As just reported on Coin Update News, the US Mint has delayed the release of the America the Beautiful Silver Bullion Coins. The move comes in response concerns expressed by many consumers about the high premiums being charged for the new 5 ounce silver bullion series.
The US Mint is now evaluating reports and collecting information to assess the appropriate course of action.
Over the weekend, one of the US Mint’s primary distributors began accepting orders for complete 5 coin sets, priced at $1,395 each. The 1,000 sets that were offered sold out in less than 24 hours.
The pricing for the set represented a premium of about $130 above the market value of the silver content. As a primary distributor, this dealer was allowed to purchase the coins directly from the Mint for $9.75 above the silver value.
The US Mint utilizes the authorized purchaser network since it is believed to be the most effective and efficient manner to distribute the bullion coins to the public. Specifically, the Mint seeks to ensure that the coins are:
A. As widely available to the public as possible;
B. Bought and sold at prices/premiums that are in line with other similar silver bullion coin products in the marketplace; and
C. Bought and sold in a manner that ensures relatively low transaction costs.
By creating a bullion coin with a minuscule mintage of 33,000 units per issue, the system broke down.
Congress put the US Mint in a difficult situation by mandating a new bullion coin program with complicated specifications at a time when they could not keep up with demand for existing programs. The US Mint put their primary distributors in a difficult situation by asking that they distribute instant rarities at reasonable premiums. The end consumer was faced with a choice of paying a high premium for a government product distributed through a privileged system, or opting out.
I am curious to see how the US Mint will handle the program at this point. If they really want “to ensure the widest possible availability, accessibility and affordability of these coins”, the most logical choice would be to distribute the coins directly to the public in a manner similar to numismatic products.
The problem is that this option does not seem to be available under the authorizing legislation, which calls for the bullion coins to be distributed by “authorized dealers utilized by the Secretary in distributing bullion coins” or the National Park service. The NPS has oddly expressed no interest in buying the coins for resale, as provided under law.
Another option would be to produce the bullion coins in the kind of quantity that bullion coins should be produced. This would eliminate the rarity factor and make the coins primarily bullion.
This might happen for years 2011 onward, but for the current year, the option is probably unfeasible. The US Mint must have hit a production or supply bottleneck that only allows the limited production already indicated.