Gold Bullion Eagles

Are Small Investors Being Discouraged From Purchasing Fractional Gold Eagle Coins?

When the demand for physical gold spiked in late 2008, the US Mint simply wasn't prepared. Though the price had fallen considerably since its high earlier in the year, private sector makers of plainchants (type-2 blank coins) were blamed for interruption of available gold bullion coins from the US mint.

Since at least 2000, the US mint has focused at least 75% of its production on one-ounce, 91.67% pure (22-karat) bullion. Gold Eagles represented the vast majority of gold coins minted and sold between 2000 and 2006, when the long-awaited pure (99.99%) gold Buffalo coin was introduced to much interest. Fractional sizes of the $50 American Buffalo bullion coins were released in 2008, in the same increments as the fractional gold eagles, with values of $1, $5, $10 and $25.

However, as of February 2009, the US Mint still has failed to release any un-circulated or proof gold coins other than the 1/2-ounce Gold Eagle. This has caused investors in certified Double Eagles to nervously put their money in existing or foreign gold bullion. Eagles remain highly sought after, with even the high-relief proof coins being bought out by eager investors as soon as they were made available.

Partly as a result of the shortage of physical gold to purchase, investors have been funneling money into electronically traded funds (ETF) and other non-physical investments that more closely track the stock market rather than the spot price of gold. After falling off almost completely, these virtual purchases have heavily contributed to the rise in the price of gold that's been observed since the beginning of 2009.

The US Mint maintains that the sale of gold bullion Eagles is not due to a lack of gold but an inability to physically keep up with a crushing demand for Gold Eagle investments. However, with the Mint's inability to keep their authorized suppliers stocked with the coins their client’s demand, those who wish to buy gold Eagles exclusively may have to seek out third party sellers or older coins.

Stocks that trade gold futures or shares in physical gold reserves are available in increments as small as 1/10th-ounce, and continue to be available regardless of the logistical movement of gold, though it is backed up by regular reserve inspections in several countries such as the US, UK and Switzerland.

But just how safe is it to buy ETF gold shares? Many old-timers and respected market-watchers recommend that you should keep your gold investments as physical coins, such as Gold Eagles. However, the rate of investment in gold futures does imply that the fear conditions that have spurred gold investment are waning in favor more economically healthy greed.

The safety of ETF gold shares can be moderated by making sure your purchases are confined to global companies that have proven reserves that are verified by inspection. While the returns on such investments may not be as high as when buying gold bullion Eagles or other bullion coins, it is still more stable than many other financial vehicles that had been thought safe until 2008.

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Arthur McGuire

March 1, 2009