce. Since then, gold has risen by nearly 12%, while the prices for the coins has not been adjusted (except at the end of the introductory period). The US Mint's flexible pricing policy, which allows for weekly changes when the average price of gold crosses $50 increments does not apply to commemorative coins.

Each $5 gold coin contains 0.2418 troy ounces of gold content. This represents an intrinsic value of around $382 for each coin. The issue price for the uncirculated version is $444.95, of which $35 represents a surcharge payable to the beneficiary organization. If the price of gold continues to rise, it seems likely that at some point the US Mint will adjust prices. The adjustment would take place under the standard method for establishing prices which involves suspending sales until new amounts can be published in the Federal Register.