Thursday, August 28, 2008

US Mint suspends red-hot Eagle gold coins

Thursday August 21, 4:46 pm ET
By Frank Tang

NEW YORK (Reuters) - A shortage of American Eagle bullion coins due to soaring demand following a recent sharp retreat in gold prices has forced the U.S. Mint to temporarily suspend sales of the popular coins.

"Due to the unprecedented demand for American Eagle gold one-ounce bullion coins, our inventories have been depleted. We are therefore temporarily suspending all sales of these coins," the U.S. Mint told authorized coin dealers in a memorandum dated on Friday.

Michael White, a U.S. Mint spokesman, said that only the one-ounce 22-karat American Eagle coins are sold out, but the half-ounce, quarter-ounce, and 1-10th ounce coins as well as the less popular 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.

Coin dealers from the United States to Canada reported a surge in buying of bullion coins and other gold products since prices plummeted from highs last month. The buying spree contributed to supply fears and helped boost gold prices sharply on Thursday.

Rand LeShay, senior vice president of Los Angeles-based A-Mark Precious Metals, an authorized purchaser for the U.S. Mint, said that there was a big spike in demand for gold and silver coins and ingots after a recent price tumble.

He said that A-Mark currently has no one-ounce American Eagle gold coins for its customers.

"Until the U.S. Mint can supply us with more coins, we won't be able to supply any to our customers," LeShay said.

The move by the U.S. Mint to halt sales caught market participants by surprise as it came at a time when the metal was sharply falling, rather than rising.

In contrast, the Mint needed to allocate its Silver Eagle coins to dealers due to overwhelming demand as the price of silver soared earlier this year.

Produced from gold mined in the United States, the American Eagles have been novel items among collectors and investors since their introduction in 1986. Each coin has a face value of $50 but it is sold by authorized dealers at a premium to the price of gold.

COIN DEMAND SPIKES

Blanchard and Co., one of the largest U.S. retail dealers of rare coins and precious metals, said the American Eagle and American Buffalo one-ounce gold coins are sold out.

"Nobody has the Eagles or the Buffaloes right now. We bought 2,000 ounces late last week, and those were the last 2,000 ounces that we can find in the marketplace," said David Beahm, vice president of New Orleans-based Blanchard.

"If we don't have them, nobody has them," Beahm said. He added that he has been recommending customers to buy the one-ounce Canadian Gold Maple Leaf gold coin instead.

Jon Nadler, senior analyst at top Canadian dealer Kitco, said that the shortage of the Eagle coins could be due to a combination of high demand and a temporary lack of supply in coin blank, which is a flat metal disk used to mint coins.

On Thursday, spot gold surged as much as 3 percent to $839 an ounce, while U.S. gold futures for December delivery scaled a one-week high at $845 an ounce. Gold hit a five-month peak of $987.75 on July 15, and it set an all-time record of $1,030.80 on March 17.

In hindsight, A-Mark's LeShay said that neither the U.S. Mint nor the coin dealers could anticipate the coin shortage.

"This kind of spike in demand is something no one can foresee, and no business runs itself waiting for this to happen," LeShay said.

(Additional reporting by Jasmin Melvin and David Lawder in Washington; editing by Jim Marshall)

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