There are always two ways to look at declining prices for any asset: Either as a correction back to reality, or a chance to get in before the inevitable climb to new highs.
For buyers of physical gold, relatively low prices and a string of bad headlines sparked such short-term demand that the U.S. Mint this week literally ran out of its popular one-ounce American Eagle gold bullion coins.
The mint reports that it sold 65,000 ounces of gold so far in August, in the form of 89,000 coins of various sizes. Sales of the one-ounce coin to date are 312,500 ounces, on track to demolish the 2007 total sales of 198,500 ounces but lower than ounce totals in 2004 and 2005 for that coin.
Investors and collectors were shocked and conspiracy theories lit up Internet chat boards.
The mint, however, says it has plenty of gold to sell, just not enough of the American Eagles to meet demand for now.
Only the American Eagle coins sold out, says Michael White, a U.S. Mint spokesman. Half-ounce, quarter-ounce, and 1-10th ounce coins, as well as 24-karat American Buffalo coins, are still available.
"We are working diligently to build up our inventory and hope to resume sales shortly," the Mint said in a statement to dealers.
The rush to buy Eagles can be attributed to any number of short-term factors, but the clearest factor has been the relative decline in the gold price.
After exceeding $1,000 an ounce in March, gold began a march down to $850 by May then returned to $950 in mid-July.
Then oil began its slide down from what most economists considered unsustainable highs, and the U.S. dollar gained ground against the euro. That pushed speculators out of gold, forcing its price down hard, well below $800 an ounce.
Gold now trades in the range of $825.
Not surprisingly, a slew of iffy macroeconomic headlines, including the Russian invasion of its neighbor, Georgia, touched off a run back into the safe haven metal.
Gold investors also tend to react to news of potential bank failures, and just this past week several key economists warned that U.S. bank failures due to the subprime crisis would greatly exceed expectations.
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