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Is the bullion coin shortage over?

While the calendar says it is about to become fall, for supplies of bullion coins it appears to be springtime.

The U.S. Mint stopped rationing supplies of silver American Eagle coins a week ago, meaning that it has the confidence that it can now meet demand from all comers.

From the Royal Canadian Mint, I learned yesterday that a new series of bullion coins will be created.

If the RCM didn’t have confidence that it could meet demand from all comers for its standard Maple Leaf silver bullion coin, I would think it would be highly unlikely that it would launch a new line of products, let alone six that were announced yesterday.

In 2011, the mint plans two designs a year of a million ounces each for three years. It is called the Wildlife series and it will start with the wolf. Prices will be identical to the Maple Leaf pricing.

What does this mean?

One thing is certain: if the leadership of the mint thought that it could sell the bullion in the form of Maple Leaves, that is what they would have done.

As it is, it appears the mint has a “surplus” of two million blanks a year that it has to offer in some other way in the hopes  that collectors will buy them (though it says the coins are for investors)

But a million of anything is a lot, and for a Canadian issue, that is a gargantuan number.
This is especially true in that it violates the basic definition of what a bullion coin is supposed to be: a familiar coin of known weight and fineness. That’s why the Maria Theresa thaler has been struck for over 200 years without even changing the 1780 date.

You defeat the purpose of a bullion coin if you have to tell the future buyer what the thing is you are trying to sell. The greater the number of designs, the greater the chance future buyers won’t handle some of them or won’t recognize them for what they are.

But what’s proliferation among friends? Others do it. The RCM has infrastructure that is all dressed up and ready to go, and if it isn’t used, it is a deadweight loss to the Canadian Crown corporation that runs it and ultimately to the Canadian taxpayer.

This seems to prove the wisdom of the U.S. Mint’s decision back in 1986 not to get into the metal fabrication business even though it has had to take the heat for the last couple of years for the worldwide shortage of blanks.

Is the blank shortage over? It is looking more and more like it is.

What will this mean?

When bullion coin buyers who have been fueling the frenzy realize they can have all they want, many will simply stop buying. Hence Canada’s attempt to stake out new ground.

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