July 17, 2024

US Mint Changes Rules for Authorized Purchasers

The United States Mint recently revised the requirements to become an Authorized Purchaser for their American Eagle Gold and Silver bullion programs. Since the start of the program, the US Mint has used an authorized purchaser network to distribute the coins to the public.

These Authorized Purchasers are the only ones allowed to buy bullion coins directly from the United States Mint. They purchase the bullion coins based on the market prices of the metals plus an established premium. The premiums are currently $2 for Silver Eagles and 3%, 5%, 7%, and 9% for one ounce, one-half ounce, one-quarter ounce, and one-tenth ounce Gold Eagles. Authorized purchasers are also required to create a two way market for the coins to ensure liquidity for US Mint bullion coin investors.

There are currently eight authorized purchasers for gold and twelve for silver.

Changes to the requirements recently made effective included modifications to the sections “Purpose”, “Marketing Support”, “Experienced Market Maker”, and “Tangible Net Worth”. The most significant change was the addition of a new section “Right to Temporarily Refrain from the Review of New Applications.”

The new section states the following (emphasis added):

The United States Mint reserves the right to temporarily refrain from the review of new AP applications during periods in which the allocation of any bullion product is required. The temporary refrain period will continue until a minimum of nine months after all allocations have been lifted, but no more than one year after all allocations have been lifted.

For more than two years the US Mint has continually resorted to their allocation program (rationing) in times when gold and silver bullion demand has spiked. From 2008 to 2010, Silver Eagles have spent more time under allocation than not, with the program implemented February 2008, lifted in June 2009, reinstated in December 2009, and lifted in September 2010.

Under the newly established rules, the US Mint can refrain from considering applications of potential new authorized purchasers until at least June 2011. During this time, if another demand spike necessitates the use of the allocation program, the clock starts again, but only after allocation has been lifted. Given the pattern of the past two years, the period of refrain could last indefinitely.

By law the US Mint is required to supply American Gold and Silver Eagles in quantities sufficient to meet public demand. In reality, the supply of coins is limited based on the number of planchets the US Mint can obtain from foreign suppliers, and distribution is limited based on the small number of authorized purchasers and the new hurdles placed before potential applicants.