Little Demand for American Palladium Coins, Study Concludes

by Mike Unser on March 13, 2013 · 24 comments

American Eagle Palladium coin designs

If American palladium coins turns into reality, the obverse will feature a high-relief of Weinman’s Winged Liberty design as it appeared on obverses of Mercury dimes from 1916 to 1945 and the reverse will bear a high-relief of Weinman’s design as seen on the reverse of the 1907 American Institute of Architects medal

A study commissioned by the United States Mint casts doubt on the viability of American palladium coins, indicating limited appeal for investor and collector versions.

"The potential pool of buyers of palladium bullion and numismatic coins is small and there is little interest in the market for palladium in coin form," the study states.

The palladium market study was completed by CPM Group LLC, a New York City-based company that describes itself as a commodities research, financial advisory, consulting and commodities management firm. The study was mandated by the American Eagle Palladium Bullion Coin Act of 2010, Public Law 111-303.

In CPM Group’s summary conclusions, it notes two key points:

  • It is unlikely that there will be sufficient demand for a U.S. Mint palladium bullion coin and such a program would most likely not be possible to undertake profitably.

  • It is unlikely that there will be sufficient demand for a U.S. Mint palladium numismatic (proof or uncirculated) coin, but such a program could be undertaken profitably.

CPM Group analysts forecast a sales potential of 100,000 ounces of palladium bullion coins in the first year, meaning they would debut as the U.S. Mint’s weakest bullion program. By the second year, they believe demand levels would drop to support 20,000 ounces, by year three to 10,800 ounces and by the tenth year to 3,000 ounces.

As for the potential of collector proof and uncirculated Palladium Eagles, the study forecasts sales of 50,000 ounces to start, and predicts a third year annual pace of 15,000 ounces. That is below current sales of the 2012 First Spouse Gold Coins — an interesting comparison since the price of a collector one-ounce Palladium Eagle would be near a one-half ounce spousal gold coin.

The act calls for an American Eagle palladium obverse to feature a "high-relief likeness" of Adolph A. Weinman’s highly regarded "Winged Liberty" design. This design first appeared on Mercury dimes from 1916-1945. The "Walking Liberty" design by Weinman is currently showcased on obverses of the popular American Eagle silver coin. Palladium Eagle reverses would depict a high-relief of Weinman’s design found on the reverse of the 1907 American Institute of Architects gold medal.

Obviously for coin collectors and even for some bullion coin investors, a coin’s design is a make or break deal. CPM Group was not tasked to look at this aspect in forecasting palladium coin demand. Adolph A. Weinman was not mentioned in the study, nor was any specific aspect of the coin’s design.

The following table outlines projections from CPM Group researchers for Palladium Eagle sales:

10-Year Demand Forecast for American Eagle Palladium Coins

  Year
1
Year
2
Year
3
Year
4
Year
5
Year
6
Year
7
Year
8
Year
9
Year
10
Bullion 100,000 20,000 10,800 5,000 4,000 3,000 3,500 3,000 3,000 3,000
Proof 33,333 13,333 10,000 4,000 4,000 2,000 1,600 1,500 1,000 1,000
Uncirculated 16,667 6,667 5,000 2,000 2,000 1,000 800 750 500 500
Total 150,000 40,000 25,800 11,000 10,000 6,000 5,900 5,250 4,500 4,500

 

In support of its conclusion on limited demand for a palladium bullion coin, CPM Group researchers cite the performance of the palladium Canadian Maple Leaf bullion coin, sourcing Royal Canadian Mint sales and mintages for the .9995 fine palladium coin as:

2005 – 2010 Canadian Maple Leaf Palladium Coin Sales & Mintages

Year Mintage Sales Average Price of Palladium Annual Average Price Change
2005 62,919 62,919 $201.37 -12.5%
2006 68,707 68,707 $320.27 58.7%
2007 25,109 15,415 $354.86 10.8%
2008 0 9,694 $351.51 -1.5%
2009 65,000 40,000 $263.27 -24.4%
2010 0 25,000 $525.51 98.4%
2011 0 0 $733.30 38.7%

 

In total, Canadian palladium bullion sales from 2005 to 2010 reached 221,735. CPM Group researchers do not expect that the U.S. Mint could match the amount even in ten years time, placing the sales potential of an American palladium bullion coin at 155,300 in a decade. The report points out that:

"The market currently is overly supplied, with ample supplies of Canadian Maple Leaf palladium coins available for sale in the secondary market by investors, and little buying interest. The Royal Canadian Mint suspended its palladium bullion coin program due to the lack of demand for the product after 2009, has not made any new palladium coins since 2009, and has no current plans to re-launch the program in the future."

Currently, the U.S. Mint has four bullion coin programs with sales levels that are envied by mints from around the world. Most recently, the U.S. Mint registered 2012 annual sales of:

  • 33,742,500 ounces of 99.9% fine American Eagle silver bullion coins,
  • 753,000 ounces of 22-karat American Eagle gold bullion coins,
  • 132,000 ounces of 24-karat American Buffalo gold bullion coins, and
  • 569,000 ounces of 99.9% fine America the Beautiful Five Ounce Silver Bullion Coins (the last of the Mint’s inventory of 2012-dated coins sold out on March 1, 2013)

As bullion products, these coins are available at a few percentage points above the current spot of the precious metal they contain. For reference, last year precious metals averages in London were $31.15 an ounce for silver; $643.53 an ounce for palladium and $1,668.98 an ounce for gold.

Comparing secondary market sales of a no longer produced Canadian palladium product with still available American bullion products of differing gold and silver content would seem like comparing apples to oranges, but it offers some insights.

A search of closed auctions on eBay.com for February shows 38 listings with Canadian Maple Leaf palladium coins. Of those, there was an average of 3.4 bids per listing and a sell-through rate of 63.2%. In a comparison and for the U.S. Mint’s weakest bullion product by sales, the American Buffalo gold bullion coin, there were 19 listings with an average of 4.6 bids per and a sell-through rate of 36.8%. Using the same criteria and searching for the Mint’s most successful bullion product, the American Eagle silver bullion coin, there were 2,457 listings with an average of 9.2 bids per listing and a sell-through rate of 88.3%. Keywords used for each eBay closed auctions were "Canadian maple leaf palladium," "American Buffalo gold bullion coin" and "American Eagle silver bullion coin."

At least one market slice of data, however mismatched and small, shows more interest in the palladium Canadian Maple Leaf than the American Gold Buffalo. If that is indeed the case, the bullion Palladium Eagle coin sales projections would seem conservative. American palladium bullion coin forecasts combined through the first three-years, the most aggressive through the ten years, totals 130,800 coins. That three-year total is below 2012 annual sales of 132,000 for the American Gold Buffalo, which is in its seventh year of issue.

Though pointing to the lack of extended success for Palladium Maple Leafs, which logically had initial barriers to a larger sales market in the U.S., CPM Group analysts expect that sales of an American palladium coin would stay mostly within the U.S.

"The potential pool of buyers of U.S. Mint palladium bullion and proof coins would likely be similar to that of platinum bullion and proof coins, with some deviation. Buyers of bullion coins are regarded as investors, who buy the coin for the metal’s value. Buyers of proof coins are regarded as collectors, who buy the coin to add to their collection for its rarity of mintage and its superior quality to the bullion coin. Both target markets are expected to mostly be contained within the United States, as much of the interest in platinum coins produced by the U.S. Mint historically has come from local sources. This likely would be the case for palladium."

As for the bottom line and highlighted early by CPM Group’s report, proof and uncirculated American Eagle palladium coins could turn a profit even with weak demand. But the study notes:

"Pursuing such a program alone, rather than in conjunction with a bullion program, may not be in line with the U.S. Mint’s usual approach to precious metals coin programs. Pursuing a numismatic program without a bullion coin program additionally may not be in the purview of Public Law 111-303, which directs the U.S. Mint to focus on ‘the production of palladium bullion coins to provide affordable opportunities for investments in precious metals, and for other purposes."

The American Eagle Palladium Bullion Coin Act of 2010 mandates that the Treasury Secretary produce and sell one-ounce, .9995 pure palladium bullion coins within one year after submitting the study to Congress, while also giving the Secretary the authority to strike collector proof and uncirculated versions. The report was delivered to the Senate Banking Committee and the House Committee on Financial Services on March 1, 2013.

While the act stipulated the study to ensure that Palladium Eagles could be minted and issued at no net cost to taxpayers, it does not include provisions should that study tag the Eagles as unprofitable.

In inquiring about the U.S. Mint’s direction going forward, CoinNews.net received the following brief response from Tom Jurkowsky, director of the U.S. Mint’s Office of Public Affairs:

"It’s premature to discuss our long term plans for palladium. At this point, the report speaks for itself."

The American Eagle Palladium Bullion Coin Act of 2010 passed by Unanimous Consent in the U.S. House of Representatives on Sept. 29, 2010 and in the U.S. Senate on Nov. 30, 2010. President Obama signed the act into Public Law 111-303 on Dec. 14, 2010.

{ 24 comments… read them below or add one }

jim March 13, 2013 at 11:32 pm

A disappointment for collectors. The history of Canadian palladium maples is telling. I think the comparison of spouse coins and palladium coins cost wise is fair but off base otherwise. I think collectors would have more interest in palladium eagles than they do for spouse 1/2 oz golds. And while they project sales after 10 yrs of only 1,000 proof palladiums they’re selling over 8,000 proof platinums after 15 years and at more than twice the price. I guess they didn’t notice that.
I would have concerns about having only one source of palladium in the US and the possible limit of available palladium in general. But then Stillwater may be floating in palladium, who knows? Availability of palladium doesn’t seem to be a concern of the report so either a non-issue or they didn’t consider it.

Shawn March 14, 2013 at 7:46 am

Well Jim,
If they do mint it, it may turn out to be a good investment after all. The Edsel of Eagles, so to speak.

Mike Unser March 14, 2013 at 9:39 am

Jim, to be clear, the comparison of the First Spouse Gold Coins was mine and not a part of the report. I thought it interesting that levels were on par. Personally, I would expect Palladium Eagles to far outperform spousal coins.

The act does allow for other sources source of palladium if none is available in the U.S. or if it is not economically feasible to obtain. The study noted that one of the largest obstacles in pursuing a palladium coin program would be the cost of financing working inventories of the precious metal.

homer March 14, 2013 at 9:50 am

I think it would depend how they managed the program. Why are they worried about what demand will be 10 years from now? The best study they could do is produce them and see where it goes. I would think if mintage would end up low one year, they would become more valuable and demand would pick up.

Victor March 14, 2013 at 10:07 am

I would think the mint has enough to do, without coming up with another coin made from a metal, hardly anyone has any idea what it’s good for. Right now the mint is having a problem, keeping up with the orders, it has. Has anyone heard of the problems, with the Girl Scouts Dollar? First it is scratches on the coins, and now I get an e-mail from the mint, telling me they have put the wrong CoA and the wrong box. The problem is, My coins have been “on the way” for over a week and a half, and haven’t left the mint, yet. They have enough to do!!!

homer March 14, 2013 at 2:37 pm

A lot of people know what palladium is. It can be used in most places platinum can be used. Adding another coin doesn’t mean production problems will increase. People that invest would rather have a palladium coin than an overpriced oz silver coin.

thePhelps March 14, 2013 at 3:01 pm

I like the design concept, but I think the other factor to consider is the simplest. The mint isn’t selling a robust number of the gold coins as it is, and that would lead me to believe the gold coins would be directly impacted by a competing palladium coin. I’m not sure that is in the best interest of either coin..

RonnieBGood March 14, 2013 at 4:32 pm

The price swing from $263 and ounce in 2009 to $733 in 2011 has not helped. The initial discussion was for for a US minting that was more affordable to the collector than Gold coins. At $771 (today spot) Palladium approaches 1/2 the price of Gold.

Joe March 15, 2013 at 1:26 pm

Enough money has been spent on the Palladium Eagle study. It is about time for a new 1o/z silver dollar. All good things must come to an end.

RonnieBGood March 17, 2013 at 1:30 pm

Mike Unser,
It would be nice to know the percentage of US coins that are purchased outside of the USA. Using a Canadian mintage as an example may not be a good reference if the purchases outside the US are relatively small. If the designs are exceptional and the costs are reasonable the coins will sell. Why must all of the coin studies be done with an assumed mintage at 90% to 100% of Palladium (ie .9995 pure) or even Gold or Silver for that matter? Plenty of Clad Kennedy 50 cent pieces can be easily found at most banks but what about the 40% silver coins minted from 1965 to 1970? None to be found! How about a great design on a reasonably priced Palladium / Silver mix? It could be a new series as popular as the American Silver Eagle series has been!

dwdude March 17, 2013 at 10:29 pm

ironic, they think this to be unprofitable, but yet gloss over the fiasco which is the (non)circulating “golden dollar”. how many millions were wasted manufacturing, promoting and then storing that ultimate waste of taxpayer dollars?

jim March 18, 2013 at 12:22 am

dude – the report had only to do with the viability of palladium coins not what to do with the monetary system.

The golden dollar isn’t the only place where millions have been spent. The money hasn’t really been wasted either, as the gd’s can be put to use once you get rid of the old guard and put forward thinking people in Congress. Then dumping the paper dollar and penny could end up a reality and the US monetary system could move into the 21rst century.

RonnieBGood March 18, 2013 at 6:24 pm

Jim, You are right on the money.
I am afraid the only way $1 paper currency will go away is if it is forced upon us like a seat belt law. Studies have been done supporting the cost savings and bills have been written but none have survived the vote to remove the “dollar” from our paper currency system. It was the intent when the idea of the Golden Dollar was conceived.

As of this posting only 3% of all US currency exists in paper and coinage form. The rest exists in banks only in digital form. Articles like the one in Fortune magazine’s July 2012 issue has “The Death of Cash” on the cover. The article talks of how the mobile payment revolution is making the Greenback obsolete. As farfetched as this may seem, just think how far cell phone use and abilities have come in just 4 short years.

I know as coin and bill collectors we do not like to address these topics but perhaps the argument on paper currency will become a “mute” point in the future. As a coin and bill collector I hope it is later than sooner…

jim March 18, 2013 at 8:44 pm

RBG – mintages of the active coins (penny, nickel, dime, quarter) number in the 100 millions just for February. Don’t forget there are plenty of us out there who don’t have (smart) cell phones and still rely on the coin of the realm to transact business, even if it’s just to buy groceries and bus fare. I don’t think you’ll have to worry any time soon that these coins will go out of style.

Jeff72 March 19, 2013 at 9:51 am

I must be a simpleton…

I’ve read the replies and just ….way to analytical….for collectors …a finicky bunch we are.

In the world of collectors …it’s ALL in the mix and NOT in one specific ingredient: It is the design of the coin + the metal used (PM always preferred) coupled with the RIGHT mintage -that makes a winner.

The Canadian Maple leaf was just ….another Maple leaf in PM….if they had done something a little more daring…”special finish” ..bolder design…it may have sold out…they did not. Same with the Paladium Eagle.

The Weinman’s Winged Liberty is a classic and in my view, a guaranteed winner in ANY PM….the mintage is the variable.

jeff .

RonnieBGood March 19, 2013 at 10:25 am

Hi Jim,
If there are 320 million people living the US and they are minting 100′s of millions of coins a month I wonder where all of the coins minted are ending up? I would not expect the much of the current circulated coins (i.e. penny, nickel, dime and quarter) are removed by collectors. In addition coins are rarely taken out of circulation like paper bills and have a very long life span.

Perhaps Jeff72 may have a point with our discussions but I have no arguments with the, “I must be a simpleton” comment.

Shawn March 19, 2013 at 12:34 pm

The US mint produces about 7 billion circulating coins each year. We should consider bringing back real coins for everyday use and getting rid of the garbage.The reason a copper penny can’t be minted is not because of copper, it is because the FED cannot stand the realization common people would have if the value of their paper was exposed. Silver coins up the ante even more.
A silver “dollar” that sells for $33.00? What does that make the paper dollar worth?
The reason banks would love to have digital money is simple: nothing to measure it against and more important, a 2.5% surcharge on every purchase.
Let’s get rid of ALL paper money…

Kahoola March 19, 2013 at 5:34 pm

Read that the purchasing power of a today dollar is equal to about 3c in the 1920′s. So a dollar in the 1920′s would have the purchasing power of…$33. It is not that the silver dollar has gone up, it is that the dollar bill has sunk. The insult added to the injury is that if you sell the old silver dollar in today’s paper you have to pay TAXES because the paper has sunk in value.
And the proposed design is beautiful, i would consider buying one of them…

jim March 19, 2013 at 8:28 pm

RBG – LOL. Got me on where the sink hole is. I’ve asked the same question about all the pennies that are continually minted at expense to the US Mint that seemingly disappear every day. Maybe it is because they are so worthless that people don’t bother to reuse them but would rather toss them into some jar or other container and forget about them. I used to take my coins whenever I went to Las Vegas and cash them in there. No cost or fee for the cashier to toss them into the coin counter and I don’t have to roll them up and write my account # on the roll.

RonnieBGood March 20, 2013 at 9:39 am

A lot of good comments were made here.
I will see that the comments in favor of a Palladium coin make it to the US mint’s “contact us” page.

tx, RBG

RD March 22, 2013 at 8:41 pm

Check out this article stating that physical demand for Swiss palladium is up to the highest level seen in four years.
http://www.kitco.com/reports/KitcoNews20130322AS1.html

I think the US mint missed the mark on this one. Everyone thinks palladium is the coin of the future, due to its rising demand for industrial applications. I wonder if the mint was influenced its platinum suppliers. Or perhaps palladium users lobbied to keep palladium less know, not widely circulated by the US mint. A palladium eagle would have made the metal far better known in the minds of investors, driving up demand just when the metal is starting to reach a much wider audience of investors. What a loss for all those invested in this metal today who have to continue to buy Canadiam palladium coins!

jim March 22, 2013 at 9:36 pm

The US Mint hasn’t missed the mark yet. This is just a report and recommendation. I wouldn’t think the Secretary of the Treasury has decided yet whether to go ahead or not.

Not having read the report I don’t know if they considered that the other palladium coins are all bullion/investor coins and not collectable proof coins. As such they are dull and unexciting like any uncirculated coin. I think if the mint created mirror/frosted proof palladium coins there will be a market for them regardless of the metal used.

RD March 22, 2013 at 10:03 pm

Palladium pretty much looks like chrome when polished–I find it beautiful. The finishes on US mint coins are far finer than those I have been made by the Canadian mint–I’m talking about circulated bullion. The finished is a degree finer than those of the canadian mint.

I don’t buy modern coins for investment, though I would in the case of a first release of palladium eagles, because it seems like a sure bet. Besides, the proposed design for the coin was one of my favorites as a child–another reason to buy a few uncirculated coins on top of the many bullion coins i would love to accumulate.

Is there a precedent of the treasury rejecting the recommendation of the people who produced the “report”?

Richard March 29, 2013 at 4:45 pm

This is really a shame. We need more quality of quantity. The mint should stop issuing so many variations on pocket change and issue something meaningful and new like a palladium coin.

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