By Dave

Over Here. No, Over There

December 07, 2009

If you have ever played with a small dog that loves to race around from spot to spot depending on where you are looking or going, you have a good sense of what the Mint looks like day to day as it tries to cope with serial bullion coin shortages.

What’s being offered today?

A new allocation of one-ounce bullion American Eagle coins.

Will there be enough?

Are you kidding?

And so it goes.

Bullion coin buyers and coin collectors who are following the spectacle like to tsk tsk this these ongoing shortages.

But there is another small dog racing around here. It is the bullion coin buyer who is also racing from spot to spot bidding up prices of the bullion coins on the secondary market to ridiculous percentages.

Forgotten by these buyers is that the unusual premiums that occur from time to time get zeroed out. Sometimes bullion coins even trade for a discount to bullion value.

To use round figures, imagine paying a 10 percent premium for a half ounce gold coin. At today’s gold price of $1,144, that works out to a gold price of $572 plus $57.20 to equal $629.20.

Gold has to reach $1,258.40 to give the coin a bullion value equal to what was paid with the 10 percent premium. That is quite a swing and quite a nut to have to cover before profits can begin.

Does it matter?

Well, just try telling a small dog how silly it looks and you will get the same result.