Final Thoughts on US Mint Product Cancellations

Earlier this week, the United States Mint announced a slew of product cancellations. Collector favorites such as the Proof Gold and Silver Eagles, and others such as collectible uncirculated Gold and Silver Eagles, and bullion Platinum Eagles will not be produced for 2009. After the announcement, I wrote a series of posts exploring the canceled (and available) products. This final post will provide some overall thoughts and reactions to the situation.

Previous coverage:
2009 Proof and Uncirculated Gold and Silver Eagles Canceled
2009 Platinum Eagles and 2009 Gold Buffalo Coins
More Details on 2009 Gold and Silver Eagles

Other World Mints and Precious Metals Demand

It's true that demand for gold, silver, and other precious metals has been exceptionally high for the past few years. During 2008 world mints struggled to cope with the increased demand, and many had to resort to product suspensions or allocations, similar to the steps taken by the United States Mint. By 2009 most world mints adapted to the elevated demand for their products, and in many cases, are now thriving in the current environment.

The Royal Canadian Mint quadrupled its capacity to produce bullion coins in late 2008. In 2009, they reintroduced two previously canceled bullion products, the Platinum Maple Leaf and the Palladium Maple Leaf, citing demand from distributors. The Platinum Maple Leaf was last offered in 1999 and the Palladium Maple Leaf in 2007. Indications suggest that sales of these reintroduced products have been strong.

The Austrian Mint extended shifts to nights and weekends, and recruited additional workers. They also introduced a new silver bullion coin, the Silver Philharmonic. The efforts of the Austrian Mint paid off. Their Gold Philharmonic captured additional market share and become the best selling gold coin in the world for the final quarter of 2008.

The Perth Mint of Australia invested in additional and improved equipment to streamline production and take advantage of market conditions. For their fiscal year ended June 30, 2009, they reported a record profit of $38 million, compared to $3.7 million profit in the prior year. Sales increased across both bullion and collector coin offerings. Rather than complaining about demand, the Perth Mint cited "favorable market conditions" as the reason for their increased profits. They aim to continue to "take advantage of the renewed interest in precious metals" in the next fiscal year.

The US Mint and Precious Metals Demand

The US Mint reacted to the increased demand for their products by implementing a series of suspensions and/or rationing programs. These eventually touched nearly all of their bullion and collectible precious metal products. As mentioned, other world mints were forced to initially resort to such measures, but managed to adapt and quickly lift suspensions and allocations.

The US Mint's rationing programs extended into 2009, even as they significantly shrunk their line of bullion coins. Until the recent announcements, the US Mint had only offered one ounce Gold Eagle and one ounce Silver Eagle bullion coins. In prior years, they had offered a full line of fractional weight Gold Eagles, a full range of fractional and one ounce Platinum Eagles, a 24 karat Gold Buffalo, and a wide array of precious metals collector coins.

At one point, the US Mint did state that they were seeking additional suppliers of precious metals blanks, which seemed to be the crux of the problem. The US Mint is held to special requirements for the sourcing of metal for its bullion coins, so the process was more complicated than for other mints. To date, I have not heard any news about the US Mint securing additional suppliers.

US Mint's Missed Opportunities

I am not convinced that it was absolutely impossible for the US Mint to produce Proof 2009 Gold and Silver Eagles. As mentioned in a previous post, the US Mint started sourcing all 22 karat gold and silver blanks to the production of bullion coins since at least June 2008. This means that they had well over one year to try to find a resolution to the situation, either by increasing acquisition of blanks from existing suppliers or contracting with new ones. During this time frame, it is worth noting that the US Mint was somehow able to secure at least 100,000 one ounce 24 karat gold blanks for the production of this year's Ultra High Relief Double Eagle Gold Coin.

The rationing programs put in place during 2008 ended in June 2009. Most took this as a sign that the unprecedented demand had abated and the US Mint was finally able to meet "full demand" without resorting to rationing. Since the rationing programs have not been reinstated, presumably the US Mint has meeting full demand during the past three months. Was the number of precious metals blanks obtained by the Mint exactly equal to the demand for bullion coins? I have to think the US Mint should have had some opportunity to put aside at least a small inventory of blanks for the production of collector coins later in the year.

Even if it was somehow impossible to take any of these steps, I still think there had to be some potential work around or another avenue to pursue. See my separate article on Coin Update News: How the US Mint Could Have Produced 2009 Proof Gold and Silver Eagles.

The US Mint's Announcement

The US Mint must have realized that this week's announcement regarding the cancellation of many popular collector coins would set off a wave of disappointment and complaints. To soften the blow, they cleverly titled their press release "United States Mint to Offer 2009 American Buffalo Proof Gold and American Platinum Proof Coins." Behind the title, the US Mint revealed the slew of canceled coins.

The tone of release was unsympathetic and unapologetic. The cancellations were simply the result of the US Mint's legal obligation to produce bullion coins. The article implied that the US Mint was not at fault, rather it was the result of all those pesky bullion buyers.

Rather trying to sidestep the issue and provide legal justifications, collectors should have been issued an outright apology. I think that breaking with a twenty two year tradition requires that someone take personal responsibility and admit that something went wrong.

Throughout the tumultuous events of the past two years, the US Mint has only issued one public apology. This was in response to an extended website outage in January 2008.

Collecting US Mint Coins in 2009

In recent history, it has never been so difficult or complicated to collect newly issued coins from the US Mint. In the past, the US Mint offered a wide variety of products, the availability core products could be depended on throughout the year, and sell outs happened in weeks or months, if at all.

Today, the product line has been reduced by more than 60%, many core products have been delayed or canceled, and we all know the Lincoln Coin and Chronicles Set will sell out on the first day. Readers have mentioned calling in sick from work on the launch date to stay home and battle with the US Mint’s overloaded server. While it seems ridiculous, this has become a practical solution. Is this the new face of coin collecting?

Even collecting newly minted coins from circulation has become a challenge. Just ask anyone who has tried to obtain the 2009 quarters from their bank, or tried to find any 2009 nickels or dimes from any source besides eBay. During the State Quarter era, the new designs would faithfully show up in change within a few months of release. Collectors could obtain uncirculated rolls of each new design from their local banks at face value. Granted there are distribution issues related to circulating coins, but another excuse, even a justified one, doesn't provide much consolation.

I honestly don’t want to have to worry about the US Mint’s supply chain issues, the legal pecking order of their products, or the distribution system for new coins. I want a reasonable assortment of products, which includes expected core offerings and occasional special offerings. If I like one of their coins or products, I want to have the ability to easily purchase it without reorganizing my life to do so. If the US Mint must release eighteen different circulating coin designs each year, I would expect the reasonable opportunity to acquire them at face value or a reasonable premium.

2009 Platinum Eagle, 2009 Gold Buffalo, 2009 Fractional Gold Eagles

To end things on a less dour note, I wanted to give my thoughts on the 2009 precious metals products that will be released in the coming months. This includes two collectible coins and some previously unissued bullion coins.

Many are looking forward to the one ounce 2009 Proof Gold Buffalo and 2009 Proof Platinum Eagle coins as potential big winners. The coins are tentatively scheduled for release on October 29 and December 3, respectively. The 2008 versions of these products now sell for double or more than their last issue prices, but will the same thing happen for the 2009 coins?

It depends. Even though the products are being offered at the tail end of the year and possibly for a short ordering period, the pent up demand for these products will be significant. Collectors will likely buy every coin the US Mint offers, but how many will this be?

If the number minted is low, or at least in line with 2008 levels, then the products will sell out and prices will move up quickly on the secondary market. If the US Mint (somehow) mints these coins in large quantities, the potential is curtailed.

As an example, the US Mint offered the 10th Anniversary Platinum Eagle set at the very end of 2007. Anticipation for the set was high following the sell outs and price appreciation for the prior 20th Anniversary Gold and Silver Eagle Sets. The US Mint produced 30,000 of the Platinum Sets and eventually sold about 20,000 sets. For a collectible Platinum Eagle, this mintage was enormous. The high mintage served to curb the potential for price appreciation after the coins were no longer available at the Mint.

Beyond the collectible products, the US Mint will also be offering one ounce bullion 2009 Gold Buffalo coins and fractional 2009 Gold Eagle coins. These will be available from bullion dealers on October 15 and December 3, respectively. Typically, most bullion coins are purchased by precious metals investors and don't carry a collectible premium. However, if the mintages come in low enough, I think it will be possible.

It's likely that the 2009 Gold Buffalo bullion coin will be heavily ordered, but end up with a comparatively low mintage. The current lowest mintage for a bullion Gold Buffalo is 189,500 coins for 2008 136,503 coins for 2007. Again, it will be a matter of how many the US Mint produces, but the number is almost certain to come in below the 2008 mintage, perhaps significantly. Since the coin will be available from October 15, there will be several weeks of data during the course of sales to examine.

I think that the best bet will be the fractional bullion Gold Eagles. The coins will be overshadowed by the Gold Buffalo and will be available later in the year, probably for just a few weeks. Mintages are bound to come in at historical lows, and draw the interest of collectors. This would set the stage for some higher prices after the coins are no longer available from bullion dealers.

This will conclude my coverage of this week's events for the time being. I will continue to cover any subsequent news and the individual coins as the release dates come closer. I invite any other collectors to share their thoughts and reactions in the comments. You are also invited to submit articles with your reactions for publication on Coin Update News. See the contributors page for more details.