Is the U.S. Government Stopping Gold Coin Sales?

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Last Thrusday, we reported that high demand prompted the U.S. Mint to stop selling popular one-ounce 22-karat American Eagle bullion coins to dealers as they scramble to build the inventory back up.

Launched in 1986, the American eagle bullion program is a popular way for investors to buy gold and silver coins.

Eric Roseman in The Sovereign Society says collecting and investing in bullion has morphed into an outright bonanza for coin dealers this decade. Now, many gold bugs say the U.S. government is behind Mint's decision to stop selling Eagle bullion coins. Eric says lack of adequate supply may also be behind the move...

But for the first time in almost 20 years since its inception, the U.S. Mint halted the sale of coins last Friday.

According to the U.S. Mint, inventories of gold and silver coins simply ran out on August 15. The institution has sold 311,000 ounces of the coins this year - about 50% more than in 2007.

Despite the big drop in gold and silver prices since July, buyers accumulated 63,500 ounces of the precious metals' coins the first two weeks of August alone.

If you check out the gold-lovers' blogs, you'll find that some investors and collectors think the government is behind a plan to hoard its inventory.

The ongoing credit crisis, now in its 12th month, shows no signs of stopping. Interbank lending rates remain elevated, housing values continue to plummet and bank lending continues to tighten.

So is the government anticipating a financial meltdown, and if so is banning physical gold ownership on the horizon?

We'll never know the motives behind last week's termination of gold coin sales. Government hoarding might be part of the mystery - but not the whole story.

I've got a feeling supply is a major problem, too. Global mine production has declined markedly since 2006. Major producers in South Africa and Australia are producing far less gold compared to just 10 years ago. And despite the big decline in Indian fabrication demand this year, net supplies are still tight for gold.

If you can't buy gold coins domestically for whatever reason, consider opening a foreign bank account in Switzerland or Austria and buy your gold and silver overseas. You can do this easily through the purchase of gold certificates or physical delivery, which is much more expensive.

Exchange traded funds (ETFs) are also convenient but don't provide direct ownership and leave the possibility open to confiscation. If you can only own gold through an ETF then do this in Switzerland where four precious metals ETFs trade in Zurich under the ZKB ETF umbrella.

Maybe the gold window is starting to close again. Tough economic times usually imply drastic measures. Before it's too late, make sure you have at least 10% of your net wealth stored in physical gold.

P.S. Gold mining stocks are another way to cash in on gold prices without actually owning