Woes coincide with gold coin rush
By Sandy Shore
Investors who have forsaken
shaky financial markets for the safety of gold
must feel a little bit like prospectors.
As the worst recession in at least a generation
spreads, so too does the clamor for gold bars
and coins, assets less likely to go up on smoke
like so many derivatives and asset-backed
"I've never seen a case where demand was so high
and supply was so short," said Chicago coin
dealer Harlan Berk, who has been in the business
Spikes in demand for gold coins this year appear
to run parallel with the mounting woes on Wall
In August, as the Federal Reserve pumped $62
billion into the U.S. banking system and
rejected requests for mortgage finance giants
Fannie Mae and Freddie Mac to take on more debt,
sales of the popular American Eagle coin were
suspended for a week.
The U.S. Mint was unable to get enough gold
blanks from suppliers to match demand, Mint
spokesman Michael White said.
In late September, when a massive bailout for
the nation's biggest banks failed, sales of the
American Buffalo coin were suspended until Nov.
3 because of shortages.
Yet even before the full extent of the financial
crisis was known, investors had begun to load up
on gold and other assets that could be held in
By early spring, investors were snapping up
precious metals such as gold, silver and
platinum, said Beth Deisher, editor of Coin
World trade magazine.
Gold for April delivery shot up to a record of
$1,033.90 an ounce on the New York Mercantile
Exchange March 17. According to a report by the
National Bureau of Economic Research released
this month, that was just three months into the
That correlation continued throughout the year
as Wall Street institutions fell.
"People sensed there was something going on that
they didn't quite understand," Deisher said.
In the third quarter, when the U.S. bailed out
Fannie Mae and Freddie Mac, the Fed gathered the
chiefs of major banks on Wall Street to plot a
rescue, and Lehman Brothers descended into
bankruptcy protection, gold sales went into high
gear, said Natalie Dempster, head of the World
Gold Council's North American investment unit.
U.S. demand for gold coins and small bars jumped
600 percent and international demand rose 121
percent, according to the council.
"The fact that gold is nobody else's liability
was really an extremely important trait for
investors in Q3 that were growing increasingly
mistrustful of financial institutions in
general," Dempster said.
To get gold as stocks began to fall, investors
were willing to pay.
"You saw people paying premiums to get coins and
small bars," Dempster said. "The refiners, et
cetera, just wouldn't have been set up to
produce that amount of gold, the same way as any
Compounding the shortage somewhat, Deisher said,
was a decision years ago to offshore some of the
tasks that go into making U.S. gold coins.
Under the law, gold used in U.S. coins must be
mined domestically. However, the government
contracts with private companies to fabricate
blank coins for striking with images such as the
American Eagle. One of those companies is Gold
Corp., owned by the government of Western
Australia and operator of the Perth Mint.
Demand for gold coins continued to grow as
economic news from Wall Street and Washington
grew more ominous.
In early October, the Dow Jones industrial
average closed below 10,000 points for the first
time since 2004. At the same time, coin dealers
saw demand a hit a peak, and bullion coins were
fetching huge premiums, said Larry Shepherd,
executive director of the American Numismatic
"That's created a shortage not only in the
secondary market, where shops are competing with
each other to find enough supply to meet the
demand but it's also created a real shortage in
the primary market where the Mint itself is
having difficulty getting enough supply to meet
demand," he said.
At his coin shop in downtown Chicago, Berk
advises customers to plan ahead when arranging
purchases, as much as two to three months.
It's frustrating, but "you learn to live with
it," he said.