Tuesday, November 24, 2009

Gold Krugerrands Run Out

By Patrick A. Heller
Monday, November 23, 2009


For some time, I have been warning that apparently plentiful supplies of gold and silver bullion-priced coins and ingots could quickly evaporate. Last Thursday we saw the first signs of a looming shortage of physical metals when just about all U.S. bullion wholesalers were unable to accept orders for the South Africa Krugerrand. One primary distributor said they expected coins in a few weeks, which I think means that they are waiting for a shipment of freshly minted coins from the South Africa Mint. My own company had to discontinue accepting new orders until we could lock in a supply.

Tens of millions of Krugerrands have been struck since they were introduced in 1967. They are not rare. If demand for physical gold is so strong (and the World Gold Council last week reported that global third quarter demand was 15 percent higher than the second quarter) that they are no longer available, we could quickly see a domino effect where other gold and silver bullion-priced products also become sold out.

We may see some temporary price dips this week as the gold and silver options expire. However, I fear that there is little time to lock in physical precious metals at reasonable premiums for quick delivery.

But this is short-term news. There is also a longer term view to consider.

Periodically, I have discussed reasons for owning gold that have nothing to do with direct consideration of whether prices are likely to rise in the future.

This week at Thanksgiving I will include owning gold and silver as one of my blessings. After I bought both metals in the 1970s, it then enabled me to purchase a home in 1980 for a much lower cost than if I had not owned them.

In more recent years, owning precious metals has helped me survive some of the ravages of the falling values of paper assets like stocks and bonds and the U.S. dollar.

As I reflected on the blessing of owning gold and silver, it occurred to me that it has also better enabled me to protect and care for my children.

Twelve years ago, the financial calamities in the Far East were so devastating in Indonesia that those who did not own gold were wiped out financially. Those who owned gold saw little impact on their standard of living.

There are hundreds of thousands of Southeast Asian refugees in the United States today who survived because they owned gold to get them away from the governments that killed so many of their compatriots. Owning gold definitely helped them provide a better life for their children.

After all the economic trials and tribulations of the past 30 months, it is not too difficult to imagine a world where U.S. dollars finally fall to the intrinsic value of the paper and ink used to produce them. In such a circumstance, all the dollars in your wallet, your bank accounts, your credit and debit card limits, and the like could become useless in providing for your children.

There are a large number of potential gold buyers who have not yet felt the urgency to make their first purchase. Maybe it just doesn’t seem that important to you. If it isn’t, then think about any children or grandchildren you may have. Would you buy gold if it had the potential to someday improve your ability to care for their health and welfare?

If you don’t yet own gold (or silver), then do it now. If not for you, then do it for the children.

Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes “Liberty’s Outlook,” the company’s monthly newsletter on rare coins and precious metals subjects. Reprinted with permission.

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