Demand for U.S. gold coins has plunged in recent weeks as the unprecedented buying by retail investors that helped bullion prices recover from their historic sell-off four months ago has almost vanished.
Record highs in U.S. stock markets, combined with little clarity about when the U.S. central bank may start curbing its bond-buying stimulus have prompted investors to hold back their physical gold purchases.
With less than 2 weeks left in August, total sales of U.S. Mint American Eagle gold bullion coins for investors stood at 3,000 ounces on Monday. That is a far cry from 39,000 ounces for the whole of August 2012 and the monthly average of almost 100,000 ounces for the first seven months of this year, according to data on the U.S. Mint website.
Projected sales for this month will be one of the lowest tallies for August since the U.S. Mint launched the American Eagle coins program for investors in 1986.
"Demand right now is next to nothing," said Michael Kramer, president of Manfra, Tordella & Brookes (MTB), a major U.S. coin dealer in New York.
Unlike previous years when sales were limited by a lack of gold coin blanks, the U.S. Mint has not experienced any supply issues this time around.
Physical gold coin sales are highly seasonal and are typically slowest in the summer months of June, July and August when many investors are on vacation, dealers said.
But August sales at just a fraction of the meteoric levels of recent months will reignite concerns that ebbing physical demand could remove a key price support for bullion.
Much of the recovery in prices since their drop in April has been attributed to small investors and collectors buying anything from jewelry to coins at bargain prices.
Bullion posted a record two-day $225 drop in mid-April as institutional investors pulled money out of gold betting on an end to the U.S. Federal Reserve's years-long stimulus program.
Prices have rebounded 15 percent since hitting a three-year low at $1,180 an ounce on June 28. On Monday, gold was down 0.7 percent at $1,366 an ounce.
But the highs in equity markets and resurgent fears that the Fed will taper its massive stimulus sooner rather than later have scuppered physical gold purchases.
"There are plenty of people who would buy a whole lot more, but there has to be clarity which way gold is going, and that's what people are waiting for," Kramer said.
SECONDARY SUPPLY RISES
The dramatic fall in demand for new coins comes as investors also sell coins they bought during the run-up in prices over the past decade to cash in on expectations that prices have little room to rise further.
Many long-term coin customers who had bought gold at much lower prices years ago have opted to take profits, said Roy Friedman, executive vice president at Dallas-based Dillon Gage, one of the top U.S. coin dealers.
"Over the course of the last couple of weeks, several large liquidations have come into the market on all gold bullion coins."
Similarly, MTB's Kramer said that he saw several 10,000-15,000 ounces sales by large customers a few weeks ago, although such sales have stopped recently.
Mints around the world are experiencing a similar slowdown in sales.
Sales of 2013 Gold Maple Leaf coins have been slower in recent weeks compared to July, Chris Carkner, a managing director at the Royal Canadian Mint, told Reuters.
Traders question whether the pace of buying will pick up given the amount of gold coins and bars already bought this year.
"If gold is just moving $10 here and there, it is not going generate a lot of buying interest," said David Beahm, vice president of New Orleans-based retail coin dealer Blanchard & Co.
"However, it doesn't take much for gold prices to go a lot higher," Beahm said, adding that could reignite coin buying.
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