Perth Mint: Gold Coin And Bar Shortages Likely To Lead To Rationing

gold & silver sold outThe extraordinary demand for precious metals coins following the 2008 global financial crisis caught the minting industry by surprise, resulting in never before seen coin rationing and shortages.
It seems not much has changed, with recent reports that the UK Royal Mint ran out of 2014 Sovereign gold coins due to “exceptional demand”, as well as the continuation for over one year of an allocation program first put into place early 2013 by the US Mint on its ever popular silver Eagle bullion coins.
While these recent events have been limited to specific coins, with availability of other leading bullion coins like the Perth Mint’s gold Kangaroo not affected, it does seem to indicate that worldwide minting production capacity is still unable to meet demand surges.

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From Goldcore:

Today’s AM fix was USD 1,246.00, EUR 911.89 and GBP 757.86 per ounce.
Friday’s AM fix was USD 1,232.25, EUR 906.53 and GBP 750.78 per ounce.

Gold climbed $18.70 or 1.52% Friday, closing at $1,247.10/oz. Silver rose $0.56 or 2.86% closing at $20.13/oz. Platinum climbed 14.85, or 1.1%, to $1,428.10/oz and palladium rose $5.99 or 0.8%, to $739.10/oz. Gold was up 0.87% and silver was down 0.15% for the week.

Today’s gold prices continued last week’s rally, strengthened by a disappointing U.S. jobs number which creates doubts about the strength of the U.S. economic recovery.


Gold in U.S. Dollars, 1 Year – (Bloomberg)

The Perth Mint‘s Bron Suchecki has written an interested blog post regarding the real risk of gold coin shortages and rationing happening again:

The extraordinary demand for precious metals coins following the 2008 global financial crisis caught the minting industry by surprise, resulting in never before seen coin rationing and shortages.

It seems not much has changed, with recent reports that the UK Royal Mint ran out of 2014 Sovereign gold coins due to “exceptional demand”, as well as the continuation for over one year of an allocation program first put into place early 2013 by the US Mint on its ever popular silver Eagle bullion coins.

While these recent events have been limited to specific coins, with availability of other leading bullion coins like the Perth Mint’s gold Kangaroo not affected, it does seem to indicate that worldwide minting production capacity is still unable to meet demand surges.

However, it is little appreciated that the bottleneck in the global coin minting process is blank (planchet) manufacture. This is a far more complex process than simple stamping of a coin, particularly around purity and accurate weight control.

If you dig deep, you will find that many of the coin supply problems come from underestimation of demand and the resulting exhausting of blank inventories. Often, blank suppliers are mints themselves and can face conflicts where they earn more by prioritising blanks for internal use rather than supply externally. Running higher blank inventories is often not an option, due to the cost of funding the high dollar value of the inventory.

 
How high coin premiums can go when coin demand overwhelms production capacity – (Sharelynx)

Notwithstanding the capacity expansion by blank suppliers over the past five years, in my opinion there is no way the industry can meet the demand that would occur were precious metals to see even a small bit of interest from the mass market. While cast bars are a lot easier to make and refiners are much more casting production capacity, I am not even sure if it could meet sustained mass market demand.

For now 2008 style shortages and rationing don’t seem to be on the horizon but the fact that the UK and US Mint are having supply issues on a few of their product with metal prices at these low levels is an indicator that as prices rise and (re)attract investor interest, shortages and rationing may become a reality of coin buying life again.

The interesting and informative blog post can be read here.

This is another reason why if you are considering buying coins or bars in volume for delivery or bullion storage in Zurich or Singapore, it is best not to wait.

“Don’t wait to buy gold and silver. Buy gold and silver and wait.”

 

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Comments

  1. The extraordinary demand for precious metals coins following the 2008 global financial crisis caught the minting industry by surprise, resulting in never before seen coin rationing and shortages.
    Yes, at $9.50 an oz, there were definite ‘shortages’.  When the price tanks in an (ahem) unnatural way (if demand is intensifying, the drop is unnatural) there will indeed be shortages at that manipulated price level.  Let the thing go up a couple bucks, and all your shortages will vanish.
    Isn’t that odd?  It has nothing to do with stamping blanks, and everything to do with laying hold of the metal.  Making blanks requires labor, which is currently in a glut.

    • Conax,
      If you read the rest of my article, you would have come across this part, in reference to what was happening in 2008: “the Perth Mint at one stage was shipping in 20 tonnes of silver each week for weeks on end from London with no problems”. The silver coin shortages in 2008/2009 had nothing to do with not being able to lay hold of the raw silver.

    • Not that hard to stamp blanks, and the mints are shutting down 2-3 weeks a year that tells me they do not have the raw materials AKA silver and gold are in short supply. It doesn’t take 3 weeks to change the dies in a coin press.

    • read his article Mary. Not hard to stamp blanks, but awful darn hard to stamp a 1kilo bar from a 400oz london good delivery bar that is not 99.99 pure.

    • MaryB,
      Making coin blanks is a lot harder than stamping blanks. The US Mint “shut down”, as you say, because they have a shortage of coin blanks. The US Mint can’t have a shortage of raw materials, by which I assume you mean raw gold/silver, because they don’t make coin blanks. Read the article http://goldchat.blogspot.ie/2014/01/coin-shortages-and-rationing-are-in-our.html for more info.

  2. Nah, I don’t buy the ‘not enough production capacity’ argument.  I worked all my life in production. The boss never turned down an order because we were too busy or didn’t have enough help.  They would just hire some temps, rent borrow buy or steal the equipment needed, put everyone on 12′s with no days off, and make that money.  My last boss would  call us together and tell us we were doing an ‘all nighter’ when he needed the production.  I have worked 101 hours in a week when the boss needed to finish an order.  He had no qualms or pangs of guilt over this. He was happy as a rat eating a cheetoh.
    IMHO these mints wouldn’t deny anyone product if at all possible.  There is so much disinformation regarding the PM circus that you must use logic to ferret out the truth nowadays.   Just an opinion, we all have one, and of course they differ.

    • i agree with the logic comment.  Understanding we are going to think logically…
       
      Why did it take 6-8 weeks for premiums to come back to reasonable levels after the crash in April… again, assuming we are thinking logically and agree with your comments that mints would not turn orders down if they could handle them.
       
      Also, let’s not forget the delays. that were experienced.

  3. Conax,
    Minting is a specialised, and small, industry. You can’t just “rent or buy” the equipment ASAP. There are only 2 or 3 manufacturers of coin presses that mints like the Perth Mint or US Mint use (which cost in the multi millions of dollars each) and current waiting times to get one are in months, if not 6 months, minimum. Blanking processes are more complex with various different machines needed. It is not as simplistic as you think.

  4. @Mikeyj80
    Premiums don’t come back until the debilitating effects of the orchestrated take downs wear off.  Might be a few months.
    People can be demoralized and are, right now.  Not everyone, as you can see.  Psychological warfare is waged in this market every day.
     

    • Sorry, I don’t understand your point. Premiums are high when demand exceeds ability to supply. If people were demoralised by a take down, then demand would be down and premiums would be low. Mikeyj80′s point is that premiums stayed high.

  5. My mistake, it is late. Premiums go up when there is
    a) a shortage
    b) excitement among buyers
    c) a shop that has bought stock at 30 and the spot has fallen to 25 and Mr Dealer isn’t that interested in taking the hit.

    I’ve hogged the page more than I like, so good night all.
     

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