The Coin Analyst: Palladium Eagle’s Future Uncertain Following Release of Report to Congress

by Louis Golino for CoinWeek ………

On March 1 the U.S. Mint delivered to the Senate Banking Committee and House Committee on Financial Services a marketing study prepared by the CPM Group on the feasibility of minting American eagle coins made of palladium. The report was completed at the end of August, but additional time was needed to do some internal review at the Mint before the report could be released to the Congress.

The report was a legal requirement of Public Law 111-303, the American Eagle Palladium Eagle Coin Act, and was necessary to gauge the market demand for palladium eagle coins in the U.S. market. The coins could not be produced unless they can be done so at no net cost to taxpayers. The U.S. Mint’s numismatic programs, as it touts on its web site, operate at no cost to the taxpayer.

The authorizing legislation called for the creation of a new series of bullion eagles made of palladium, and left the Mint with the discretion to decide whether or not to also issue collector versions in proof and/or uncirculated finishes, but it included the stipulation that if collector versions were issued, each year’s coin would have a finish that differed from the previous year’s coin.

palladium coin The Coin Analyst: Palladium Eagle’s Future Uncertain Following Release of Report to CongressThe legislation also stipulates that the obverse of the coins had to be a high-relief version of the famous Winged Liberty ten cent coin, and the reverse a high-relief rendition of the 1907 American Institute of Architects gold medal, both designed by Adolph Weinman.

The coins had to start being issued within one year of the delivery of the report to Congress, so the clock is now ticking.

But coin collectors and palladium investors will be disappointed to learn that the main conclusion of the report is that bullion palladium eagles are unlikely to be profitable because demand would continue to trail off after the first couple of years, while collector versions would be more likely to turn a profit.

The report points out that it is unclear whether the Mint would have the authority to only issue collector versions, even if profitable, in the absence of a bullion program. I would suggest that Mint officials discuss this with the relevant congressional authorities as collectors are eagle for these coins.

The report, which I obtained from the Mint, is a 136-page analysis. In a key section it says that: “One of the largest obstacles to the U.S. Mint in pursuing a palladium coin program would be the cost of financing the palladium working inventories, either by leasing the metal or through direct purchases of inventories (which would need to be hedged against adverse palladium price moves).”

In addition, a lot of emphasis is placed in the report on the relative newness of the palladium market and the fact that it has traditionally been seen as an industrial, rather than precious, metal, and that it has been more volatile in price compared to gold, silver, and platinum, factors which are seen as limiting demand for palladium and palladium coins. It is also stated that palladium is not seen as a safe haven the way other precious metals are and that it is not “a gifted item” the way the other three metals are. However, I suspect that if the Mint made palladium bullion coins with a nice design, they would in fact be given as gifts, or used in jewelry.

palladium coin rev The Coin Analyst: Palladium Eagle’s Future Uncertain Following Release of Report to CongressI find the report provides what may be an overly static view of the palladium market and the potential market for palladium eagles. As the report notes, the metal is now traded in ETF’s, or exchange-traded funds. Those ETF’s have only been around since I believe 2009, so there is not nearly enough data or evidence to draw the conclusion that palladium is an unloved precious metal. I also question the report’s statements about an oversupply of palladium coins on the market, which has not at all been what I have seen at major bullion dealers.

Moreover, it is hard to gauge the impact of a strong design on investor demand. Consider the American silver eagle, the world’s most popular silver coin, which would be unlikely to have that status if it did not sport such a compelling obverse and reverse. One should never underestimate the patriotic instincts of American metal investors who like to “buy American.”

Some people reacted to the market study by asking why the Mint did not survey collectors, although the report does indicate that precious metal experts and coin dealers were contacted. They could have found a way to gauge the views of potential bullion investors more directly too rather than rely so strongly on the experience of palladium bullion programs in other countries such as Canada, Russia, and Australia.

Also, the Mint does not normally do a lot of advertising outside of the numismatic print media. Who knows what might happen if they advertised more in the general media, or electronic resources like this one?

In addition, if they had reached out to potential buyers of the collector version with surveys instead of using models, I can say with close to certainty that they would have seen very positive interest. It is true that at the same time some collectors say they cannot afford to start collecting another precious metal series, but interest in a one-off coin like the 2009 Ultra High Relief Double Eagle would be huge, and some collectors might change their buying patterns and switch from say gold eagles in proof to palladium ones if offered the choice.

In addition, collectors I have been in touch with say that if each year’s coin had a different classic American coin design on it, the chances that they would buy it would be very high. Another suggestion I heard made was to issue fractional versions, which collectors have been virtually clamoring for since the discontinuation of gold and platinum fractional coins after 2008.

It is true that palladium is the least well known major precious metal and that the market for it is more limited at the moment than it is for gold, silver, and platinum.

But all that is changing, and as the U.S. and world economies slowly regain their footing, we will continue to see increased demand for palladium, especially in the automotive sector, where it is a cheaper alternative to platinum for use in catalytic converters.

As the metal’s industrial applications expand, and its price rises, I believe we will see increased interest in it as a precious metal too, especially as more investors learn how scarce it is compared to far more abundant gold and silver. The report highlights how different palladium is from other precious metals, but over time I see it converging with them.

Besides, one of the main reasons palladium coins have not sold that well is that the supply of the metal in coin form is limited despite what the report says, and that is why dealers rarely have major supplies of the coins in stock. Most palladium is traded in bar form, not coin form, because the bars are much more plentiful and have lower premiums. But a low-premium palladium eagle with a compleling design, if the metal could be sourced at the right price, could theoretically change the market.

I would urge the Mint to strongly consider at least issuing a one-year collector version palladium eagle, which will be extremely popular. The design appeals to most collectors and buyers, and it would potentially be the only palladium coin ever issued by the Mint.

But down the road, as the market for palladium bullion increases, the Mint should also not cede the entire market to foreign countries.

golino portrait thumb The Coin Analyst: Palladium Eagle’s Future Uncertain Following Release of Report to CongressLouis Golino is a coin collector and numismatic writer, whose articles on coins have appeared in Coin World, Numismatic News, and a number of different coin web sites. His column for CoinWeek, “The Coin Analyst,” covers U.S. and world coins and precious metals. He collects U.S. and European coins and is a member of the ANA, PCGS, NGC, and CAC. He has also worked for the U.S. Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of newspapers and web sites.

About the Author:

Louis Golino is a numismatic journalist and writer specializing in modern coin issues. He has been writing a weekly column for Coin Week since May 2011 called "The Coin Analyst," which focuses primarily on modern U.S. and world coins and developments at major world mints, and is also a contributor to two magazines, American Hard Assets and the Numismatist, the American Numismatic Association's monthly publication. His work has also appeared in Coin World, Numismatic News, and various coin web sites. He collects classic and modern U.S. coins and modern world coins from a number of different countries. He first joined the ANA in the 1970's. He has also worked for the Congressional Research Service of the Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of publications. He has been writing professionally since the early 1980's.

16 Comments on "The Coin Analyst: Palladium Eagle’s Future Uncertain Following Release of Report to Congress"

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  1. Bad Alan says:

    I have one palladium coin – a one half oz Chinese panda & I do not particularly favor the metal. IMO it just doesn’t “feel” or look as good as Pt, Au or even Ag. I really do like the proposed design & would buy the coin. Would be nice if the mint uses this artwork on a coin even if it’s not Pd.

    Sir your articles are so great I can’t thank you enough for all the information.

  2. Joe sabet says:

    Nice article. I hope they make one 1/10 ounce for those of us with limited funds

  3. CoinsBlog says:

    While I haven’t written my own response to the US Mint study, I think we can agree on the concept, “if you strike it, they will buy!”

    What I found interesting is that the report ignored the trend of the bullion market in general where coins sell better and at a higher premium than bars. In fact, it you look at most of the investing sites, they say to consider buying gold coins over gold bars. Aside from their intrinsic value, the numismatic value makes it a safer investment (notice, I said safer, not safe!).

    I would be willing to gamble that if the coins are made, the US Mint will sell them and the cost of the bars would drop as the demand went to the coin.

    I guess I am saying I agree with you, Louis. Contrary to some of my previous comments, I don’t say that I agree with you often enough!! :-)

    Scott

    • Louis Golino says:

      Thanks very much, Scott. You make some excellent points, which I would say even if you did not agree with me!
      I think one has to be realistic and admit that palladium is still getting off its feet as a coinage medium, but why look mainly backwards as the report largely does, rather than try to analyze how the things might change?
      Anyway, thanks for your comments and good luck with your ANA run.

  4. Hi Louis,

    Thanks for the extensive write-up, and you make what is probably the most compelling defense of the potential program I have read to date.

    I am inclined to agree with the report in regards to the bullion program, but I do think you are correct that if the changing designs were handled well, there would be a significant market for proof palladium eagles. I bet the mint could do at least as well as they do with the platinum eagle program. Some of the best modern coin designs I’ve seen have been produced in the platinum eagle program. Perhaps this design could be used on the next series of platinum eagles after the current run is finished.

    Nearly everyone I know who collects coins wanted one of these. It’s a shame the study didn’t get better results.

    • Dave in CT. says:

      CAP;—- yes, I agree with your views, as well as writer (louis) of the article. We need to hear more on this subject, and I hope others would add their two cents worth.

    • Louis Golino says:

      Thanks for your comments, CO. I think there is a widespread desire to see the design used on some coin.

  5. Richard says:

    Since collecting is not simply a rational action – a need – but a rationalization brought on by our desires, feelings, and opinions – our wants – I just wanted to offer a glimpse into mine… those forming the opinion of a young collector. And I’d love to know if any one feels the same way, because I strongly feel it’s these thoughts that really drive the collector’s markets.

    PLATINUM
    I’ve never been remotely interested in our platinum coins for two reasons:
    1) I love the statue of liberty, but on a coin she looks like a cliche – like a tourist trinket. There are already many more sophisticated liberties out there to choose from (if we think of sophistication as being embodied by anything that’s harder to describe – this goes for colors, art, people – this starts to makes sense).
    2) Super high prices + an unchanging design = why would I ever collect that? (I don’t collect our gold coins for the same reason, although I’ve considered them, based solely on their beauty)

    PALLADIUM
    I’ve also never bought a palladium coin from another country – simply because the designs are… well… simple. An interesting metal needs an interesting design, and similarly, an expensive metal needs a sophisticated design – one drawing from the highest works of art. It’s basic marketing really – all the components need to align in order to appeal to your target market.

    And that’s why this coin MUST get made. Next to the 2009 Ultra High Reliefs, this is the most desirable idea the mint’s had since I started collecting very young, 19 years ago (I’m 32).

    1) It’s exotic, new, and exciting.
    2) It’s of a material that is extremely rare
    3) Yet the prices are attainable
    4) The obverse portrays one of the most elegant “liberties” ever designed, so it’s just the opposite of the cliche on our platinum coins.
    5) The reverse is a refreshing take on a very sophisticated version of our eagle – on the level of the UHR’s – and leagues better than the platinum’s flat design and looks as if [UN]inspired from a poor photo.
    5) And it will come out in a new finish every year? Are you kidding me? This sounds too good to be true!

    I don’t think I’ve ever wanted to collect a coin with such a passion.

    Anyone feel similarly?

  6. Richard says:

    On a related note:

    To all you collectors out there with more experience and wisdom than I:

    If you want your collections to hold or grow in value, we’ll need to get the Mint to draw in more young collectors with exotic, new, and exciting coins – even with an old hobby such as this. And I don’t mean all the overabundance of boring that the Mint is issuing since the 50 state quarters program. It was fun until the 50th State when we all realized our collections halved in value at the end and insult was added to the injury when the Mint kept coming up with every reason under the sun to pump similar quantities of coins out.

    Quality over Quantity please? Since collecting is driven 100% by desire (not need), there’s a lot the US Mint could learn about quality from the most desirable brands in the world. Perhaps oddly, perhaps not, European fashion brands come to mind – Chanel, Prada, Louis Vuitton, Burberry, Apple… wait.. Apple? Yes, Apple’s success has come from a European approach, which is why it was so misunderstood by American analysts at the beginning of it’s rocket ride. These brands know that they’ll sell anything they make if they push quality to the forefront, focusing all their public efforts into driving desirability. A desirable brand with THE desirable product sells huge.

    The last several years have brought some great examples of quality in International coinage: France, Spain, and the Netherlands are your leaders in design innovation. And they’re not just adding avant-guarde graphic designs of subjects that are actually interesting; they’re physically innovating. Exotic metals, multiple metals, coins within coins, technologically-advanced aesthetics, wavy planchets, etc (please let’s not resort to coloration though – else coins really become kitch trinkets). They’re only downfall is price (too high) and market (too weak, poor Europe). But the design is spot on and somehow the French mint still sells out relentlessly.

    So bring on the Palladium coin. Relative to these European mints, it’s even conservative… yet so oh so nice. Perhaps most accurately, it’s the US Mint’s iPod/iPad… questioned by the misunderstanding analysts; yearned for by collections… to be (or sadly not to be) the coin of coins.

    I guess we’ll know by March 1, 2014.

    • Dave in CT. says:

      Richard,
      Now what can I say about one of the most intelligent reply’s I have ever, ever read. You are obviously very educated, and well read, unlike most of what I read on other coin blogs, such as the “Mint News Blog”. You’ll never read anything over there that has so much thought put into one’s opinion, or a subject matter. Instead of coin collectors at that blog, posting thoughts in a manner such as yours, that blog posters would rather contribute insults to each other. Just not much class is instituted by the guy that runs it, nor it’s sister blog. The folks that contribute here are the cream of the crop, top shelf, and I always look forward to when Mr. Louis Golino writes on a new topic. And I then put many thoughts into his articles, and then the reply’s, which are in an educated form. Funny, here you do not have any mean or nasty comments, but that other one has it on a weekly basis, and he never cleans it up. So, its just nice to read comments that come from adult and educated folks, such as everyone here. Thanks Louis, Richard, and the CAP…. Please keep your exciting thoughts with us always. As for me, I love you guys, if you know what I mean..

      Dave in CT…. have a great weekend guys..

      • Dave in CT. says:

        Dear Moderator; Not to be sarcastic, but you didn’t post post my thoughts. Their is nothing wrong with what I here, and everyone’s thoughts should be heard, esp, when one is paying a compilment on this blog. My feelings are conveying free speech, and you should go ahead an include it in with the rest of others posts.
        Now are you aware that anytime “Coin Week” is mentioned on Zeilinski’s site (mint news blog/world news mint blog), he deletes it that post as fast as he can. No, you were not aware of this. At least I didn’t mention this guy’s name, his blog, yes, but not only what I have written here is my opinion, it’ happens to be the truth, mr moderator. He disses you, and that is fine, but going to the point of erasing one’s thoughts, because of one’s naming of this fine online magazine, well, just backs me up. Please tell me why Mike Z hates you guy’s so much..

        Sincerely,
        dave in ct. baddbee@att.net thanks..

  7. Louis Golino says:

    Richard,
    Thanks for your eloquent contribution to this discussion. You make a lot of compelling points, esp. on why people want a collector version palladium eagle. The existing palladium coins are indeed pretty boring, and often not in stock. If we gave buyers a more interesting choice, I’ll bet they would flock to it.
    One clarification though on the palladium eagles. The proof versions do have changing reverses. Check out in particular the quarter ounce platinum eagles in proof, which have a different reverse design each year, and all but the two key dates, 2008 and 2004, are pretty reasonable. Also the one ounce proofs issued since 2009 carry a different reverse design each year. This year’s coin will have a very interesting design.

  8. Richard says:

    How ignorant am I!

    Thanks for the note, Louis – I guess I never gave the platinum coins a second look after the first time I saw them.

    I second the words of Bryce M on another forum: “That is a beautiful original depiction of Liberty!!!!!! How long has it been? Almost 100 years? I vote we put that on the obverse of the dollar coin and get rid of the dollar bill. This one should be seen by everyone.”

    It’s just too bad it still has the same obverse…. and the gown held in the right hand IS confusing… and it still would be nice to get back into coinage with less field showing. If the greeks could do it millennia ago…

    I am way too critical. Good work whomever designed this…

  9. Richard says:

    …I’m referring to the 2013 Platinum designs, in case I wasn’t clear.

  10. Richard says:

    Although if the 2011 Platinum is any indication, the design will be lost with the engraving.

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