by Louis Golino for CoinWeek ……
On October 3 the U.S. Mint suspended sales of some numismatic silver coins because of the recent rise in silver spot prices and announced plans to increase prices for some silver coins by $5 per ounce.
The Mint issued the following statement to the numismatic press:
“Because silver has been trading in a range of $30.00 - $35.00 per ounce, since August 23, 2012, prices for the following products will be increased:
- 2012 American Eagle One Ounce Silver Proof Coins from $54.95 to $59.95
- 2011 and 2012 American Eagle One Ounce Silver Uncirculated Coins from $45.95 to $50.95
- 2011 and 2012 America the Beautiful Five-Ounce Silver Uncirculated Coins from $204.95 to $229.95.
- 2012 Annual Uncirculated Dollar Coin Set from $54.95 to $59.95
No other United States Mint products are impacted by this change.”*
The suspension ended on October 10, when the Mint relisted these coins at the new, higher prices.
The Mint reprices numismatic precious metal coins in different ways when metal prices increase depending on which metal the coins are made of.
In 2008, when metal prices were very volatile, the Mint had to suspend gold and platinum numismatic coins for repricing when metal prices increased substantially. That led to long suspensions in sales of those products, and played a key role in why the 2008-W gold and platinum eagles in proof and burnished finishes have such low mintages and high premiums.
Several years ago the Mint addressed that situation by implementing a grid system in which gold and platinum products are repriced once a week depending on how those metals performed during the previous week. Gold coins are basically set up to increase by $50 per ounce when the average weekly price during the previous week increases enough to push prices into the next higher tier, while platinum prices increase by $100 per ounce.
Silver coins, on the other hand, are treated differently. There is no tier or grid-based system for numismatic silver products the Mint sells.
Coins such as commemorative silver dollars and silver proof sets are priced sufficiently above their melt value so that they rarely have to be repriced apart from the initial annual issue price.
But coins like American silver eagles in proof and uncirculated finishes and five-ounce silver America the Beautiful coins, which were priced very competitively this year relative to silver value, have to be suspended from sale when silver prices rise beyond a certain level. Then the new prices must be published in the Federal Register before they can be relisted on the Mint’s web site.
A total of 13 silver coins were affected by the recent suspension, which ended sooner than most past silver coin suspensions.
There are a lot of problems with this system for silver coins, as well as problems in the way gold and platinum coins are treated. The basic issue is that the current system is far too rigid and inflexible for today’s rapidly moving bullion markets, and moving towards a real-time price adjustment mechanism similar to what bullion dealers use would be better for both the Mint and its customers.
The current system is simply too complicated, it inhibits sales, and it can result in increases in coin prices even when metal prices decline, or are unchanged by the time the new prices are in effect, as happened last year several times.
An increase of $25 for the five-ounce coins is not justified by current silver prices. Until silver rises substantially above $35 many buyers of these coins are likely to curtail their purchases because there is too large a gap between melt value of $170-175 and a retail price of $230, especially since the bullion version of these coins is currently selling for $200 or less at bullion dealers.
Besides, some coin dealers are still selling the numismatic versions for substantially less than the Mint’s forthcoming price. For example, Mint Products in New Hampshire (www.mintproducts.com) has the collector versions of the five-ounce silver coins for $215 instead of $230.
The Mint’s silver numismatic product sales recently experienced a significant increase, but the new prices may halt or reverse that trend and put the series back in the doldrums.
The Mint appears to be positioning itself for further increases in silver prices, which are widely predicted by precious metal analysts, but experts also anticipate dips and corrections, particularly because of massive short positions held by some large banks, profit-taking, and temporary dollar strength.
Some people of a conspiratorial mindset believe the Mint has some kind of insider information about metal prices, but as someone who follows these issues closely I know that is highly unlikely.
A well informed investor who reads widely and does their own research, or relies on people with greater expertise than they have, has basically the same information as a large Wall Street investment bank or hedge fund that trades in precious metals.
Surely the largest mint in the world with a 225-year track record can come up with a better system than this for pricing precious metal coins.
In theory suspensions should only take place when the retail price of coins begins to approach its melt value, as happened in July 2011, but it is just not clear how much metal prices have to increase before sales are suspended. This uncertainty is harming the Mint’s sales, especially for silver coins whose current repricing system is too cumbersome.
But whether the action can be done on its own authority, or in consultation with congressional officials as necessary, it is high time the Mint move towards something similar to the real-time pricing system used by coin and bullion dealers.
Would it not be possible to determine some sort of defined premium level for different coins that covers production costs, other overhead, profit margin, etc., and then adjust prices as metal values increase or decrease day-to-day? That way collectors won’t have to deal with sales suspensions and weekly repricing, and the Mint will not lose millions of dollars of business during the periods when coins are not available for sale.
There has to be a better way to price precious metal-based coins, and the Mint should be able to create something that would work much better than the present system.
*The U.S. Mint was contacted for additional information and comments on the justification for the higher prices, and the possibility of developing a real-time pricing system but did not respond by the time this article was published. If any information is provided later, it will be added to this article.
Louis 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.