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

Jan 4, 2013 11:34AM
A paid off house and well stocked kitchen are more important to me than gold.  i wish i had well water..... 
Jan 4, 2013 11:30AM
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 11:16AM
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
Better to buy bullets than gold. Soon Obama will make bullets more valuable.
Jan 4, 2013 10:35AM

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 10:24AM
That might be....  But paper dollars are FAR WORSE....
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.
100 character limit
Are you sure you want to delete this comment?


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?


[BRIEFING.COM] As expected, the major averages began the day on the defensive. The S&P 500 trades lower by 0.2%, while the Nasdaq Composite (-0.3%) underperforms amid relative weakness in its top component.

Shares of Apple (AAPL 100.11, -1.52) have surrendered 1.5% in the early going, which has translated into relative weakness for the technology sector (-0.3%). Similar to technology, other cyclical groups like consumer discretionary (-0.4%), industrials (-0.3%) also trail ... More