To sell or not to sell, that is the question

It is time to sympathize with the U.S. Mint over its pricing of the uncirculated “W” American Eagle gold coins. It is experiencing the perils that face every vendor of bullion coins: rapid market fluctuation. It is almost a week late in repricing these coins.

How do you make money when a daily price movement can severely dent or even eliminate the profit on a gold coin?

Regular bullion dealers basically benchmark volume. Sell 10,000 ounces today. Make sure you have another 10,000 bought so by the close of business the position is square.

As crazy as it sounds, this can put bullion sellers in the position of replacing inventory with higher priced replacement coins. More money would be made simply holding on. But that is not a bullion seller’s business. In fact, simply holding on would end the business. The cash flow comes from getting a percentage of each sale as profit.

The Mint is facing this bullion seller’s challenge of fluctuating markets with the added handicap of thinking it needs to offer coins at fixed prices. When prices are rapidly escalating, this creates two choices: sell at a loss or don’t sell at all. The Mint has chosen the latter at least for the time being.

I have suggested in this space that perhaps the Mint should float its prices and adjust them regularly with the market. Perhaps the delay in reoffering the gold “W” uncirculated coins is an indication that this possibility is being explored.

Or, the Mint could simply be a deer caught in headlights.