Proof Eagles Have Been Grounded

Oct 19, 2009 | bullion, Eagles, gold, silver, US Mint

I am sure you heard that the US Mint has announced that they will not produce American Eagle gold and silver proof coins “[because] of unprecedented demand for American Eagle Gold and Silver Bullion Coins.” Is there really an unprecedented demand?

What We Should Have Learned
In an analysis posted here last April, production totals for 2008 showed that the US Mint experienced an extraordinary increase in demand for American Silver Eagle bullion coins striking over 20 million ounces of silver for the first time. This was a 128-percent increase over the 2007 production and almost twice as large as 2006, the second highest production total.

Gold production totals revealed a different story. There was an unprecedented demand in 1998-1999 where the number of American Gold Eagle coins and the ounces of gold used has not been matched by the US Mint. In addition to striking over 5 million coins using over 2 million ounces of gold, the US Mint also struck over 4.4 million 50 State Quarters in the program’s first year of issue. The production of 1.1 million coins using 788,500 ounces of gold was only a bit above average but the most in the 21st century.

Since the start of the current economic crisis that experts say began in December 2007, it was clear that the US Mint was unprepared when investors turned to purchasing American Eagle coins looking for safe investments. In fact, the US Mint admitted that the US Mint knew they were experiencing shortages as early as June 2008. By October, the US Mint had to announce that there is a shortage of bullion because the US Mint could not purchase enough material at market prices to meet the demand. After a year, the US Mint announced that “the United States is lifting the allocation process,” ending the rationing of bullion issues.

Whoever said no news is good news has never met the politicians running the US Mint.

Where We Stand Today
With the announcement by the US Mint, I downloaded the 2009 bullion production totals and added it to the previous analysis to see if there has been an unprecedented demand.

If the demand for silver in 2008 was any indication, it would be matched or exceeded by the demand in 2009. Through the first week in October, the US Mint has struck over 21 million one-ounce American Silver Eagle bullion coins. That is more coins than the 20.5 million struck in 2008. Figure 1 shows that if the trend continues, 2009 will exceed all silver production totals for American Silver Eagle coins.

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Although there was a dip in the monthly production for September (see Figure 2), trends show that American Silver Eagle coins struck in the fourth quarter (the first quarter of the fiscal year) can outpace production in earlier in the year. It is possible that the US Mint could produce another 10 million silver coins by the end of the year, especially if collectors plan to buy bullion coins to fill in the whole made by the 2009 discontinuance of the proof coin.

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Gold Glitters, But…
Although production for the 2009 American Gold Eagle is outpacing production for 2008, this cannot be said about gold. While gold will surpass last year’s production totals, the US Mint will not produce the amount of coins or strike the amount of gold that they did in 1998 and 1999 (see Figure 3). And while the US Mint may strike more than the 1.3 million coins that marked 1997, they will do so by striking only one-ounce coins.

Click image to enlarge

Even with the production increases in 2009, the combined unit production of the gold and silver American Eagle coins will be less than it was a decade ago.

So What Is The Mint Doing?
At the end of April, it was reported that US Mint ceased production of nickels and dimes that would last for six months because of the reduced demand from the Federal Reserve. They continued the production of other coins with changing designs, such as the Bicentennial Lincoln Cent, DC & Territories Quarters, and Presidential Dollars. Recent reports show that the US Mint has not continued striking nickels and dimes while producing fewer quarters than any series since the start of the 50 States Quarter program began in 1999.

The Philadelphia Mint has also ceased production of Kennedy Half Dollars. In fact, Denver has out produced Philadelphia by 26.5 million coins.

As part of the announcement of the temporary cessation of production, the US Mint said that workers will participate in a six-month productivity maintenance program and capital maintenance in order to keep the rank-and-file workers employed.

According to the US Mint’s Annual Reports, American Eagle coins are struck at both Philadelphia and West Point. Bullion issues do not include mint marks making it difficult for collectors to determine where the coins were struck.

If there are idle coin presses at the Philadelphia Mint and employees not working on the production of business strikes, why has management not allocated the appropriate resources to meet the demand for bullion as well as the demand for collector American Eagle coins?

Between 1998 and 2001, the US Mint was running at full production including the new 50 State Quarters and was able to meet the bullion and collector demand for American Eagle coins. In fact, between the two years, the US Mint was producing half-dollars for regular circulation and changed the production of dollars from the Susan B. Anthony dollars to the Sacagawea design. Even with the economic slowdown, the US Mint produced a record number of coins in 2001.

With coin presses silent and the lack of sell outs for this year’s commemorative coins, why can’t the US Mint keep up with the investor and collector demand for American Eagles?

It Does Not Make Sense
Even though there was a coin shortage in the mid-1960s, production at the US Mint exceeds what it is today. In order to find production totals as low as they are this year, we would have to look over 50 years ago when the Philadelphia Mint was in its third building and only producing five types of coins with no commemoratives.

Today, the Philadelphia Mint is in a larger building with more state of the art equipment. The same facility that helped produce record numbers of coins less than ten years ago while striking bullion that included platinum American Eagle coins.

The only answer is the incompetence of the US Mint’s management.

It is very clear that the leadership of Director Edmund Moy and Deputy Director Andrew Brunhart must be questioned. Moy was a patronage appointee who has no experience managing a manufacturing operation or in any other type of position where workflow and resource management is critical. Brunhart, who was hired for his “expertise in organizational change,” appears to be changing the US Mint the same way he changed the Washington Suburban Sanitary Commission (WSSC), for the worse.

I know that the country has issues that may be more important than who is running the US Mint. But the US Mint is a profit center for the federal government and those profits (seignorage) are being hurt by its leadership’s inability to manage its resources properly. Therefore, it is time that President Obama set aside a few moments to replace these political hacks before they destroy one of America’s oldest bureau.

Will You Help?
If you are a collector, investor, or have an interest in seeing the US Mint successfully carry out its mission, I ask that you write a letter (addressed to 1600 Pennsylvania Ave NW, Washington, DC 20500-0001), send an email, or go to the White House website contact form and tell President Obama that Director Moy and Deputy Director Brunhart are damaging this venerable institution.

Hopefully, we can convince the President to act now before US Mint management tries something insipid, like blame collectors for their problems as they tried to do in the mid-1960s.

Fort Knox Visitors Day, 35 Years Ago

Sep 23, 2009 | bullion, history, US Mint

Treasury Department, Procurement Division, Public Buildings Branch, Fort Knox – United States Bullion Depository (1939)

The United States Bullion Depository at Fort Knox, Kentucky has been called the world’s most secure facility. Its construction was completed in 1936 in order to store the country’s gold supply away from the coast to keep it safe from potential attack by Nazi Germany. Fort Knox is so secure that only those who work there, the Secretary of the Treasury, and the President of the United States may visit the facility.

Outside visitors are rare. Following President Franklin D. Roosevelt’s inspection trip in 1943, no outsiders have been allowed to visit the facility. Following an audit that was completed in 1953, the vaults were sealed and nobody was allowed to visit.

In 1974, noted conspiracy theorist Dr. Peter Beter wrote a book titled The Conspiracy Against the Dollar that alleged “powerful Americans have secretly permitted $20 billion worth of gold to be removed from Ft. Knox.” The claim caught on and the public clamored to prove that the nation’s gold was still in Fort Knox.

After clamoring from the public, congressed impressed on the Secretary of the Treasury William Simon and Director of the US Mint Mary Brooks to open the doors of the vault to public inspection. It was finally agreed that a select group of congress members and press would visit Fort Knox on September 23, 1974.

On September 20, 1974, the US Mint release the following press release:

FOR IMMEDIATE RELEASE
September 20, 1974

INSPECTION OF GOLD AT FORT KNOX

The inspection by Members of Congress on September 23, 1974, of U.S. gold stocks stored at the Fort Knox (Ky.) Bullion Depository marks a unique departure from the long standing and rigidly enforced policy of absolutely no visitors, Mrs. Mary Brooks, Director of the Mint, announced today.

“On April 28, 1943, President Franklin D. Roosevelt inspected the Bullion Depository,” Mrs. Brooks said. “His visit was the one and only time a gold vault was opened for inspection for anyone other than authorized personnel.

“The Congressional inspection adheres to the new open door policy of the government announced by President Ford. Treasury Secretary William E. Simon issued the invitation to Congressmen to inspect the gold at Fort Knox. By also inviting the press to witness the Congressional inspection, the Mint is clearing away cobwebs and re-assuring the public that their gold is intact and safe. For the first time photographing is being permitted inside the Depository.”

After the Congressional inspection, the Bullion Depository will once again be closed to visitors.

On September 24, 1974, a special settlement (audit) is scheduled to begin and at its conclusion a report on the audit will be issued.

The audit will be performed by a committee of auditors from the U.S. General Accounting Office (GAO) and the Department of the Treasury. The auditors from the Treasury will be drawn from the Office of the Secretary, the Bureau of Government Financial Operations, the U.S. Customs Service, and the Bureau of the Mint. In addition, the committee will include technicians from the Bureau of the Mint who are trained in assaying and weighing gold bullion.

The monetary gold stock of the United States totals 276.0 million fine troy ounces valued at $11.7 billion at the official rate of $42.2222 per fine troy ounce, and is stored in various federal depositories (table attached), the largest of which is at Fort Knox, Kentucky. 147.4 million fine troy ounces, valued at $6.2 billion, is stored in 13 vault compartments at Fort Knox Bullion Depository.

MONETARY GOLD STOCK OF THE UNITED STATES
(in millions of ounces)

Account of the U.S. Treasury    
Fort Knox 147.4  
Denver Mint 54.9  
New York Assay Office 54.1  
San Francisco Assay Office 10.6  
FRB New York – Special Custody Acct. 4.2  
Bank of England 1.3  
Bank of Canada 1.4  
Other .1  
    274.0
Exchange Stabilization Fund   2.0
Total   276.0

For more on the Fort Knox visit, you should read the article by David Ganz, who attended as a freelance writer after skipping a day at law school.

Recently, the History Channel aired a show, Fort Knox – Secrets Revealed that was produced in 2007. “Hidden deep inside the vault is an estimated $73 billion dollars in gold. Almost all information about it is classified. Through interviews with eyewitnesses, rare photos and rarely seen films, we will construct a picture of what the building might look like. Hear testimony of those journalists and congressmen who were among the select few invited inside in 1974.”

If you cannot wait for the History Channel to air the show, you can purchase a DVD copy for yourself from Amazon.com. The link to the right will bring you right to the page to purchase the DVD.

30th Anniversary Panda Bullion Coins

Jun 27, 2009 | bullion, coins, foreign, gold, silver

Fans of the Chinese Panda can look forward to a special edition bullion coin to commemorate 30 years of producing bullion coins. Although the Panda began its production in 1982, The People’s Bank of China has been producing bullion coins since 1979.

The basic design of the coin will be the same as the regular 2009 issue. The obverse of the coin features the Hall of Praying for Good Harvest of the Temple of Heaven in Beijing, the title for the Peoples’ Republic of China in Chinese, and the year. Added to the lower half of the edge will be “30th Anniversary of the Issuance of the Chinese Modern Precious Metal Commemorative Coins” in Chinese.

The reverse will feature the panda design for 2009 with a border that will include “30th Anniversary of the Issuance of the Chinese Modern Precious Metal Commemorative Coins” in English. The weight and fineness of the metal will be placed at the bottom of the design just above the border.

This commemorative series will consist of a one-quarter ounce gold coin and a one-ounce silver coin. The gold coin will be made of one-quarter troy ounces of .999 gold, 22 millimeters in diameter, and have a face value of 100 Yuan. The silver coin will be made of one troy ounce of .999 fine silver, 40 millimeters in diameter, and have a face value of 10 Yuan. Mintage is limited to 10,000 gold and 300,000 silver coins.

Coins will be struck at the Shenzhen Guobao Mint and officially distributed by China Gold Coin, Inc., a corporation of the People’s Bank of China.

It looks like I will have to add the silver coin to my want list in order to keep up with the series.

Image courtesy of China Gold Coin, Inc.

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