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Decision time nears for Buffalo gold proof

HarperD_color.jpgBy now you are probably aware of the fact that the U.S. Mint has changed the order limits on the American Buffalo proof gold coin. It has been raised from 10 coins to 5,000. That?s quite a jump. I can already hear my readers saying that the Mint is caving in to the big boys who want to jump in and dominate the program.

As in most things, there is some truth to that charge. But on the other hand, there is much for the Mint to take credit for in this program.

Let?s start with the credit. When the sales of the American Buffalo proof began June 22, nobody really knew what might happen. It is clear from the logjam of early orders that tied up the Mint?s phone lines and Web site capacity that many readers thought the Buffalo gold proof would sell out quickly. These believers bought an incredible 50,000 coins in the first 24 hours. That?s $40 million at $800 apiece in quick revenue for the Mint.

Because the Mint did, indeed, impose a 10-coin maximum on orders, it is clear that officials believed that a sellout could occur quickly enough that many readers would not have adequate time to get their orders in. So steps were taken to keep access open to each and every hobbyist in the United States for a period of time that would give every potential buyer ample opportunity to get his or her order in by phone, Internet and even mail.

Here we are one month later. It is July 25 as this is written. Roughly half the maximum Buffalo mintage possible has been spoken for, but at the current rate of sales, the possibility of a sellout is still in doubt. We here at Numismatic News have had a lively exchange in our letters section and in my column wondering in our various ways whether a sellout can be achieved.

From the standpoint of the Mint, a sellout is better than no sellout, so adjustments to the limit have been made to allow some big buyers in. How many coins will the big buyers take? That is a good question. They may buy all of them. With the current healthy business of having the coins slabbed by third-party grading services and a much higher retail price asked as a result, it is no surprise that major marketers will continue to want to do this as long as they find ready buyers for Proof-69 and Proof-70 coins. The market for gold coins generally is hot. The market for a new issue, which provides a good marketing story, is even hotter, otherwise you wouldn?t see the ads that we all see in the financial press and on TV.

Can big coin marketers find enough clients on the secondary market to justify purchase of the remaining 144,000? It is possible, though marketers would not think in quite such terms. They would make up their minds based on each 5,000-coin purchase. They would ask at each point whether they could sell another 5,000.

Initially, the raised order limits will send sales numbers up quite quickly as big buyers place their first orders. Total sales could easily pop over 200,000 in a matter of days and perhaps even to 250,000. At that point, if it happens, trend watchers will get excited because it would appear that a sellout becomes possible and they would jump on it and help snap up the final supply. That, of course, would prove me wrong. I wrote in the July 11 issue that I didn?t think a sellout was possible short of an outside surprise, like soaring gold prices, or a terrorist attack.

While nobody likes to be wrong, I will be pleased to write the stories and headlines announcing it if a sellout actually happens.

If you have read the exchange of opinions on both sides of the sellout question, I hope you have enjoyed them. If you have not yet acted one way or another as far as buying the American Buffalo proof coin is concerned, the time now seems to be nearing where a decision must be made. If you believe a sellout has become more likely and you haven?t purchased a Buffalo proof yet, now is the time to consider doing it.

Opinions of editors and readers are nice, but they are of no consolation if you want a coin and don?t act to buy it.

 

Send e-mail to David C. Harper at address david.harper@fwpubs.com.

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