Gold Mart Sees Y2K Flashback in Hoardinggreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Saturday September 29 8:12 AM ET
Gold Mart Sees Y2K Flashback in Hoarding By Alden Bentley
NEW YORK (Reuters) - Nervous investors have been snapping up gold coins like hot cakes since the deadly attacks on New York and Washington rocked global financial markets and sparked a rush for hard assets that might retain value.
U.S. gold dealers and analysts say coins are a good gauge of overall investor interest in bullion, the price of which jumped some 8 percent in the days after the hijacked airliners leveled the World Trade Center and part of the Pentagon.
Gold has historically been used as a hedge against turmoil and falling prices. But it fell out of favor until very recently as inflation faded and central banks decided they needed less gold to back currencies and sold some of their reserves.
Analysts see parallels as well as contrasts with the safe-haven gold buying of 1999 that was in anticipation of the New Year computer meltdown, which, along with predictions of a new millennium catastrophe, failed to materialize in 2000.
An apocalyptic view of world events is a motivation for some in the coin-buying crowd. The fear of the Y2K bug was one such event, as hoarders acted on fears of widespread technical failures in everything from planes to cash machines.
Most of the 1999 gold hoarders had sold back their Y2K purchases a year and a half before the September 11 attacks.
The scene in lower Manhattan rekindled similar visions of devastation just steps from the heart of U.S. gold trade at the COMEX division of the New York Mercantile Exchange.
At least 12 metric tons of the gold bars and 930 tons of silver are buried in vaults under the rubble. The bullion is there to guarantee delivery against the futures traded at the COMEX. Dealers said there are probably more gold coins and bars temporarily out of circulation in the ruins, that were not officially registered with the exchange.
The sudden investor demand for American Eagle coins, which are both U.S. legal tender and an investment in pure gold, has taxed the government's ability to mint them. Interest in numismatic gold -- antique or rare coins -- is also up.
``Yes, coin is up, but appreciate that demand is up from zero,'' said Bob Piesco, deputy managing director at HSBC Bank USA, a major bullion trading bank and precious metals custodian. ``There was an initial blip, but then the exchange was closed, so you were limited for dealing.''
Mike Clark, president of Delaware-based bullion dealer and Depository FideliTrade Inc., said many small investors were taking unusual physical delivery of coins rather than having a custodian to store them in a vault, under account.
``To buy coins and to take delivery of those indicates it is almost like the pre-Y2K period, where we saw a lot of interest in physical possession of coins because of the uncertainty,'' he said. ``Of course, with Y2K it came and went, it was a nonevent and a lot of those coins came back to the market place.''
The United States Mint told Reuters on Monday its total gold sales since September 12, were 45,000 Troy ounces, or about 1.4 tons, double the full month totals of July and April, the best two months of 2001, with 22,500 ounces each.
``We mint to demand,'' Mint spokesman Matt Kilbourne said.
Rand LeShay, senior vice president at A-Mark Precious Metals, Inc., a wholesale coin dealer and among the largest customers of the Mint, said coin sales had increased 10-fold since the attacks, with buying across the board from banks, brokerage houses and coin dealers to meet retail demand.
While newly minted 1-ounce American Eagles have been the hottest sellers, there has been run on all varieties and denominations from all the countries that make gold coins.
``Older-dated coins or coins that came back during the dishoarding of 2000 -- some of which may have even been earmarked for refining because they were unsalable -- those have literally flown off the shelves to the point where we have very little if any inventory,'' LeShay said.
Indeed, over the last two weeks, there was extra buying of gold wafers, 5-10 tael bars (one tael-1.20337 ounces) and 10 tola bars (one tola-0.375 ounce) from traditional gold centers in the Middle East and Far East, dealers said.
``In many cases gold is truly a safe haven,'' Clark said. ''It's a currency of last resort because they feel the wars may be coming to their areas. Their political systems, their way of life, their financial system they perceive to be in peril.''
In 2000, according to Gold Fields Mineral Services, a precious metals research group, investors bought only 46 tons of coins including Eagles, Australian Kangaroo Nuggets, South African Krugerrands, Canadian Maple Leaf coins and Austrian Philharmonics.
That was a drop from 133 tons sold globally in 1999, and was associated with a total gold disinvestment in 2000 of 47 tons, versus 543 tons of bullion bars and coins bought in 1999.
``You can't really count the millennium because that was a special situation there and subsequent to that we saw coin sales plunge,'' said Bill O'Neill, head of future research at Merrill Lynch.
``It is a positive sign for the market,'' he said. ``The big thing is, will this persist? Or will it be a short-lived scenario? I suspect it will be short lived. The coin and numismatic demand is better than it was but, like the market, its potential is probably limited.''
LeShay said the main difference between the safe-haven buying of 1999 and 2001 was that this year there were fewer survivalist types accumulating smaller-sized coins than in the head-for-the-hills mentality before January 1, 2000.
``In the pre-Y2K era, late '98 to '99, fractional sized coins -- 10th ounce, quarter ounce, half ounce coins -- those were flying off the shelves because people were thinking they needed coins for barter,'' he said. ``This is more of a traditional flight to quality.''
-- Martin Thompson (email@example.com), September 30, 2001