Testimony delivered during a hearing of the House Subcommittee on Domestic Monetary Policy and Technology on “The State of U.S. Coins and Currency” revealed inefficiencies in the United States Mint’s procurement process for precious metals blanks. These inefficiencies have had a significant impact on the Mint’s ability to efficiently manufacture gold and silver bullion coins.
The United States Mint offers bullion coins through the American Eagle Bullion Coin Program and the more recently introduced American Buffalo Gold Coin Program. Under Public Law 99-61 and 99-185, the US Mint is required to produce Gold Eagle and Silver Eagle bullion coins in quantities sufficient to meet public demand.
The onset of the global economic crisis caused a significant increase in the demand for physical precious metals. Since late 2008, the United States Mint has been unable to keep up with the increased level of demand, resulting in frustrations for investors and collectors.
On several occasions over the past two years, sales of gold and silver bullion coins have been suspended due to the depletion of the US Mint’s available inventory. For significant stretches of time, the US Mint has imposed an allocation program, which rations the available supply of bullion coins amongst their authorized purchasers. The production of collectible versions of the American Gold Eagle and American Silver Eagle were canceled in 2009, as the US Mint sourced all precious metals blanks supplies to the production of bullion coins.
Testimony from Michael Clark, President of Diamond State Depository, described the “heart of the problem” as the Mint’s inability to source precious metals blanks from multiple producers. According to the testimony, the US Mint relies on just three suppliers for precious metals blanks. Adding further inefficiency to the process, precious metals are shipped to these foreign suppliers to be made into blanks, and then shipped back to the United States to be minted into coins. This is the result of the legislative requirement that precious metals for the coins must come from newly mined U.S. deposits.
Separate testimony delivered by United States Mint Director Edmund Moy supports Clark’s observation about the bottleneck in the process. Moy stated, “We had no difficulty in obtaining gold, silver and platinum in raw material form, but we experienced considerable difficulty in getting this raw material fabricated into planchets by our vendors in sufficient quantities to meet public demand.”
During 2008, the United States Mint had made public acknowledgment of production problems for bullion coins and promised action. To date, no significant action has taken place.
Clark concluded his statement on the US Mint’s bullion coin programs by providing three recommendations to Congress:
1. Authorize the Mint to produce both proof and uncirculated versions of the Gold and Silver Eagle Coins, regardless of the demand requirements of the bullion coins, to ensure uninterrupted supply of the market;
2. Direct the General Accountability Office to undertake a review of the Mint’s procurement process for blanks, and seek its recommendations on what can be done to improve it; and
3. Require that the Mint procure the blanks for its bullion programs from sources within the United States by no later than 2014.
Maybe they should use some US/AMERICAN vendors!!! What a stupid country we have become.
It is time to bring a lot of jobs back to the US from other countries, not just for these blank coins.
This appears to be a great area for job creation in the United States. Why can’t the mint create these bullion blanks at their mint facilities here in the U.S.? This can be much cheaper and less time-consuming. Plus, it would at least ensure that the product is an entirely 100% authentic coin mined and minted in the United States of (North) America!
-Richard Stinchcomb
Inefficiencies — No!
Incompetence — Yes!
Do you think more futures contracts would be demanded for delivery if we could have blanks made in the US? I dont think the govt wants this to happen, If fractinal gold is ever minted to allow unlimited amounts to real demand along with silver eagle premiums going closer to spot it will drive phisical demand through the roof due to defaults in futures.
I know alot of people that say they would buy 1/10 to 1/4 ounce gold each week or month if they could get govt gold, they cant afford an ounce at a time and the fractinal coins are more liquid and are more likely more practical if a major problem were to occur with currencies,same with silver eagles, as long as spot price and premiums stay 10-20% apart it keeps most people I know away, which is key to driving investment bullion demand higher.
Having the raw metals sent outside of the USA to be made into blanks for minting in the USA makes me wonder if we are being ripped off when these metals are outside the USA. I cannot believe anyone in their right mind ever allowed this to happen.
Now I am sceptical of buying bullion coins or collector versions from the US Mint.
What foreign countries is the metal being shipped to?
I agree with Richard.
Phil, don’t be stupid. It is trivial to anyone to detect if there is a problem with the coins. It is easy to measure weight, density, dimensions, and other properties of the coins. Not everyone does every time they get a coin but enough people do that if we were getting a lot of faulty planchets people would know. Not to mention the mint would notice since it would throw their production process off.
Phil You are right, Not only must we mint the gold here we must keep it here, we must import as much gold as we can before the price triples, our govt can print dollars and countries cant control us if we have the gold ,gold is alot more rare than most people believe, as if we dont have enough gold in the entire world to give an ounce to each person alive. Not many people understand a chunk of gold metal buying a car but they do understand it if we mint it into lower weight certified coined metal .Importing actual precious metals for devaluing paper currency seems a good idea to me, especially when that metal is in high demand, we can create jobs ,any way of creating non paper pushing gambling wall street bet jobs that takes raw materials and create something that is demanded should be allowed to be done,if high net value people believe gold and silver will at the very least hold there value they would create alot of jobs by converting 10% or more to mining and the metals themselves,just like they did during the gold rush in 1849,this time its global.
Bob,
No need to be rude Bob. I am not stupid. As a matter of fact, I have been a coin collector for many decades and understand the process each coin goes through at the Mint. I am sure you are right about the Mint discovering any problem with planchets they receive.
However, there have been a lot of fake gold and silver coins introduced into the US and world markets in recent months. Many of these fake coins have been so well made that they have been purchased by very experienced coin dealers. That is why I am very sceptical.
The new tax on reporting in 2012 will create more demand for gold demonations 10 grams and under as you can buy less than 600.00 at a time many times.
@goldstandard
No. You will be required to fill out a 1099 if your purchases exceed $600 with a vendor for the entire year. This is NOT limited to one transaction. Unless you can find dealers who will sell you ONE coin per year and you use a lot of dealers, your attempt to circumvent the law will prove fruitless.
Go look at the health bill and do some more reading on the subject if you won’t take my word for it.
The law is CLEAR. Produce enough coins to meet demand. ANY variance is ILLEGAL. Produce the coins, as mandated by LAW.
Sheesh!
“We had no difficulty in obtaining gold, silver and platinum in raw material form, but we experienced considerable difficulty in getting this raw material fabricated into planchets by our vendors in sufficient quantities to meet public demand.”
So, it’s been close to two years since the mint has produced a single platinum eagle. Even if the planchets were being fabricated by hand and shipped by covered wagon they should have some for sale by now. If the minting was done by “for profit” private enterprises in a competitive environment, we’d have coins available and all demand satisfied in no time. Of course the US Mint operates it’s bullion sales program as a “for profit” operation too. As the law states “Amounts received from the sale of gold shall be deposited by the Secretary in the general fund of the Treasury and shall be used for the sole purpose of reducing the national debt.” …But it seems they aren’t doing much to contribute to that end either.
IMO, this is just kicking the (PM) can down the road again, another GAO study to determine that the governmet has no business running any business and little credibility as a governing body.
I don’t think the government wants to mint less than 1 ounce of gold or less than 1 ounce of silver because it would provide a separate and viabile medium of exchange separate from the Federal Reserve Note which is backed by the full faith and credit (debt) of the US Government. Besides which a physical shortage pushes some people into riskier investments of paper PM’s which promise much and pay off in the aforementioned FRN’s. Just look at the premiums for 1/10 gold and 1/2 ounce silver and it becomes quickly clear how much of a threat the entire process could be to the paper money which has lost more than 96% of it’s value since being introduced less than 100 years ago.