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Eagles Fly in Different Directions
December 14, 2011



When I took economics in college, one of the anchors of theory was that higher prices deter people from buying, so overall demand drops. Conversely, when prices fall, people buy more. This is the market clearing function of prices where supply and demand is balanced.

When I look at sales of 2011 for U.S. gold bullion American Eagles, I want to snap my fingers and say theory is on target with real events.

Gold is indeed higher this year. It closed last year at $1,421.10 a troy ounce. This year has taken the price to $1,900, though the current correction has the market back down to $1,626. Nevertheless, the price has been higher for virtually the entire year.

Where last year the U.S. Mint sold 1,143,000 gold American Eagles, sales so far this year stand at 877,000, down abut 23 percent.

A higher price equals lower demand.

With silver, the textbook seems to be thrown out.

Silver has been higher than its $30.915 2010 closing price for virtually the entire 2011 calendar year. It reached nearly $50 a troy ounce in late April.

Sales of silver American Eagles went up anyway. So far in 2011 the Mint has sold 39,215,500 silver American Eagles, up 13 percent from the 34,662,500 sold in 2010.

What accounts for this divergence from the pattern gold has set?

Relative to the funds most Eagle buyers have to spend, gold seems expensive. Silver seems cheap. You get so many more coins when you spend $2,000. With gold you would get as little as two coins.

Silver is also more familiar to most investors. Many of them still remember when silver circulated in our change. Buying something familiar is far easier than buying something that most people only know from their wedding rings.

Will we see gold and silver Eagle sales figures continue to diverge in 2012, or will one or the other Eagles change direction and match what price theory tells us they should be doing?



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Strike It Rich with Pocket Change, 2nd Edition

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About the Author
David C. Harper has been a coin collector since 1963. He joined the Krause Publications editorial staff in 1978 and is currently editor of Numismatic News and World Coin News. He also edits two books annually, North American Coins & Prices and Coin Digest. He is the author of the Class of '63 column that runs each week in Numismatic News. His first bylined numismatic article appeared in the June 1971 issue of Coins Magazine and his various Krause Publications assignments included a stint as editor of the magazine 1980-1983. Harper received a bachelor of science degree from the University of Wisconsin-Oshkosh in 1977. He had a double major of journalism and economics.

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