Gold hit two thresholds today, November 2, making it a popular topic of interest across major news outlets.
One threshold was closing above $800. The other was a new 28 year high. For a time, gold actually hit $810.70 on the New York Mercantile Exchange. It finally closed at $808.50 an ounce.
Speculation is abound, many believing the climb will continue through this year and into next. The U.S. dollar at record lows, historically high oil prices and fears of inflation are certainly helping gold’s surge upward. Will the trend continue?
(The MarketWatch.com video to the right is a conversation between Kelsey Hubbard and John Bridges, senior analyst for JP Morgan. It’s an interesting analysis about gold and where it could be heading.)
Given where gold is already at and where it may be going, the United States Mint could be – or may already be – in another crunch.
How will the continual rise of bullion affect U.S. Mint coins? Are new suspensions in order?
Due to earlier bullion surges, the U.S. Mint suspended some bullion sales. The sale of gold coins has since resumed, but the Mint still hasn’t adjusted prices for Uncirculated Platinum American Eagles. You can’t purchase them. We’ll take platinum discussions off the table. The Mint has a bye on this.
Let’s look at the Mint gold coin history to perhaps get a glimpse of the future…
The initial suspension of Gold American Eagle and Buffalo coins was lifted October 15. On that very day, gold closed at $758.85 an ounce. Their new adjusted price for the one-ounce uncirculated Gold American Eagle price was (and is) $831.95.
From a strict price comparison standpoint, they were making a margin of +$73.10 per gold eagle and that has steadily decreased since.
At the close of today, Gold is sitting at $808.50. Doing the math, the Mint margin for a one-ounce uncirculated Gold American Eagle is now only +$23.45.
You can bet production, labor and marketing costs exceed that. The Mint, given current gold prices and inventory replacement costs, is likely back to losing money.
U.S. Mint margins are now lower than they were prior to the first gold suspensions
In fact, when the Mint first suspended gold sales back on September 13, the uncirculated one-ounce Gold American Eagle to gold/ounce margin was higher at +$38.
Unless the Mint is sitting on a hoard of gold inventory, the same logic for suspending gold coin sales the first go-around should kick in once again. And, kick in harder. They’re either losing money or, if you’re an optimistic, making much less than ever before.
If they don’t adjust gold coin prices once again, why did they do it the first time? What is their barometer?
Do you think the Mint wished they had changed their bullion coin policy – adjusting their prices daily to that of bullion values?