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Gold Update: Products and Possibilities
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(September 13, 2008) The US market for physical gold bullion is going through extraordinary time, with demand surging in the face of a 25% drop in gold spot prices since March. So exactly where are we today?
Supply troubles in the US gold bullion markets started with the temporary shortage of 1-ounce gold Eagles so infamously announced during the last week of August. If you are an avid follower of Internet commentary about gold bullion, then you have probably read the variety of conspiracy and manipulation theories about that shortage. Glancing at the usual sources this weekend, it seems that there is no end to the speculation. And in this free country of ours, you have the right, but not the obligation, to pick your favorite.

At any rate, that was last month’s news, as Eagles are now available in quantity at normal premiums.

However, the shortage situation has now shifted to other bullion items.

This week’s latest no-shows are the 1-ounce and ten-ounce gold bars, with availability thin from pretty much all the known refiners. This is partially due to demand from India ahead of the fall wedding and festivals seasons, occasions which are marked by much gold buying for gifts and jewelry uses. Additionally, in the US we are also seeing a lot of first-time gold buyers coming into this market, and often their first choice is the low-premium .9999 pure gold bars.

We have sufficient quantities coming this week to fill all confirmed orders for the 1-ounce and ten-ounce Pamp bars. Unfortunately, we have to temporarily suspend further sales of the Pamp gold bars in those sizes until we are assured of the timing of another shipment to the US, probably in early October.

The larger gold bars are still freely available, the most popular size being kilogram .9999 gold bars from the the Royal Canadian Mint and Pamp company, at 2.5% over spot, delivered.

Palladium has undergone a spectacular correction in price over the past few months, having lost well over half its dollar value from its March 4th 2008 peak at $582 to Friday’s fixing at $241.00. That fact, coupled with the suspension by the Royal Canadian Mint of its palladium Maple Leaf coin production, has lead to spot shortages of product. Again, we rely on the Pamp company for our stock palladium items, and are trying to acquire a supply of new product from their next shipment in October. When product is again available, and we hope that is soon, we will offer it on the palladium page of this website.

We are also waiting on the Royal Canadian Mint to resume production of their 2008 five-nines (99.999%) pure gold Maple Leaf. As soon as we have confirmation of new supplies, we will reinstate them into our lineup.

The regular issue bullion .9999 fine gold Maple for 2008 is in stock and available in quantity, and we have yet to run into any supply shortages there.

Premiums on Krugerrands remain strong, which is to be expected in a period of surging demand for bullion products. In a sense, there is a fixed supply of Krugerrands in this country, since very few coins have been imported since 1985. The Krugerrands which are traded in this country are predominately coins which were coined and imported during the 1970s and early 1980s. This ‘floating supply’ varies in price according to mood of US gold investors. When few Americans are selling their Krugerrands, then the premium over spot increases. And when few people are buying them, the premium sinks along with demand.

This varying premium is in contrast to the newly minted bullion products such as Eagles, Maples, Kangaroos, Pandas, and gold bars, which are simply produced to meet demand, with standard and unvarying premiums charged by the issuing mint or refiner. Under normal circumstances there should be significant changes in premiums at either the wholesale or retail level on these items, as long as production doesn’t lag demand.

In short, the US gold bullion market over the past few weeks has been one of many buyers, and few sellers. Despite ramped-up production from the various mints, various spot shortages have occurred. Americans are generally not in a mood to sell their gold at current prices, so we are just not seeing significant liquidations of gold bullion from the public. So we, along with most gold dealers, are having to rely on the mints for supply. And sometimes, production just doesn’t keep up with demand.

On a more positive note, we are getting a steady stream of 2008 gold Mouse Lunar coins from the Perth Mint. Also from Perth, in October, we will have the 2009 Year of the Ox gold issues in the various sizes, as well as the new 2009 Kangaroo.

As always, at Onlygold we stock a lot of product so that we can fill your order when you place it.

In this imperfect world, production of investment size gold bullion products doesn’t always perfectly meet the ebb and flow of changing demand. But rumors of general gold shortages have been greatly exaggerated.

-Richard Smith

 

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In addition to gold, silver, platinum, and palladium in coin and bullion form, we also purchase a wide range of numismatic coins and currency for our retail business. Feel free to call us for quotes or price indications on anything in coins, bullion, and paper money.

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