Thursday, October 8, 2009

US Mint halts sale of certain Gold & Silver bullion coins because of 'unprecedented demand'

UPDATE: Gold soars to record high; price hits $1,059.60 on intraday trading and closes at $1,055.40 US/ounce.
UPDATE @ 6:00am EDT: Gold futures up to $1,055 and Silver futures up to $17.77.

In a development that is already sparking a frenzy among gold bugs, the US Mint announced on Tuesday that they would no longer be offering 6 different bullion coin products it used to sell.

Affected by this decision are:

  • one-ounce American Eagle Silver Proof Coins
  • one-ounce American Eagle Silver Uncirculated Coins
  • all American Eagle Gold Proof Coins (all weights, as well as the four-coin set)
  • one-ounce American Eagle Gold Uncirculated Coins
  • the United States Mint Annual Uncirculated Dollar Coin Set, which also includes a one-ounce American Eagle Silver Uncirculated Coin
  • and American Eagle Platinum Bullion Coins (all weights)

The US Mint issued a press release stating that production of these coins has been suspended "because of unprecedented demand for American Eagle Gold and Silver Bullion Coins."

Gold bugs are already drawing parallels to Franklin D. Roosevelt’s 1933 Presidential Executive Order that prohibited “hoarding gold” and the move is being seen by some as the start of the slippery slope towards gold confiscation by the government.

Market turmoil is fueled by such rumours and speculation... fueled by fear.

And talk of inflation, hyper-inflation, dollar collapse, and new credit collapses are made even more poignant with this latest development from the US Mint.

Are events building into a powder keg awaiting a spark to ignite a speculative frenzy and firestorm?

Yesterday we had stories about oil being traded in euros and replacing the dollar as the currency of trade, a story credited for driving gold way up.

Then there is the current situation in Latvia, which has the potential to freeze up a large number of Swedish banks as this MarketWatch story outlines. If is feared that this could trigger a nightmare scenario that would have Swedish banks then pulling down other European banks, triggering Credit Crunch: Part 2.

On the periphery is the efforts of various US Senators to unearth a full itemization of the commitments the US Federal Reserve has made in secret to bail out the banks. This is in addition to a bill working it's way through Congress to open up US Federal Reserve books.

Gaining ground is the growing realization of the impact that Chinese Banks defaulted on billions of dollars in derivative contracts. In November 2008, top tier Chinese banks (Bank of China and Industrial and Commercial Bank of China) reneged on derivatives contracts and failed to come up with billions in collateral on dollar/yen FX trades, which were out of the money after the yen’s October appreciation. This should have been headline news in every financial newspaper, but it wasn’t. At the end of August 2009, China signaled that state owned oil consumers: Air China, COSCO, and China Eastern could default on money-losing commodities derivatives contracts without penalty.

Most credit support annex agreements would say that closing out these trades would be an event of default, and then the cross default on all the trades would kick in with the same counterparty. But the credit of the Chinese banks was better than many of their counterparties. Everyone was forced to renegotiate contracts with the Chinese banks.

From the perspective of the derivatives markets, this is earth shattering. What would have happened if AIG had done the same thing? (Hey, Goldman, UBS, and others…you want your collateral? Well... stuff it!)

Meanwhile some are worried about US unemployment combining with rising interest rates to create a situation similar in many respects to Argentina in 2001?

One thing is for sure: fear can be a powerful, irrational motivator. Perhaps that's why Barclays see's gold going to $1,500 an ounce.

For market speculators, October 2009 is shaping up to be a very interesting month as it does every single year.


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  1. Very misleading blog entry. If you read the US Mint press release linked to in the posting, you'll see that they're suspending production of *uncirculated* and *proof* coins (i.e. coins destined for the coin collecting trade) in order to direct extra capacity to gold and silver *bullion* coin production.

    Even the author of this posting must realize this, because the body of the entry details that it's uncirculated and proof coins that will no longer be offered. (Admittedly, it appears as if production of platinum bullion coins is indeed being suspended, but how many of us were really planning on buying platinum coins anyway?) So why does the headline then misleadingly proclaim in alarmist fashion that it's bullion coins that are not going to be available? This headline is either intentionally misleading (because it suits the author's conspiratorial worldview), or just irresponsibly sloppy.

  2. Your concern seems to be with the headline. Fair enough... the word 'certain' has been added to the title.

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