The Coin Analyst: Is “Mint to Demand” the New Normal?
by Louis Golino for CoinWeek…..
Some U.S. Mint products have always been essentially made to demand, that is produced to whatever level buyers order, rather than set to a specific mintage level. Examples include proof and mint sets and proof and burnished American silver eagles.
But in the wake of the widespread criticism the Mint received for its handling of the release of the 2011 25th anniversary American silver eagle sets, an increasing number of Mint products are now being produced to demand, including some which had previously been limited, as well as new products.
When the Mint’s projected demand of 5 million coins for the Chester Arthur presidential dollars turned out to be insufficient, the Mint said it would make more coins to meet the demand for them. Since then orders for more than 7 million coins have been received, and they are still coming in.
It is not clear what is driving the demand for Arthur coins. In December Vice President Biden announced that dollar coins would no longer be made for circulation because nobody wants them. But a lot of collectors clearly do want them, and they are stacking up large quantities of the Arthur dollars for whatever reason.
It is unlikely that President Arthur is particularly popular with collectors, so the expectation of a low mintage coin seems to be the likely reason for the demand. But now that the coins are being made to demand, one wonders whether that information has just not reached a lot of people, or whether there was pent-up demand because the release of coins was delayed for a couple months.
The five-ounce silver America the Beautiful coins, which during their first year of production (2010), were limited to a run of 33,000 coins per design, are also now being produced to demand. This only applies to the bullion versions since the collector versions are currently limited to 25,000 per issue. That move is likely to further erode demand for a series that has already seen a big drop in interest.
If the bullion versions had actually captured the interest of bullion investors the way American silver eagles have, then unlimited mintages would not necessarily be a problem. But those looking for as much silver as they can get for their money are likely to opt for bars or rounds, while those interested in the designs of the coins are probably going to want the limited edition collector versions, even at a premium of around $40 a coin.
The recently-announced special two-coin American silver eagle proof set to mark the San Francisco Mint’s 75th anniversary will also be made to demand. And the first circulation-quality quarters minted at San Francisco since 1953, which will begin with the June 21 release of the El Yunque “S”-mint quarters, will also be made to demand despite early reports that suggested the coins would be limited to 1.4 million pieces per issue. Collectors have expressed a range of views on the proliferation of “to demand” products.
Some are pleased they will not have to jump through all kinds of hoops, such as dealing with jammed up web sites and phone lines, and that everyone should have a fair chance to obtain coins from the Mint.
Others make a distinction between circulation coins, whether or not they are only sold at a premium, and coins specifically made for collectors. They feel that circulation coins should have unlimited mintages, whereas collector coins should have limited production. That is the general approach followed in other countries.
In fact, many foreign mints are believed to create demand for their products by making them in small numbers, which often leads to a frenzy to obtain them on the day of release. Many recent Canadian issues have sold out of their limited mintages during a pre-release period when only members of the Master’s Club can order the coins. To be a member buyers must spend at least $1,000 Canadian during the preceding twelve months.
The U.S. Mint has frequently been criticized for creating instant rarities through limited mintages and household limits, and Mint officials have pointed out that it is not the Mint’s goal to make it easy for buyers to make quick profits.
But it now seems to be erring so strongly on the side of caution, that many collectors are wondering if the days of limited-edition coins are over.
In addition, it is worth bearing in mind that if a product is made to demand but sold for a limited period of time, it is only capturing demand during a specific period. Over time more collectors will want to obtain many of those items, and they will be willing to pay secondary market premiums for those coins if they need them to keep their collections updated, or because they appeal in some other way.
It is certainly understandable that the Mint feels the need to discourage “flipping,” as it is called, which leads to rapidly increasing secondary market values that often crash before long.
But if taken too far, this approach risks substantially reducing demand for the Mint’s offerings and driving collectors to other areas of numismatics such as classic coins or world coins.
Besides, there are ways to allow a fair chance at obtaining new coins without making them to demand. The household limit has clearly been abused numerous times, but there are all kinds of other approaches that could be used. For example, order forms could be mailed to Mint customers and then returned during a specific window, or a web site queue system could be used that staggers orders, which is what the Perth Mint in Australia has recently started using to considerable success compared to last fall when it was impossible to place an order for high demand, limited edition offerings.
It does not have to be an all or nothing approach. Creative approaches that combine fair access and limited mintages can be created and used for certain numismatic products that have wide appeal, but which many collectors would prefer to be minted with some kind of limit.
The prospect of price appreciation is a powerful part of the incentive for all types of coin collecting, even if some purists like to pretend otherwise.
If you have an idea for how to limit mintages while allowing broad access, please leave a comment at the end of this article, and suggest it the next time you receive a survey from the Mint.
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.