This is old news now, but this is the first article I have read that offers good background information -
BK
Written by Frank Holmes. U. S. Global Investors.
September 4, 2008
Soaring Sales of American Eagle Coins Cleans out the Mint
American Eagle gold coins have been sold for more than two decades, and for the first time ever, there’s been a sellout.
A late-summer gold rush led the U.S. Mint to suspend sales of the 1-ounce coins, which were first struck in 1986. A big difference between then and now - the average price of gold in 1986 was under $400 an ounce, while this year the average has been above $900.
Typically, 12,000 of the coins are sold in an entire month, but in the first two weeks of August, investors snapped up 60,000 of them for their portfolios. The Mint halted sales on Aug. 15, resuming limited distribution a week later.
The American Eagle coin wasn’t alone in seeing greater demand. South Africa’s Krugerrand, the granddaddy of gold bullion coins, saw an unusually large order of 5,000 ounces from an unidentified buyer in Switzerland. The order cleaned out the Rand Refinery, the exclusive supplier of the gold coin blanks used to manufacture Krugerrands.
In the United States, there was a surge in retail buying, but why the sudden interest in hoarding gold coins? That’s tough to explain in this case: Such retail buying typically coincides with a peak in price, and in this case gold had just sold off almost $200.
A few theories are floating around. Perhaps a hedge fund was trying to tighten the physical market prior to India’s traditional gold-buying season, banking on a higher price this fall. Also, the buying overlapped with the conflict between Russia and Georgia, which also might have been a factor.
Although this is the first time the Mint has halted sales of American Eagles, there have been past shortages. But those shortages typically occurred when the price of gold was rising, and this time it was falling sharply. Those were different times, when there were fewer ways to gain exposure to gold.
Each 1-ounce American Eagle gold coin has a face value of $50, but its sale price is essentially the market price of gold plus a small premium.
