I'll Wait for the Numismatic Version

Earlier this week, the US Mint revealed the release date and details of the America the Beautiful Silver Bullion Coins. The news of significantly reduced mintages was exciting, but for me some of this excitement has fizzled.

The bullion version of the coins will not be available directly from the US Mint, but rather they will be distributed through the US Mint's authorized purchaser network. As with other bullion programs, only a small group of primary distributors are able to buy the coins directly from the US Mint based on the market price of the metal plus a mark up. They are then responsible for distributing these coins to the public, as well as facilitating two way market for the coins.

The premium paid by the primary distributors for the America the Beautiful Silver Bullion coins is $9.75 per coin. Recently, many readers have noted one of the primary distributors offering complete five coin sets for sale, priced at $1,395. This works out to $279 per coin, or about $130 per coin over metal value.

As I have explained in this Coin Update News article, the US Mint asked their primary distributors to market the coins "in a manner which ensures that they will be available, accessible, and affordable to all members of the public." They also note, per the authorized purchaser agreement, the "premiums are to be competitive with those charged for other bullion coins."

Is a 90% premium above the market price of silver affordable and accessible? So far there seem to be plenty of buyers willing to pay the premium, as sales have been going swiftly. With one primary distributor setting a high bar for the price, others will probably follow. At subsequent levels of distribution, prices might spiral even higher.

Personally, I will not be buying the bullion coins.

I am aware that many readers have purchased the America the Beautiful Silver Bullion Coins at the available prices. For what it's worth, I think prices will likely increase from this point, but to what extent, time will tell. It's also uncertain how much of the appreciation has already been captured by the primary distributors through the high initial pricing.

I will be awaiting the release of the numismatic versions of the coin. The US Mint will have available 27,000 units of each design, with an uncirculated finish and the "P" mint mark. The coins are expected to be available in the first quarter of 2011.

Pricing has not yet been announced, but I think it will be lower than the $279 being charged for the bullion versions. Even if the coins are priced at 5 times the cost of the 2010 Proof Silver Eagle, that would still be $230. (It may actually happen that the announcement of the pricing for the lower mintage numismatic versions of the coin will serve to deflate market premiums for the bullion version.)

Since numismatic products are sold directly by the US Mint to the public, they would like impose household ordering limits or other procedures to ensure broad and fair distribution.

Sales of the numismatic America the Beautiful 5 ounce silver coins might proceed in a manner similar to the Lincoln Coin & Chronicles Set. It was almost universally understood that the product would become a secondary market winner. The US Mint imposed a one per household ordering limit. Most people who wanted a set were able to purchase it at the initial price during a 30 hour window of availability. There were few complaints and most people seemed happy to be able to get a low production, well conceived set at a reasonable price.

So far, the US Mint has not offered much explanation for the significantly reduced mintage levels of the America the Beautiful Silver Bullion Coins.

Congress mandated that they create a new bullion coin series with complicated specifications precisely when the Mint was having trouble keeping up with the existing bullion programs. The low production for the bullion coins might be attributable to inadequate planchet supplies, the limited production time frame, or the allocation of some planchets to the numismatic versions of the coin.

It's probably safe to assume that the US Mint was not seeking to create a low mintage product on purpose. Recently, the Mint has exhibited a strong preference against this type of product.

At one point, the Mint stated that they could have produced a small quantity of 2009 Proof Silver Eagles, but instead they chose to cancel the offering, since the amount they could make would not fulfill all collector demand. Rather than creating a rarity for some, they preferred to have everyone get nothing. In the case of the ATB silver coins, they were legally required to produce the coins, so they went ahead despite the low production levels.

I am completely in favor of the US Mint creating collectible products with production below demand levels, but this should only take place when the coins are available to the public in a fair manner, which allows everyone to have an opportunity to buy at the reasonable offering price.