Monday, October 27, 2008

Mints struggle to meet metals demand

 
Gina Teel
Calgary Herald; with files from Canwest News Service

Safe-haven investors are on a shopping spree for precious metals, snapping up gold and silver as an antidote to topsy-turvy markets -- if they can find any, that is.

Demand for physical gold and silver is gobbling up product at nearly every mint around the globe and in Canada has the Royal Canadian Mint allocating its supply among its distributors, who in turn are limiting the number of coins they sell to dealers, who sell to consumers.

"Virtually every mint in the world is sold out of product and as fast as we can produce it, all of us, there is more demand," said David Madge, director of bullion services at the Royal Canadian Mint.

The situation is causing major headaches for bullion dealers like Donald Carlson.

"It's a nightmare trying to keep enough stock in," said Carlson, general manager of Calgary's Albern Coins & Foreign Exchange Ltd.

In the United States, sales of the one ounce gold bullion American Eagle coins are being allocated to authorized dealers, while sales of American Buffalo gold coins were suspended in late September. In the latter case, demand depleted inventories, said Carla Coolman, spokeswoman for the U.S. Mint.

"We are working very hard to resume sales as soon as we can," Coolman said from Washington, D.C.

It's a little different in Canada, where the voracious appetite for physical metal in both coins and bars has seen the Royal Canadian Mint double its output for gold twice in the last eight weeks, and they're still having trouble keeping up, Madge said. "We have never produced more than what we are producing right now. We just can't keep up with all the demand," he said.

It's the same story for silver. Madge said it's going to be a record year at the mint for making silver Maple Leaf coins.

In 2007, the Royal Canadian Mint produced a record 3.5 million one ounce silver Maple Leaf coins. Officials estimated production could easily double that this year, given the abnormal demand.

"That gives you a sense of magnitude as to how much we're pumping out right now," Madge said.

But back in Calgary, Carlson said silver, especially, is almost impossible to find.

Earlier this week, Albern Coins was pre-booking silver about 12 weeks out, while gold was running about two to three weeks behind.

"We get it in, we go through it, and start pre-booking for the next shipment," he said.

Back in March, when gold blew through the roof at $1,033.90 per ounce -- its highest ever price -- business was 70 per cent buyers and 30 per cent sellers, Carlson said.

Now it's 99 per cent buyers and one per cent sellers, and people are buying whatever's available.

The reason for the global run on demand is two-fold, with buyers snapping up gold lured either by free-falling prices that make it a bargain, or by the security it offers.

Physical gold is a very liquid asset and historically is sought out during tumultuous economic times, noted John Ing, president of Maison Placement Canada Inc. "Gold itself, to me, will be the antidote to these financial problems," Ing said.

Price volatility is being driven by a strengthening U.S. dollar, which pushes gold prices down. Also, depending on the day, volatility is coming from the selling side as investors liquidate their holdings -- be it physical gold or gold held in an exchange traded fund -- to raise cash.

gteel@theherald.canwest.com

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