A reliable indicator of gold, silver and platinum demand in the United States is the sales of precious metal bullion coins of the U.S. Mint. Sales are indicating slowly diminishing interest by investors in the United States.
Started in 1986, the American Eagle gold bullion coins have become the world's top 22 karat gold bullion coin, with an astounding 20.4 million ounces sold. Sales skyrocketed from 198,000 in 2007 to 1.4 million ounces in 2009. Since then, sales have been in steady decline: 1.2 million in 2010, 1 million in 2011, 753,000 in 2012 and a slight uptick to 856,500 in 2013. In 2014, in spite of strong January sales, it looks like the year will end somewhere between 450,000 and 600,000 ounces, barring a spike in inflation or escalation of geopolitical risk with global economic ramifications.
American Eagle silver bullion coins sales started at the same time as gold. They also dominate the global market for silver bullion coins, with a mindboggling 383.6 million ounces sold. Sales almost doubled from 9.9 million ounces in 2007 to 19.5 million ounces in 2008. Usually silver and gold bullion sales track closely together. But instead of declining in 2010 like gold sales did, silver sales steadily increased to a historic record of 42.7 million in 2013. In 2014, sales started red hot and have slowed somewhat, but are on target for equaling the record set last year.
The American Eagle platinum bullion coin program started in 1997. While platinum bullion is much less popular worldwide than gold or silver are, the U.S. Mint-made coins started off strong, with 175,650 ounces sold in 1998. Demand dwindled to 20,000 ounces a year on average and was discontinued from 2009 through 2013. The program resumed in 2014 to lackluster sales.
Finally, the newest bullion coin program is the America the Beautiful 5 ounce silver bullion coin. Started in 2010 as a companion to the America the Beautiful quarter program, these coins weigh in at a hefty 5 ounces. The coins have sold modestly and primarily to the collectors market because these large coins are unusual in a bullion market used to 1-ounce coins. After a big second year in 2011, when 465,100 ounces were sold, sales have stayed in the 150,000 ounces range each year.
There are several takeaways for today's investor.
First, the U.S. Mint's sales supplement the existing bullion market. That there are sales each year indicates that the existing number of bullion coins is not sufficient to meet demand.
Second, the United States is the world's largest market for bullion coins and American's preference is for U.S. Mint products. However, the largest market for gold is China, closely followed by India. When the West buys physical gold, it buys government-made bullion coins because they want the government guarantee of content and quality and are willing to pay the cost of manufacturing above melt value to get it. When the East buys physical gold, it buys jewelry because they want to buy as much gold as possible, which means as close to the spot price of gold as possible. An exception is China, which encourages gold ownership and the purchase of the Panda (the government-made gold bullion coin and the only bullion coin allowed to be sold in China).
Third, American Eagle gold bullion coin sales may be less than half of their peak volume, but that is still be between two and three times more than the pre-crisis volume. Sales have diminished from its peak but still are strong.
Fourth, American Eagle silver bullion coin sales are increasing, not decreasing. Because of the lower cost of silver, it is more popular with individual investors than with institutional investors. And the most popular way for individual American investors to invest in physical silver is to buy silver bullion coins made by the U.S. Mint.
Fifth, while the American Eagle platinum bullion coins are popular, the platinum bullion market is very small. Severely reduced supply from African mines due to strikes and the risk of supply manipulation from Russia due to the conflict with Ukraine both contributed to a sharp rise in platinum prices. But that did not result in a sharp rise in platinum bullion coin sales.
The U.S. Mint is the world's largest manufacturer of bullion, circulating and collector's coins. Because it dominates the market, its sales of bullion coins can give the investor insight if they know what to look for. Right now, sales are indicating that U.S. individual investors' interest is slowly cooling off from crisis highs, but there is still much more interest than there is in a normal period. Of course, that could all change with the next crisis.
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