December 5, 2022

Gold and Silver Bullion Coin Sales Jump 25% In August, San Francisco Silver Eagle Set Sold Out

The latest sales figures from the U.S. Mint for August show a significant increase in sales of both gold and silver bullion coins.

Sales of gold bullion coins during 2012 have varied dramatically from month to month with a high of 127,000 ounces in January to a low of only 20,000 ounces in April.  Monthly gold bullion sales through August have averaged 51,625 ounces.

Monthly sales of silver bullion coins have been more consistent during 2012.  The U.S. Mint sold over 6 million ounces of silver bullion coins in January, but the monthly pace has tapered off to under 3 million ounces.  The average monthly sales of silver bullion coins through August is 2,817,500.

American Eagle Gold Bullion Coin Sales

Total sales of the American Eagle Gold bullion coins during August totaled 39,000 ounces, up 27.9% from July’s total of 30,500 ounces.  Total sales of gold bullion coins by the U.S. Mint through August totaled 413,000 ounces, valued at approximately $700 million based on today’s closing gold price.

On an annualized basis, the U.S. Mint will sell almost 620,000 ounces of  gold bullion to investors this year valued at $1.0 billion if the price of gold remains at $1,692.  During 2009, the peak year of gold bullion coin sales by the U.S. Mint, investors purchased 1,435,000 ounces valued at $1.4 billion based on the average price of gold of $972 per ounce.

Investors who have reduced gold bullion purchases due to the increased cost per ounce will no doubt regret this decision as the price of gold continues to increase.  The value of gold should be viewed in the context of the reduced purchasing power of the dollar – as the Federal Reserve constantly destroys the purchasing power of the U.S. dollar, the “dollar cost” of gold will naturally increase.  The price of gold is merely reflecting the fact that paper dollars are worth less and less every day.

As the Fed continues to do what it does, expect the bull market in gold to continue.

Listed below are yearly sales figures for the American Eagle gold bullion coins since 2000.  Sales for 2012 are through August 31st.

Gold Bullion U.S. Mint Sales By Year
Year Total Sales Oz.
2000 164,500
2001 325,000
2002 315,000
2003 484,500
2004 536,000
2005 449,000
2006 261,000
2007 198,500
2008 860,500
2009 1,435,000
2010 1,220,500
2011 1,000,000
2012 413,000
Total 7,662,500

American Eagle Silver Bullion Coin Sales

Sales of the American Eagle Silver bullion coins by the U.S. Mint during August totaled 2,870,000 ounces, up 25% from the July total of 2,278,000 ounces.  Investor demand for silver has remained strong, with many investors taking the opportunity to purchase additional silver below the highs reached during 2011.  Sales of the silver bullion coins remain near record levels and total sales for 2012 should be well in excess of 30 million ounces for the third consecutive year.

Total annual sales by the U.S. Mint of the silver bullion coins since 2000 are shown below.  Sales for 2012 are through August.

American Silver Eagle Bullion Coins
YEAR OUNCES SOLD
2000 9,133,000
2001 8,827,500
2002 10,475,500
2003 9,153,500
2004 9,617,000
2005 8,405,000
2006 10,021,000
2007 9,887,000
2008 19,583,500
2009 28,766,500
2010 34,662,500
2011 39,868,500
Jul-12 22,540,000
TOTAL 220,940,500

U.S. Mint Numismatic American Eagle Gold and Silver Coins

Both the American Eagle gold and silver bullion coins can only be purchased from the U.S. Mint by Authorized Purchasers who in turn resell the coins to other dealers and the general public.  The numismatic versions of the American Eagle series coins can be purchased directly from the U.S. Mint.

Many of the numismatic silver coins produced by the U.S. Mint attract strong demand and often times, the coins will sell at a premium in the secondary market.  A recent example of this is the 2012 San Francisco Silver Eagle Set.  According to the Mint News Blog:

The 2012 San Francisco Silver Eagle Set was one of the United States Mint’s most anticipated product releases of the year. Each set contained one 2012-S Proof Silver Eagle and one 2012-S Reverse Proof Silver Eagle.

Product sales began on June 7, 2012 at 12:00 Noon ET with pricing of $149.95 per set. Rather than establishing a maximum product limit, as had been done for similar products in the past, the US Mint would accept orders during a four week ordering window and produce the sets to meet the total demand. A sales odometer which was updated daily gave collectors an indication of the progress of the offering. Sales officially closed on July 5, 2012 at 5:00 PM ET. The last indicated sales total was 251,302 sets.

On the secondary market, prices for the sets remain above the issue price. A quick survey of eBay auctions completed within the past few days show the prices realized for raw sets mostly falling into a range of $180 to $190, compared to the issue price of $149.95.

Sets which have been graded by PCGS or NGC and received the top grade of Proof-70 have sold for premiums above raw sets. Sets with the two coins graded PCGS PR70DCAM and PR70 have recently sold for prices around $425 to $450. Sets with the two coins graded NGC PF 70 Ultra Cameo and PF 70 have sold for prices around $300 to $325.

Fed’s Easy Money Policies Will Continue – Why Bernanke Must Err On The Side Of Inflation

By Axel Merk

To print or not to print? Odds are that Fed Chairman Bernanke has been contemplating this question while drafting his upcoming Jackson Hole speech. The one good thing about policy makers worldwide is that they may be fairly predictable. As such, we present our crystal ball as to what the Fed might be up to next, and what the implications may be for the U.S. dollar and gold.

First off, we may be exaggerating: on process rather than substance, though. That is, Bernanke isn’t just thinking about whether to print or not to print as he is sitting down to draft his speech. Instead, he considers himself a student of the Great Depression and has been pondering policy responses to a credit bust for some time. Consider the following:

  • Bernanke has argued that going off the gold standard during the Great Depression helped the U.S. recover faster from the Great Depression than countries that held on to the gold standard for longer.
    • Bernanke is correct: subject to many risks, debasing a currency (which going off the gold standard was) can boost nominal growth. Think of it this way: if the government takes your purchasing power away, you have a greater incentive to work. Not exactly the mandate of a central bank, though.
    • Note by the way that by implication, countries that hold on to the gold standard invite a lot of pain, but have stronger currencies. Fast forward to today and compare the U.S. to Europe. While neither country is on the gold standard, the Federal Reserve’s balance sheet has increased more in percentage terms than that of the European Central Bank since the onset of the financial crisis. Using a central bank’s balance sheet as a proxy for the amount of money that has been “printed”, it shouldn’t be all that surprising that the Eurozone experiences substantial pain, but the Euro has been comparatively resilient.
    • Possibly the most important implication: Bernanke considers the value of the U.S. dollar a monetary policy tool. When we have argued in the past that Bernanke might be actively working to weaken the U.S. dollar, it is because of comments such as this one. This is obviously our interpretation of his comments; a central banker rarely says that their currency is too strong, although such comments have increasingly been made by central bankers around the world as those pursuing sounder monetary policy have their economies suffer from competitive devaluations elsewhere.
  • Bernanke has argued that one of the biggest mistakes during the Great Depression was that monetary policy was tightened too early. Here’s the problem: in a credit bust, central banks try to stem against the flow. If market forces were to play out, the washout would be severe and swift. Those in favor of central bank intervention argue that it would be too painful and that more businesses than needed would fail, the hardship imposed on the people is too much. Those against central bank intervention point out that creative destruction is what makes capitalism work; the faster the adjustment is, even if extremely painful, the better, as the recovery is healthier and stronger.
    • If the policy choice is to react to a credit bust with accommodative monetary policy, fighting market forces, and then such accommodation is removed too early, the “progress” achieved may be rapidly undone.
    • We are faced with the same challenge today: if monetary accommodation were removed at this stage (interest rates raised, liquidity mopped up), there’s a risk that the economy plunges right back down into recession, if not a deflationary spiral. As such, when Bernanke claimed the Fed could raise rates in 15 minutes, we think it is a mere theoretical possibility. In fact, we believe that the framework in which the Fed is thinking, it must err on the side of inflation.

Of course no central banker in office would likely ever agree with the assessment that the Fed might want to err on the side of inflation. But consider the most recent FOMC minutes that read:

  • An extension [of a commitment to keep interest rates low] might be particularly effective if done in conjunction with a statement indicating that a highly accommodative stance of monetary policy was likely to be maintained even as the recovery progressed

As the FOMC minutes were released three weeks after the FOMC meeting, many pundits dismissed them as “stale”; after all, the economy had somewhat improved since the meeting. Indeed, it wasn’t just pundits: some more hawkish Fed officials promoted that view as well. But to make clear who is calling the shots, Bernanke wrote in a letter dated August 22 (the same date the FOMC minutes were released) to California Republican Darrell Issa, the chairman of the House Oversight and Government Reform Committee: “There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery.” Various news organizations credited the faltering of an incipient U.S. dollar rally on August 24 with the publication of this Bernanke letter.

For good order’s sake, we should clarify that the Fed doesn’t actually print money. Indeed, printing physical currency is not considered very effective; instead, liquidity is injected into the banking system: the Fed increases the credit balances of financial institutions in accounts held with the Fed in return for buying securities from them. Because of fractional reserve banking rules, the ‘liquidity’ provided through this action can lead to a high multiple in loans. In practice, one of the frustrations of the Fed has been that loan growth has not been boosted as much as the Fed would have hoped. When we, and Bernanke himself for that matter, have referred to the Fed’s “printing press” in this context, referring to money that has been “printed”, it’s the growth in the balance sheet at the Federal Reserve. That’s because the Fed’s resources are not constrained; it’s simply an accounting entry to pay for a security purchased; that security is now on the Fed’s balance sheet, hence the ‘growth’ in the Fed’s balance sheet.

Frankly, we are not too concerned about the environment we are in. At least not as concerned as we are about the environment we might be in down the road: that’s because we simply don’t see how all the liquidity can be mopped up in a timely manner when needed. At some point, some of this money is going to ‘stick’. Even if Bernanke wanted to, we very much doubt he could raise rates in 15 minutes. To us, it means the time for investors to act may be now. However, talking with both existing and former Fed officials, they don’t seem terribly concerned about this risk. Then again Fed officials have rarely been accused of being too far sighted. We are concerned because just a little bit of tightening has a much bigger effect in an economy that is highly leveraged. Importantly, we don’t need the Fed to tighten: as the sharp selloff in the bond market earlier this year (and the recent more benign selloff) have shown, as soon as the market prices in a recovery, headwinds to economic activity increase as bond yields are rising. That’s why Bernanke emphasizes “communication strategy”, amongst others, to tell investors not to worry, rates will stay low for an extended period. This dance might get ever more challenging.

In some ways, Bernanke is an open book. In his ‘helicopter Ben’ speech a decade ago, he laid out the tools he would employ when faced with a collapse in aggregate demand (the credit bust we have had). He has deployed just about all tools from his toolbox, except for the purchase of foreign government bonds; recently, he shed cold water on that politically dicey option. Then two years ago, in Jackson Hole, Bernanke provided an update, specifying three options:

  • To expand the Fed’s holdings of longer-term securities
  • To ease financial conditions through communications
  • To lower the interest rate the Fed pays on bank reserves to possibly 10 basis points or zero.

We have not seen the third option implemented, but the Fed might be discouraged from the experience at the European Central Bank: cutting rates too close to zero might discourage intra-bank lending and cause havoc in the money markets.

As such, expect Bernanke to give an update on his toolbox in Jackson Hole. The stakes are high as even doves at the Fed believe further easing might not be all that effective and could possibly cause more side effects (read: inflation). As such, we expect him to provide a framework as to why and how the Fed might be acting, and why we should trust the Fed that it won’t allow inflation to become a problem. For investors that aren’t quite as confident that the Fed can pull things off without inducing inflation, they may want to consider adding gold or a managed basket of currencies to mitigate the risk to the purchasing power of the U.S. dollar.

Please sign up to our newsletter to be informed as we discuss global dynamics and their impact on gold and currencies. Please also follow me on Twitter to receive real-time updates on the economy, currencies, and global dynamics.

Axel Merk
President and Chief Investment Officer, Merk Investments
Merk Investments, Manager of the Merk Funds

Gold – The Escape From Slavery

By Axel Merk

Vice President Joe Biden was accused of racism when suggesting a Romney administration would “unchain banks” that in turn might put the black audience he was talking to back into “shackles.” The political uproar overshadows a reality that knows no racial boundaries: a person in debt is not a free person; a nation in debt is not a free nation. Does it mean those with large bank accounts are free? Not so fast…

We don’t want to downplay the horrific crime of slavery, but want to provide food for thought: debt is often taken on voluntarily; once taken on, however, one is forced to work to pay off one’s debt. To be unshackled from banks and creditors, investors may want to consider living debt free and owning gold. Let us explain.

Chains and Dollar

Access to credit may fundamentally change one’s lifestyle. On the plus side, it opens the path to home ownership and access to capital goods, be that a car, or these days even a mattress or exercise machine. But it also makes the creditor, rather than oneself the boss. One symptom of the building credit bubble that caught my attention a decade ago was the rise of Spanish language billboards promoting mortgages. Proud immigrants in search of the American dream were lured into mortgages they could ill afford. Rather than focusing on feeding themselves and their family, the focus shifted to serving the bank. That shift only became apparent once the loan became too expensive to service, either because interest rates were resetting to higher levels or because someone lost their job and thus their income, but the debt remained.

Berkshire Hathaway CEO Warren Buffett famously discusses in his annual shareholder letters that the insurance business is a great business to be in, as policyholders pay him to hold money:

“Insurers receive premiums upfront and pay claims later. … This collect-now, pay-later model leaves us holding large sums — money we call ‘float’ — that will eventually go to others. Meanwhile, we get to invest this float for Berkshire’s benefit. …”

Indeed, Buffett has said that he would never allow his firm to be in a situation where he is at the mercy of banks. It doesn’t mean he will never borrow money. But it means that when borrowing money, he always wants to be in a situation where he could pay it back if needed. Consumers have seen all too often that they only qualify for a loan when they don’t really need it. Jamie Dimon, CEO of JPMorgan Chase has said responsible banks act like mothers: they will decline your loan request if it is too risky for you.

One cannot be a truly free person with debt. While bankruptcy may have been downgraded to a mere business transaction in the U.S., some countries continue to put those that can’t pay into prison. The neighborhood surrounding Dubai’s airport has seen thousands of abandoned cars, often Ferraris or other expensive vehicles, as the formerly rich fled the country after their fortunes turned to avoid debtors prison.

Anyone is likely to argue that a nice pile of cash in a bank account will make one feel financially secure – some place that pile at $100,000. Some at a million; as a million bucks isn’t what it used to be, the wealthy often say they are not comfortable if they don’t have $10,000,00 or more. We have met people with very modest means that feel that they are wealthy; and others that have lots of money, but don’t feel wealthy. Aside from the fact that some of them might simply have a distorted sense of reality, the wealthy often also carry a great deal of debt. Those able to manage their debt thrive in this low interest rate environment. But let even a wealthy person with debt hit a road bump, say lose a job (or face an obstacle in refinancing a loan) and such a person may quickly join the lower ranks of the 99%. In our assessment, highly accommodative monetary policy is a greater driver of an increasing wealth gap than the policies of either Democrats of Republicans.

But even with $100 in a bank account, what does one really hold? One owns a promise by the bank to pay $100. The $100 bill is a Federal Reserve Note; it’s a piece of paper issued by the Federal Reserve. That $100 bill could be returned to the Fed; in return the Fed would issue a credit balance to your account (you would have to go through a bank, as the Fed won’t open accounts for individuals). The “resources” of the Fed are without limit: through its various quantitative easing programs, the Fed has increased the credit balances of the financial institutions where it has purchased securities. The Fed literally creates money out of thin air, with the stroke of a keyboard. Even prudent central banks like to see a little bit of inflation; it means that the dollar bills you hold erode in purchasing power, giving you an incentive to put the money to work to make up for the shortfall.

Importantly, the $100 bill in your bank account is really someone else’s loan – the bank’s loan, the Fed’s loan. In fact, if you take out a loan from a bank, you will pay a merchant, who will in turn deposit the proceeds in his or her bank. As such, we talk about credit in a society. For simplicity’s sake, let the banks hold 10% in reserves; $100 in bank reserves with an offsetting $100 in demand deposit liabilities can thus be multiplied into $100 in bank reserves plus $900 in loan assets with an offsetting $1,000 demand deposit liabilities through the leverage of the fractional reserve banking system as banks lend and new deposits are made in a circular fashion. Between the Fed and the banks and the banks and their depositors the system can have a multiplier effect of about 100; that is, $100 created by the Fed can lead to $10,000 in credit. That’s why we sometimes call the credit created by the Fed (the monetary base) super credit. In the current environment, banks have not been aggressive in lending, and as such, we have not seen the “velocity” of money pick up. A key reason why many are concerned about the Fed’s increase in monetary base is because it has the potential to fuel inflation. Indeed, a key reason I personally hold a lot of gold is not because of the environment we are in, but because I am concerned about how all the liquidity that has been created might be mopped up one day. Federal Reserve Chairman Bernanke claims he can raise rates in 15 minutes; we think there may be too much leverage in the economy to have the flexibility when the time is needed; the political will to induce a severe recession to root out inflation may not be there.

It’s all about debt. So if one doesn’t want to have debt, what is one to do? The answer is real assets that are free of claims. Real estate held free and clear might be one answer, although keep in mind that governments tax real estate, thus making home owners tenants of the government. As the housing bust since 2008 has shown, the fact that many others owe a lot of money on their property changes the dynamics of this real asset.

The purest form of a debt free asset is gold. Gold is true money, the only form of money that isn’t someone else’s liability. While central banks might be able to lower the gold price by dumping their own reserves, central banks cannot print more gold – it’s very difficult to ramp up gold production. If your bank goes broke, if Greece goes broke, gold will still be there. Some call gold a relic from the past. To us, it’s the purest indicator of monetary policy, precisely because it has little industrial use. We created the cartoon below last year after CNBC’s Steve Liesman suggested to me on the air that gold might not be accepted in a store.

Cash vs. Gold

Mind you, we are not suggesting that everyone should sell all they own and buy gold instead. Everyone should consult with his or her financial adviser for specific investment advice. Specifically, one must be keenly aware of the volatility the price of gold can have relative to the U.S. dollar; given that we have a lot of our expenses in U.S. dollars, one has to be aware of the fluctuating value of the investment relative to the U.S. dollar. But we want to get investors to be keenly aware that we live in a credit driven society. We also believe that the developed world has made too many promises, too much debt has been issued.

Governments with too much debt may a) engage in austerity to pay off their debt; b) default outright; c) default though inflation. All scenarios suggest to us to hold assets that are debt free. We see gold playing a very important part in portfolios that take the risk into account that our policy makers continue to spend and “print” more money than is prudent. We don’t need actual money to be printed – credit creation through quantitative easing – is far more powerful.

Please sign up to our newsletter to be informed as we discuss global dynamics and their impact on currencies. Please also follow me on Twitter to receive real-time updates on the economy, currencies, and global dynamics.

Axel Merk
President and Chief Investment Officer, Merk Investments
Merk Investments, Manager of the Merk Funds

“Gold and Silver Heading Lower” – Classic Sign Of A Market Bottom

Yahoo Finance ran a story today entitled “Gold, Silver & Copper Are All Heading Lower.”  Nothing worth discussing about the specifics of the article – the real story here is that this a classic contrary headline seen at market bottoms, not tops.

What is the really smart money doing in the gold market as the mainstream press encourages John Q. Public to sell off his gold holdings?  Here’s a nice recap from The Economic Collapse:

When men like John Paulson and George Soros start pouring huge amounts of money into gold, it is time to start becoming alarmed about the state of the global financial system.

The amount of money that these men are investing in gold is staggering….

And the central banks of the world are certainly buying gold at an unprecedented rate as well.  According to the World Gold Council, the central banks of the world added 157.5 metric tons of gold last quarter.  That was the biggest move into gold by the central banks of the globe that we have seen in modern financial history.

But that might just be the beginning.

According to a recent Marketwatch article, there are persistent rumors that China has plans to buy thousands of metric tons of gold….

The gold bull market is far from over when two of the world’s most successful investors are increasing their gold holdings.  The price correction in gold since last summer has provided another excellent buying opportunity for long term investors.

More on this topic:

Why There Is No Upside Limit For Gold and Silver

Why Higher Inflation and $5,ooo Gold Are Inevitable

The Federal Reserve Can’t Produce Oil, Food or Jobs But They Will Continue To Produce Dollars

Ultimate Price of Gold Will Shock The World As Loss Of Global Confidence Leads To Economic Collapse

Gold Bull Market Could Last Another 20 Years With $12,000 Price Target

Ron Paul – “U.S. Treasury Guilty of Counterfeiting Dollars”

When Ron Paul retires after his current term in Congress, one of the most notable voices for a sound currency and protection of civil liberties against a despotic government will be gone from the official Washington scene.  Although Paul was never able to rein in a government that assumes more power over our lives with each passing minute, his warnings gave Americans the opportunity to understand the threats to their financial future and personal liberties.

What may be one of Ron Paul’s last legislative efforts is his campaign to allow competing currencies in the United States in order to break the monopoly on money by the Treasury and Federal Reserve.

I recently held a hearing in my congressional subcommittee on the subject of competing currencies.  This is an issue of enormous importance, but unfortunately few Americans understand how the Federal Reserve and Treasury Department impose a strict monopoly on money in America.

This monopoly is maintained using federal counterfeiting laws, which is a bit rich.  If any organization is guilty of counterfeiting dollars, it is our own Treasury.  But those who dare to challenge federal legal tender laws by circulating competing currencies– at least physical currencies– risk going to prison.

Like all government created monopolies, the federal monopoly on money results in substandard product in the form of our ever-depreciating dollars.

Yet governments have always sought to monopolize the issuance of money, either directly or through the creation of central banks. The expanding role of the Federal Reserve in the 20th century enabled our federal government to grow wildly larger than would have been possible otherwise.  Our Fed, like all central banks, encourages deficits by effectively monetizing Treasury debt.  But the price we pay is the terrible and ongoing debasement of our money.

Allowing individuals and business to use alternate currencies, especially currencies backed by gold and silver, would expose the whole rotten system because the marketplace would prefer such alternate currencies unless and until the Fed suddenly imposed radical discipline on its dollar inflation.

Sadly, Americans are far less free than many others around the world when it comes to protecting themselves against the rapidly depreciating US dollar.  Mexican workers can set up accounts denominated in ounces of silver and take tax-free delivery of that silver whenever they want.  In Singapore and other Asian countries, individuals can set up bank accounts denominated in gold and silver.  Debit cards can be linked to gold and silver accounts so that customers can use gold and silver to make point of sale transactions, a service which is only available to non-Americans.

The obvious solution is to legalize monetary freedom and allow the circulation of parallel and competing currencies.  There is no reason why Americans should not be able to transact, save, and invest using the currency of their choosing.  They should be free to use gold, silver, or other currencies with no legal restrictions or punitive taxation standing in the way.  Restoring the monetary system envisioned by the Constitution is the only way to ensure the economic security of the American people.

After all, if our monetary system is fundamentally sound– and the Federal Reserve indeed stabilizes the dollar as its apologists claim–then why fear competition?  Why do we accept that centralized, monopoly control over our money is compatible with a supposedly free-market economy?  In a free market, the government’s fiat dollar should compete with alternate currencies for the benefit of American consumers, savers, and investors.

As Austrian economist Ludwig von Mises explained, sound money is an instrument that protects our civil liberties against despotic government. Our current monetary system is indeed despotic, and the surest way to correct things simply is to legalize competing currencies.

Ron Paul is routinely dismissed as a naif by the Federal Reserve and Treasury.  Yet a quick look at the  chart of the purchasing power of the U.S. dollar (published by the St. Louis Fed) proves the legitimacy of Ron Paul’s concerns.  Federal Reserve policies have resulted in the systematic destruction of the purchasing power of the consumer dollar.

Will Ron Paul be successful in his quest to legalize a competing U.S. currency?  Let’s look at Paul’s track record.

Of the 620 bills that Paul had sponsored through December 2011, over a period of more than 22 years in Congress, only one had been signed into law – a lifetime success rate of less than 0.3%.   The sole measure authored by Paul that was ultimately enacted allowed for a federal customhouse to be sold to a local historic preservation society (H.R. 2121 in 2009).

Although Ron Paul’s crusade against corrupt government and the Federal Reserve is a losing battle, the value of his message is invaluable.   Ron Paul has seen the future of constant U.S. dollar debasement and positioned his personal portfolio heavily into gold and silver – something that the average American should think about.