U.S. gold and silver coin sales soar, but dealers cautious

Tue Jan 15, 2013 3:54pm EST

* American Eagle silver on pace for monthly record high

* Gold on track for strongest performance since 1999

* Heavy investor buying after profit-taking, U.S. tax hikes

* U.S. coin sales seen tapering off sharply after January

By Frank Tang

NEW YORK, Jan 15 (Reuters) - U.S. American Eagle gold and silver coin sales have been exceptionally strong in January, building on a late 2012 rally as collectors scramble to snap up newly minted 2013 coins and investors seek refuge from U.S. economic uncertainty.

Some coin dealers, however, warn of a post-January drop in sales similar to last year's pattern, as early interest tends to wane once the first mintage is over.

"There is always a big boom in the new year when the new issue comes out, and you will see a drop in the next month," said Miguel Perez-Santalla, vice president of online precious-metals exchange BullionVault.

Physical coins, whose sales tend to rise in response to fears over inflation and a falling dollar, have also struggled to compete with cheaper products such as exchange-traded funds, traders said.

As of Jan. 15, silver Eagle sales for the month exceeded 5 million ounces, data from the U.S. Mint's website showed. At that rate, sales would surpass an all-time monthly high of 6.1 million ounces set in January 2012.

With two weeks remaining in January, gold coin sales were 110,500 ounces, compared with 127,000 ounces for all of January 2012, on track for the highest monthly tally since 1999.

American Eagle gold coin sales tend to be highly seasonal, with the strongest performance usually at the start of the year. They often fall in the summer months and pick up again in September with the start of the Indian wedding season and later the Chinese new year.

However, the 2008 global economic crisis and lingering European debt fears had boosted overall coin sales throughout the year in the last several years.

Some investors are now buying gold again after reducing their positions late last year out of fears of higher 2013 taxes, said Edmund Moy, chief strategist of Morgan Gold, which offers precious metals coins and bars in U.S. retirement accounts.

Last year, buying peaked in November as the world's largest economy lurched towards huge tax hikes and spending cuts known as the "fiscal cliff", which many economists feared would send the United States into a recession.

In recent weeks, uncertainties related to the ongoing U.S. debt-ceiling fight have helped boost precious metals buying, analysts said.

Gold coins from other mints also posted encouraging sales in the new year. Demand for silver and gold Maple Leaf bullion coins continued to be "very strong" after December, a spokesman at the Royal Canadian Mint told Reuters.

BUILDING ON LATE 2012 GAIN

Improved sales in the first two weeks of the year have built on strength seen the last four months of 2012, when they rose nearly 40 percent year-on-year on political and economic uncertainties.

Over the course of 2012, sales plunged 25 percent to hit their lowest level since 2007 when gold was worth about $700 an ounce, more than half current prices, as an improved U.S. economic outlook decreased bullion buying.

Intense competition from cheaper products such as exchange-traded funds (ETFs) also dent coin sales.

Silver held by No. 1 iShares Silver Trust rose to a 1-1/2 year high at 325.8 million ounces, while bullion held at SPDR Gold Trust also hovered near its all-time record at 43.5 million ounces set in early December.

Gold-backed ETFs offer access and exposure of bullion without physical possession. Investors, however, must pay an annual management expense. For the SPDR Gold Trust, the estimated expense ratio is at 0.4 percent

Meanwhile, the premium of a physical U.S. American Gold Eagle coin has been quoted at 5 percent over spot gold, which is around $85 based on Tuesday's price, dealers said.

FALLOFF AFTER JANUARY?

January has been one of the best performing months since 2011, but sales tended to tank after that.

Gold sales sank to 21,000 ounces in February last year, a fifth of January's total, and silver tumbled to around 1.5 million ounces, a quarter of the previous month's record.

After a brisk start in 2013, the chances of a continued run remains uncertain, said Raymond Nessim, CEO of Manfra, Tordella & Brookes (MTB), a major U.S. coin dealer in New York.

"What happens in Washington, Europe and China are all very relevant. And to say that what happens in January will continue for the rest of the 2013, I think it's (inaccurate) to make such a statement," he said. (Editing by David Gregorio)