US Investors Choosing Gold Eagles or Canadian Maple Leafs
The US Mint has ramped up production of 90% pure gold Eagle coins in recent months to meet the rising demand of investors hoping to hedge their losses in the stock markets and banking sectors. Dealers across the country have noted a massive up-turn in the number of investors buying gold bullion Eagles – as much as 300% in many places. At the same time, however, sales of 99.99% pure Canadian Maple Leafs have also surged. How do investors weigh the pros and cons of these two investments?
Like gold bars, both these coins sell for a small mark-up over the spot price of gold. In fact, given the rather abrupt movements in the price of gold in late 2008, the US Mint has moved to update their prices on a weekly basis for 2009, making the markup more responsive to market conditions.
The 1985 law that made it legal to own US gold bullion coins again, in conjunction with the introduction of the gold Eagle program, caused a large and sustained increase in the amount of gold mined in the US per year. However, this total has slowly fallen since. This causes some to worry that the supply of these coins could be jeopardy if demand continues to rise unabated.
However, bottlenecks in gold bullion eagles or Canadian Maple Leaf coins seem to be logistical rather than supply-based. Both countries are major producers, and have very large reserves on hand. Canada produces about half the amount of gold as the US, mining 4.2% of the world's total in 2008, while the US accounted for nearly 10%, on par with the production rates of South Africa, Australia and China.
While production of some US gold coins has been rationed by the US Mint to meet demand, the production of Maple leaf coins continues unabated. The most obvious difference between the coins is the purity. Alloyed with silver, the 90% gold Eagle coins are more resistant to wear. The almost entirely pure Maple leaf coins are soft and easily scratched with even minimal handling. People who enjoy handling their gold coins often prefer the durability of these coins.
The demand for gold in 2008 was unusual because it continued surging even as the price of gold continued to fall. Usually, only an increasing price (when not near the bottom of a cycle) can cajole buyers into increasing their stocks of gold. Both coins are widely available, though a larger number of small dealers in the US carry gold bullion Eagles exclusively.
Danny Burns
March 12, 2009
