October 2, 2022

How Much Gold and Silver Will the Treasury Secretary Determine is Sufficient to Meet Public Demand?

A bill, which seeks to provide greater Congressional oversight for circulating coin compositions, may have implications for the quantity of United States Mint gold and silver bullion coins that are available to precious metals investors.

The bill H.R. 6162 Coin Modernization, Oversight, and Continuity Act of 2010 primarily establishes rules for the Secretary of the Treasury to provide biennial reports to specified committees on the costs related to circulating coins, and make recommendations for new metallic materials or procedures. A final section of the bill deals with “meeting the demand for gold and silver numismatic items”, although the implications seem to extend to bullion coins.

Following the cancellation of the 2009 Proof Silver Eagles, the United States Mint sought greater flexibility to produce numismatic versions of the coin. The Director of the United States Mint requested such authority be granted to the Secretary of the Treasury at a hearing of the Subcommittee on Domestic Monetary Policy and Technology on July 20, 2010. The chairman of the subcommittee Melvin Watt was the one who introduced the bill H.R. 6162.

The following is Sec. 4 of the bill:

Subsections (e) and (i) of section 5112 of title 31, United States Code are each amended by striking ‘quantities’ and inserting ‘qualities and quantities that the Secretary determines are’.

Here’s how the law authorizing American Silver Eagles currently reads (emphasis added):

(e) Notwithstanding any other provision of law, the Secretary shall mint and issue, in quantities sufficient to meet public demand, coins which— (1) are 40.6 millimeters in diameter and weigh 31.103 grams; (2) contain .999 fine silver; (3) have a design— (A) symbolic of Liberty on the obverse side; and (B) of an eagle on the reverse side…

And here’s now the law would read if the bill H.R. 6162 is enacted (emphasis added):

(e) Notwithstanding any other provision of law, the Secretary shall mint and issue, in quantities and qualities that the Secretary determines are sufficient to meet public demand, coins which— (1) are 40.6 millimeters in diameter and weigh 31.103 grams; (2) contain .999 fine silver; (3) have a design— (A) symbolic of Liberty on the obverse side; and (B) of an eagle on the reverse side…

A similar change occurs for subsection (i), which deals with American Gold Eagles.

The inclusion of the word “qualities” was necessary to accomplish the presumed goal of the legislation to allow the issuance of numismatic versions of the coins, but what about the added phrase “that the Secretary determines are sufficient”?

Is the amount of gold and silver bullion coins that the Secretary determines are sufficient to meet public demand different that than amount which will actually meet public demand?

Even under the strict existing standard, there have been extended periods of time when full public demand was clearly not being met. The sale of Gold and Silver Eagle bullion coins have been completely suspended for brief periods, and rationed for considerably longer periods. Most recently, Gold Eagles were subject to rationing from December 2009 until March 2010, and Silver Eagles were rationed from December 2009 until September 2010.

What will happen if the standard becomes less strict and more indefinite?

US Mint Bullion Programs at the Treasury Secretary’s Discretion

Besides the American Gold and Silver Eagles, no other US Mint bullion programs carry the requirement to be produced in quantities sufficient to meet public demand. The language varies, but each program is effectively left to the discretion of the Secretary of the Treasury.

The 24 karat American Gold Buffalo coins, carry the requirements, “Not later than 6 months after the date of enactment of the Presidential $1 Coin Act of 2005, the Secretary shall commence striking and issuing for sale such number of $50 gold bullion and proof coins as the Secretary may determine to be appropriate, in such quantities, as the Secretary, in the Secretary’s discretion, may prescribe.”

The subsection dealing with American Platinum Eagles reads: “The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.”

And, the recently issued 5 ounce America the Beautiful Silver bullion coins: “The Secretary shall strike and make available for sale such number of bullion coins as the Secretary determines to be appropriate that are exact duplicates of the quarter dollars issued under subsection (t)”

Granted that there is no public demand requirement, but how is the Treasury Secretary doing with these other gold and silver bullion programs?

Inventories of the American Gold Buffalo bullion coins were completely depleted by the end of September 2010. At that point, the US Mint indicated that no further inventory of 2010-dated bullion coins would be made available.

The American Platinum Eagle has not been available in bullion format for more than two years. After final inventories were exhausted in late 2008, the US Mint indicated that the 2009 release would be delayed. The 2009-dated bullion coins were eventually canceled. The US Mint has not provided any information on 2010-dated bullion coins, and none have been issued to date.

The America the Beautiful Silver Bullion Coins went on sale to authorized purchasers today. The supply was so limited that the US Mint urged primary distributors to keep prices reasonable. Market forces took precedence and the bullion coins have been selling for double the silver value, or more.

Conclusion

So what is the difference between “quantities sufficient to meet public demand” and “quantities that the Secretary determines are sufficient to meet public demand”?

In practice, we shall see if this represents a different standard, but at this point the change in wording makes me uncomfortable.  I want the supply of gold and silver bullion coins to be determined by demand in the marketplace, not determined by unspecified criteria established by the Secretary of the Treasury.

As the bill has already been passed in the House and Senate, and only requires the President’s signature to become law, it seems too late to do anything other than brace for the possible repercussions.

Comments

  1. The difference would be that, another bureaucrat can now make that decision. Maybe to reduce transparency and accountability?

  2. I’ve never really understood why us gold and silver guys have “WANTED” to buy and patronize the Government in business. They don’t do postal, healthcare, etc etc well, and they never done a good job in minting and meeting demand. I’d much rather support and buy from a private mint like Scottsdale Silver that knocks quality & service out of this world. If a company is known as the “Benz of Bullion” I’d rather drive that car than the Chevy Volt of silver in the Eagle that has massive delays.

  3. benevolent dictator says

    Hi Tim,
    The coins that have face value AND sanctioned by the US government give legal status to transport across national boundries as stores of value without customs and tariff fees. In the event of a curency collapse the coinage with the most recognized, circulated and integrity of content will be the preferred medium. A privately minted coin must be more scrutinized for its value than say an American Eagle (maybe), hence a decrease in value. What we have here is a battle of integrity and the medium to be selected as the defacto store of value will be based on the above. Look on craigs list and Ebay; the coins of unfamiliar origin and content sell at a discount compared to the familair coinage that sells at a premium to spot prices. Only the junk silver coin defies this performance as it usually sells at spot or less.

  4. What about that quality part? I’m wondering if they will consider diluting the metal with base metals in the future. Perhaps to bring certain coins back into the money supply?

  5. I think the are going to make a switch from producing a lot of chip low quality investment coins, with very small premium, to producing mostly a few very high quality collectors grade coins with exorbitant premium. There will be AE’s in abundance but very few will want to have them.

    The words “qualities that the Secretary determines are sufficient” here is the focus of the new law.

    They cannot change the purity of metal but will drastically decrease viability of the coins as an investment vehicle.

    Very nasty trick! Yeah, the Ron Paul’s original law is finished.

  6. I’m surprised that the blogger took very little notice of the added word “quality”. does this mean the secretary (goldman sachs) could now fill the american eagles with concrete?
    I’m sure the president will veto this and show that he’s not just a pencil on the table used by banks to robo-sign anything they want.
    bankers are literally printing legislation out of the thin air

  7. As mentioned “quality” was added to provide for the minting of proof or uncirculated numismatic versions.

    The composition is still specified within the existing law as:

    (1) 40.6 millimeters in diameter and weigh 31.103 grams;
    (2) contain .999 fine silver;

  8. The 5 ounce coins did NOT go on sale yesterday. The Mint suspended sales to authorized distributors because of widespread reports of price gauging. The coins were to be sold to the distributors for $10 over spot with an understanding that they be marketed as bullion items with low premiums. But the mintages are 33,000 per coin, which created a frenzy, and now on e-Bay people are paying $700 for 5 ounces of silver even though they may never get those coins! Dealers would not even sell indivudual coins, only sets at $1400-2000. And, yet, the plan is for the Mint to next year sell even scarcer versions directly to the public, which will probably destroy the market for those $700 coins! It’s a crazy situation that is the result of por management at the US Mint. Spend your bullion money wisely, folks!

  9. Now this is the funniest thing yet. Let’s take Timmy G (former GS head) and put him in charge of bullion. He’s nothing but a scapegoat figurehead anyway, as the Treasury went defunct in 1922 and was replaced by the IMF. So let’s charge so much money that the common man or woman won’t be able to get these coins and have a way to pay for goods when inflation goes through the roof. Yeah, sounds like they’re covering themselves quite well. Not only being corrupt bankers, but also taking anything! of worth from people that will need it. One World Order anyone? Cashless society is getting closer. Hold your gold and silver coins. For soon, they will be worth anything from a load of groceries to a house. And I’m not talking about 3-400 of them either.

  10. Hi I’m a high school student and i have to find out for my class how much we actually have in gold and silver

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