Gold rush forces U.S. to clip Eagle sales

By Javier Blas
Financial Times, London
Thursday, November 26, 2009

http://www.ft.com/cms/s/0/393e551e-daaa-11de-933d-00144feabdc0.html

The rush by retail investors into gold has forced the US government to suspend sales of the world's most popular bullion coin, the American Eagle, after running out of inventories.

The shortage, the second since the start of the financial crisis in August 2008, is the latest sign of investors seeking a safe haven into bullion amid the US dollar woes. Safe-haven buying spurred by concerns about the health of Wall Street and a spike in inflation due to a lax monetary policy have also benefited gold sales.

"The US Mint has depleted its current inventory of 2009 American Eagles one-ounce bullion coins due to the continued strong demand," the mint said in a statement late on Wednesday. It added that selling will resume "once sufficient inventories ... can be acquired to meet market demand."

The stoppage helped to push gold prices yesterday to a fresh all-time high of $1,194.90 a troy ounce, up 0.5 per cent on the day. Bullion later pared gains to trade at around $1,185 a troy ounce as the US dollar strenghtened.

The mint suspended sales last year after the collapse of Bear Stearns and Lehman Brothers triggered a wave of buying that depleted its stocks. Coins dealers have reported ocassional shortages of other popular coins.

Philip Newman, director at London-based precious metal consultancy GFMS, said that physical gold demand in North America had picked up in the last two months.

The US Mint has sold about 1.19m ounces of American Eagles so far this year, up almost 75 per cent from the same period last year and on track to be the highest annual volume in ten years, according to official data. Sales of American Eagle silver coins have hit 26 million ounces, the highest level in at least 23 years.

Although gold and silver coins account for a relatively small fraction of the precious metals market, analysts see them as a good proxy of retail investor appetite.

Gijsbert Groenewegen, managing director at New York-based precious metals hedge fund Silver Arrow Capital, said that investors were shifting from paper assets to physical assets. "Bullion is the only asset without counterparty risk," he said.

The scarcity of American Eagle coins ahead of the Christmas-period, which usually sees strong demand for bullion, pushed coins premiums higher.

FideliTrade, a major US-based coins bullion dealer, quoted the American Eagle at almost $60 above spot gold prices, much higher than quotes for other coins.

Traditionally, the American Eagle and its sister, the American Buffalo, are the world's best-selling gold coins, followed by the the Canadian Maple Leaf, the Austrian Philharmonic, and the South African Krugerrand.

Turkey's local gold coins sell even more that its American counterpart but trade is limited to within the country.

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