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.
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.
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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?
The smart money buys when prices are low.
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......
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.
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.
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