Gold coins losing luster for investors

Sales have been falling for 3 straight years. High prices may be a factor, but a stabilizing economy is also tempering enthusiasm.

By Charley Blaine Jan 4, 2013 9:49AM
Image: Gold © Comstock Images/JupiterimagesUpdated: 12:34 p.m. ET, Friday

Despite what financial experts say about the benefits of owning gold, investors may not be taking that advice to heart.

Sales of gold coins by the U.S. Mint fell in 2012 for a third straight year. Sales of silver coins also were lower in 2012.

And we're not talking modest declines. Gold coin sales were off 24.7% from 2011 to 753,000 ounces, data from the Mint's site says. They're down by nearly half from 2009 when sales peaked at 1.44 million ounces.

Silver coin sales were off 11.3% to 33.74 million ounces from 2011's record 39.9 million ounces.

The declines came as the average price of gold climbed 6.3% to about $1,670 an ounce in 2012 while the average price of silver was $31.15 an ounce, down 11.3%.

So, what's going on? Probably some of the gold sales decline has to do with price. Gold is hardly cheap at Thursday's $1,674.60 an ounce. And, if prices aren't rising 25% or more each year, maybe some gold enthusiasts are looking elsewhere -- perhaps to silver, where prices jumped 38% in 2010 and 74% in 2011 before falling in 2012.
But there's a thought, offered by The Wall Street Journal on Thursday, that maybe a lot of individuals are eschewing the bother of holding onto and caring for gold coins and going to gold exchange-traded funds.

Here, too, there's a problem. The volume on the SPDR Gold ETF (GLD) fell 40% in 2012 after rising 8.4% in 2011. Volume fell 82% on the iShares Gold Trust ETF (IAU). And the ETFs rose not much more than gold itself.

Here are some  better explanations:
  • Gold coin sales appear to rise when the economy is under stress. There were big jumps in sales in 2002 after the Sept. 11, 2001, terror attacks and in 2008 and 2009 as the financial crisis erupted. The crises eased and so did sales.
  • Financial headlines in 2011 were dominated by the European debt crisis and then the debt ceiling fight between Democrats and Republicans in the United States.
  • Many gold investors may have been like other individual investors and recently tuned out markets.

There was a big volume spurt in the fourth quarter.


Sales of gold coins jumped from 41,000 ounces in November 2011 to 136,500 a year later -- an increase of 233%. In December, sales dropped back to 73,000 ounces, but that total was still a gain of 16% from the year before.


Many customers were freaked at President Obama's reelection and wanted gold coins as protection against the volatility of the fiscal cliff, says Terry Hanlon, president of Dillon Gage Metals, one of the largest dealers of gold coins.


The price of gold itself rose 4.7% between Nov. 2, the Friday before the election, and Nov. 23, from $1675.20 an ounce to 1,753.80.


That run-up seems to have run out of gas before the end of the year, and the selling worsened Thursday and Friday. Gold fell to as low as $1,626 an ounce Friday morning and was off $30 to $1,644 an ounce in the early afternoon.


Reason: Minutes from the December Federal Reserve meeting suggested half the members of the key Federal Open Market Committee want to end a bond-buying program this year.


That sounds esoteric, but the import of the thinking is not. It suggests the Fed may be closer to raising interest rates than thought -- although a rate increase isn't likely any time soon. Higher interest rates will drive commodity prices lower.


All this may not be good news for the U.S. Mint, which does its small part in trying to keep the federal deficit down. The Mint sold $1.35 billion in gold coins in fiscal 2012, down 29% from a year earlier. The business generated a profit of some $28 million.


Its silver business wasn't so strong: sales of $1.11 billion, down 29% from a year earlier, and a loss of about $5 million.


More on Money Now

59Comments
Jan 4, 2013 11:34AM
avatar
A paid off house and well stocked kitchen are more important to me than gold.  i wish i had well water..... 
Jan 4, 2013 10:24AM
avatar
That might be....  But paper dollars are FAR WORSE....
Jan 4, 2013 10:35AM
avatar

When the FED is pumping $80 billion into the monetary supply each month. It might be a good idea to buy some gold on these dips. The banking system can turn this into as much as $800 billion each month. Even if we figure a more realistic $500 billion, it looks like $6 trillion more dollar bills over the course of a year. How does that stack up against gold production? 

Jan 4, 2013 11:37AM
avatar
No one can predict the future. All these people in the financial markets are speculators and carnival magicians at best. The fact of the matter is the Fed is creating a huge bond bubble that will burst eventually in the years to come(They have created 2  massive bubbles within the last 20 years). The debt-to-GDP ratio is already 100%. Japan's is over 200%. The Fed has also been suppressing the real price of Gold when compared to the S&P 500 with the dollar through all these stimuluses, bond purchasing programs, QEs, etc. Between kicking the U.S. deficit can down the road, the looming bond bubble in the near future by all the monthly multi-billion dollar treasury purchases by the Fed, the future inflation caused by all the Fed's injected QEs on the economy will create in my opinion a future monetary crisis that will concede a day of reckoning sometime in the future(who knows when). Stay the course for the long haul! Buy Gold and other precious metals conservatively and wisely. I also agree with some of the other posts to pay off the house, have a well stocked kitchen and horde ammo.
Jan 4, 2013 11:16AM
avatar
When I see the spiels about the benefits of owning gold, I have to think, "If owning gold is so urgent, why are these companies so excited to get rid of theirs?" You would think if it's value was expected to rise, they would hang on and profit themselves. I own some gold and silver but that is just a part of a survival strategy. Canned goods in the pantry are another part. A few guns and a modest amount of bullets are around too. And a house on a hill overlooking the highway, keep to the high ground.
Jan 4, 2013 11:05AM
avatar
Better to buy bullets than gold. Soon Obama will make bullets more valuable.
Jan 4, 2013 11:30AM
avatar
sell your gold and buy ammunition, silver and food. They are more practical and thus more valuable no matter what you predict for the future. 
Jan 4, 2013 12:20PM
avatar
I own a little gold. When the market goes down, as we have seen time and time again, gold goes up. It's a seesaw with the market on one side and gold on the other.

The smart money buys when prices are low.
Jan 4, 2013 3:27PM
avatar
If the world goes into turmoil, gold and silver will be useless!! The only way to survive is a gun!!! The real barter item will be bullets.
Jan 4, 2013 12:58PM
avatar
This story was the biggest bunch of bs. We all know the JP Morgue does not have enough silver or gold to back their ETFs. The criminals there manipulate the price daily. You can see it in the daily charts. Push the price down, buy. Price reaches their target, sell. Wash, rinse, repeat. Now the Morgue is trying to corner the copper market. Also, I thought 2012 was the most Eagles ever sold by the Mint. Hmm
Jan 4, 2013 4:41PM
avatar
Think about it. Gold never goes away. Gold doesn't go bad. Gold doesn't spoil. Gold doesn't rust away. All the gold that has ever been pulled out of the ground is still here. The same cannot be said about sovereign currencies. Usually every hundred years or so there is a defaut. Not with gold. Usually, while the value of a country's paper currency is in decline, gold not only maintains its value, but that value goes up in a sovereign debt crisis. We are not anywhere near a sovereign debt crisis here in the U.S. just yet., but we will be, someday, sooner now than later. Nobody knows when. It's like predicting the end of the world. But it will come. Meanwhile, it is always a good thing to have a year's supply of physical gold and silver safely put away. Any gold or silver tucked away is better than none. Don't put it in a safety deposit box. And certainly not declared to anyone but yourself. 
Jan 4, 2013 11:50AM
avatar

i asked an old timer i worked with years ago.  "Ron" inhereted oil wells from his mom and swore he'd never simply use up her money.  he was our company machinist.  meanwhile he had some 18 properties across the country, other acquired assets.  a truly cool guy to talk with. 

 

i asked him one day "ron, how does anyone actually make money from gold?"

 

his answer to me was "i WORK it". 

 

he would buy gold at decent prices, then provide the material to artists he knew who would make beautiful work from the gold. 

 

he'd pay the artist a decent fee and then hold the artwork.  he'd sell it later for increased gold value AS WELL AS art value. 

 

then i was sad i just worked in clay...... 

Jan 4, 2013 4:03PM
avatar

Gold has held value for thousands of years. It always seems to increase in value..maybe not year to year,but 10 years from now, I know an ounce of gold will be worth more than today,and at least have some value verses a "promissary" paper note..aka..the dollar...backed by...nothing. 

  I believe a lot of other countries are fearful of the dollar and the USA's multi TRILLION dollar debt...not to mention piling on more TRILLIONS of debt every year. Who would loan someone so deeply in debt another penny?? If the Federal reserve of the USA finally destroys the value of the dollar,by printing them like toilet paper..at least physical gold will be worth something in Yuans,pesos..or some other currency. Sad to think in such terms..but this is the direction the ship is pointed...  time to buy a few more coins for the vault.

Jan 4, 2013 4:20PM
avatar
Good thing about investing in physical gold is that one can sell their gold and get cash, if one sells stock there is lots and lots of paperwork and taxes and another thing if one owns alot of physical gold that person can just hand it over to their kids and nobody knows and they can sell it off as they need federal resreve banking cartel notes, that is why the US government doesn't like gold..if you have cash convert it to physical gold and then give it to your kids problem solved.
Jan 4, 2013 12:20PM
avatar
Sales of coins at the US Mint may be down because they have worse prices than competing coin dealers.  Look up the prices for a gold american eagle and see.
Jan 4, 2013 7:01PM
avatar
Americans are investing in a different precious metal.....lead.
Jan 7, 2013 10:44AM
avatar
I don't know if many of you heard or know, but China stated it will position itself and is ready to play hardball and try to crash the dollar and eliminate it as the World's reserve currency. Go research it folks.
Jan 4, 2013 11:45AM
avatar

I guess I would have more coins, Eagles,Maples or Kruggers....If I wanted to store or hold Gold.

 

But I prefer to invest in Miners and buy and sell their stock to take profits..

 

Then we can buy what we want....It has worked well, and most physical gold we have is in jewelry.

But Steve is right....A full freezer and pantry are more important.

Along with our own water supply, and generators if need be.

Jan 4, 2013 4:56PM
avatar
These are commodities and if you go back to 1970 and chart prices of gold and silver they have only been high about 3 different times.  The rest of the time prices have not fluctuated very much.  A so called crisis makes people think they should own these commodities.
Jan 4, 2013 5:47PM
avatar
Why do you get 12 hands down.....On something that makes a lot sense ???
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM] The stock market finished the Wednesday session on a modestly lower note, but it is worth mentioning today's retreat took place after six consecutive gains. The Dow Jones Industrial Average (-0.1%) and S&P 500 (-0.2%) settled not far below their flat lines, while the Nasdaq Composite (-0.8%) lagged throughout the session.

Equity indices started the day in the red, with the Nasdaq showing early weakness as large cap tech names and biotechnology weighed. The technology ... More

MSN MONEY'S