Although the US Mint adopted a flexible pricing policy for gold and platinum numismatic products, they retained the old method of pricing for silver numismatic products.

Under the old method, prices must be adjusted through a more involved process which involves officially providing notice by publication within the Federal Register. This process has sometimes led to suspensions lasting up to a few weeks while new prices are being established, although sometimes prices have been adjusted more quickly. The US Mint has not publicly revealed their criteria for when pricing changes are made for silver numismatic products, however looking at current pricing levels and past actions provides some clues about where the US Mint’s current thresholds might be.

The one ounce 2011-W Uncirculated Silver Eagle is currently priced at $45.95. This price was last adjusted ($5 reduction) on December 27, 2011 when the market price of silver was around $29 per ounce. Sales were subsequently suspended on February 24, 2012, when silver was above $35 per ounce, but later resumed when the price of silver fell back.

The five ounce 2011-P America the Beautiful Silver Coins are currently priced at $204.95 each. The prices were last adjusted ($25 reduction) on December 27, 2011 when silver was around $29 per ounce. Sales were suspended on February 24, 2012 with silver above $35 per ounce, but resumed after silver declined.

The one ounce 2011-W Proof Silver Eagle went on sale April 12, 2012 priced at $59.95.  This price was established through publication in the Federal Register dated March 12, 2012 when the market price of silver was $31.47.

Although the US Mint is sometimes unpredictable, it seems like the prices for the numismatic Silver Eagles and 5 oz. ATB coins will not be adjusted unless silver falls more significantly below the level of the last adjustment or rises above $35 per ounce. It might be possible that the US Mint will slightly adjust prices of the Silver Eagles to keep them in line with the San Francisco Set scheduled for release on June 6, 2012. (They made slight adjustments to Silver Eagle products ahead of the release of the 25th Anniversary Set last year.)

The 2011 Silver Proof Set contains 1.33823 troy ounces of silver and is priced at $67.95. The 2012 Silver Proof Set is scheduled for release on June 4, 2012 and is also priced at $67.95. The price for the 2011 set had been established on January 4, 2011 when the market price of silver was $30.67 per once. Sales were suspended a few months later when silver rose to $43 per ounce, but resumed after the price fell back. In September 2011, the US Mint briefly suspended sales when silver fell to less than $30 per ounce, but later resumed sales with no price change.

The 2011 America the Beautiful Quarters Silver Proof Set contains 0.90420 troy ounces of silver and is priced at $41.95. The 2012 set is priced at the same level. The price for the 2011 set was established on March 18, 2011 when the market price of silver was $35.15 per ounce. Sales were suspended one month later when silver rose to $43 per ounce, but resumed after silver declined. In September 2011, sales were briefly suspended when silver fell below $30, but later resumed with no change.

The US Mint seems to have a very wide tolerance for the annual sets containing 90% silver coins. During the past few years, they have suspended sales and raised prices only when the melt value + other face value of the sets had risen to within a few dollars of the product price. However, when silver prices fell, they have never reduced the prices.

The 2012 commemorative silver dollars contain 0.7736 troy ounces of silver and are priced at $54.95 for proofs and $49.95 for uncirculated coins. The 2011 September 11 National Medal contains 1 troy ounce of silver and is priced at $66.95.

To my knowledge, the US Mint has never adjusted prices for commemorative silver dollars or silver medals during the course of an offering (excluding the changes related to pre-issue discounts). Based on this, I don’t think the US Mint would undertake any pricing action for these products unless the market price of silver rises to a point where the intrinsic value of the coins approaches the product prices.

The weekly average market price of gold based on the London Fix prices from the prior Thursday AM to the current Wednesday AM was $1,569.64. This fell into the $1,550 to $1,599.99 range, which was one pricing tier lower than the previous week. Since the Wednesday PM Fix price agreed directionally, pricing adjustments were made. The prices for impacted products were decreased by one tier, or the equivalent of $50 for each ounce of gold content. (For more information on how numismatic gold products are priced, refer to this post.)

Products with reduced prices include the 2011 First Spouse Gold Coins, 2011 & 2012 Proof Gold Buffalo, 2011 & 2012 Proof American Gold Eagles, and 2012 commemorative gold coins.

At the time of this post, the market price of gold is $1,539.90, which is already below the range used to calculate the reduced prices.

The continuing decline in precious metals prices has had the impact of reducing sales for the US Mint’s gold and silver numismatic products. Last week, declines took place for nearly all silver products. In this week’s report published yesterday, declines were noted for 15 out of 18 gold products.

The Mint will offer a 200-coin bag, containing 100 coins from the Philadelphia Mint and 100 coins from the Denver Mint. This are placed within a canvas bag sewn shut with an indication of the “P” and “D” mint marks, the date, “Kennedy Half Dollars”, and the face value of the coins.

Each bag is priced at $139.95. This represents an increase of $5 from the price charged for last year’s similar bags. Over the past two years, the price has increased by $9.

There will also be two-roll sets of the 2012 Kennedy Half Dollars available. The product consists of one 20-coin roll from the Philadelphia Mint and one 20-coin roll from the Denver Mint. These are packaged custom US Mint branded wrappers, which indicate the year, mint mark, face value, and issue.

Each two roll set is priced at $32.95. This represents a decrease of $2 from the prior year. Two years ago, the product was priced the same as this year’s offering.

For 11 years, the half dollar has been produced for collectors only. During this time, mintage levels have diminished, but seem to have stabilized around 1.7 to 1.8 million coins per year per mint facility.

2002-2012 Kennedy Half Dollar Mintages

At the time of this post, the two roll sets of 2011 Kennedy Half Dollars still remain available for sale on the US Mint’s website. It is possible that sales will conclude to coincide with the start of sales for the current year products. Although there hasn’t been much consistency over the years for product sales ending dates, most recently the US Mint seems to be concluding sales of numismatic bags and rolls when sales of the current year product begins. In the case of denominations with multiple designs, this has been occurring when sales start for the design one year ahead in the schedule.

The reverse design for this year’s Native American Dollar features a Native American and horse in profile. There are three small horses running in the background, intended to represent the historical spread of the horse. This reverse was designed by Thomas Cleveland and sculpted by Phebe Hemphill. The series has featured a different reverse design each year since 2009.

The obverse features the portrait of Sacagawea and child designed by Glenna Goodacre.

The 100 coins are packaged in a United States Mint canvas bag, which has been sewn shut. The bag indicates the face value of the contents, while a tag indicates the year and mint mark. Bags are available from either the Philadelphia or Denver Mint.

The bags are priced at $111.95 each, plus applicable shipping and handling.

As of the latest sales report, the United States Mint has sold 1,217,975 of the 2012 Native American Dollars through the existing offerings. This is lagging sales of the Chester Arthur Presidential Dollars, which have now sold 7,088,500 coins across the various product options.

2012 Native American Dollar Sales

2012 Chester Arthur Presidential Dollar Sales

Prior to adopting the new policy, the Mint was required to publish notice of any pricing changes within the Federal Register. Determining the new pricing levels and awaiting publication could sometimes take several weeks. In times of highly volatile precious metals prices, the re-pricing process could become even more prolonged. For example, in late 2008 the collectible versions of the Platinum Eagle were unavailable for more than two months. Presumably, by the time the US Mint had determined new pricing levels and them prepared for publication, the change in the market price of platinum had already made these numbers outdated.

The old pricing policy with a requirement for publication in the Federal Register is still in effect for products not specifically covered by the new policy. For example, the old policy still covers all numismatic silver products.

The new policy was originally adopted for the 2009 Ultra High Relief Double Eagle, numismatic versions of the American Gold Eagle, American Platinum Eagle, American Gold Buffalo, and First Spouse Gold Coins. In mid 2011, the new policy was also adopted for commemorative gold coins.

How the Flexible Pricing Policy Works

The United States Mint created itemized pricing grids for both gold and platinum numismatic products (here and here for commemoratives). The grids include ranges for the average price of gold established at $50 intervals and ranges for the average price of platinum established at $100 intervals. For each range, price levels are indicated for numismatic products.

Each week, the US Mint determines an average weekly price for gold and platinum. These are calculated based on the London Fix prices (found here) from the prior Thursday AM Fix to the current Wednesday AM Fix. This is inclusive of the PM Fix prices within the period.

For the most recent week, the prices for gold coins were as follows (Monday was a bank holiday in the UK):

These prices yield an average price $1,624.07. Within the US Mint’s pricing grids, this falls into the range of $1,600 to $1,649.99. In the previous week, the average also fell into the same range. As such, there was no change.

If the range falls into a higher or lower range than the previous week, then a pricing change might take place, subject to a second criteria.

To take into account the directional trend of prices, the US Mint looks at the Wednesday PM Fix price. In order for a pricing change to take place, the Wednesday PM fix price must agree directionally with the change. This means that if prices are to be increased, the Wednesday PM price must fall into the same tier or higher as the currently weekly average price. Conversely, if prices are to be decreased, the Wednesday PM price must fall into the same tier or lower as the current weekly average price.

So for a price change to take place, the average weekly price must be in a different range than the prior week and the Wednesday PM price must agree directionally with the change.

A final thing to mention is that the policy reserves the right of the US Mint to discontinue sales of gold numismatic products if the selling price of bullion products begins to approach the sales price of numismatic products. The US Mint has exercised this right on a few occasions in the past when the market price of gold has risen rapidly. It is worth noting that there is not a corresponding right to suspend sales in the event of rapidly falling gold prices.

Some issues with the Flexible Pricing Policy

The catalysts for new policy were “transparency, agility, and customer service”. When the policy was initially released, the US Mint did not reveal the second criteria of the policy, which was initially considered a secondary internal policy. Only through specific inquiry was the internal policy revealed and explained. The US Mint has since included an explanation of both the first and second criteria on the pricing grid pages.

Even with the explanation, the policy is still somewhat complicated and difficult to explain, especially judging by the number of questions that I receive about it.

The US Mint created the policy to be “more responsive to changes in the market price of gold and platinum” (see their press release), however the second criteria of the policy is used “with the intention of minimizing changes to prices” (see this article). These two goals seem to be at odds with one another.

The pricing tiers for platinum coins are established at $100 intervals, while the pricing tiers for gold coins are established at $50 intervals. The US Mint has never provided any specific explanation for this. When the new policy was adopted, the market price of gold was $827 and the market price of platinum was $964. As time moved on, the gap between the metals closed and currently the market price of gold is higher than platinum.

The pricing grid is set up so that for each $50 increase in the average gold price, product prices move up by exactly $50 per ounce, or the proportion thereof. This results in a situation where the percentage premium on the products decreases as the market price of gold increases. At the most extreme example, at a gold market price of $500 per ounce, the Proof Gold Buffalo would be priced at $810, or a premium of 62% over metal. At a gold market price of $2,999.99 per ounce, the Proof Gold Buffalo would be priced at $3,260, or a premium of 8.67% over metal.

The US Mint supposedly manages its numismatic program to a net margin of 10%, so at the extremes the pricing grid wouldn’t work in this regard. The grid also makes the inherent assumptions that the US Mint’s costs are completely fixed regardless of the price of materials and the level of production, which almost certainly cannot be the case.

For its flaws, the US Mint’s flexible pricing policy is better than its old policy. It’s also worth noting that most world mints that sell precious metals numismatic products do not seem to have specific policies with regards to pricing changes. On only one occasion have I seen a world mint reduce numismatic product prices in response to a decline in precious metals.

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For the month of April 2012, circulating coin production reached 858.04 million coins. This represents the highest monthly total since June of last year. The production total is up about 34% compared to the year ago period and about 24% compared to the prior month.

A breakdown of production by denomination and mint facility is presented below. The first number column represents the total production for April 2012, and the second number column represents the total production for the year to date.

Once again production was dominated by cents, nickels, and dimes, which accounted for 98.65% of all coins produced. The only other denomination actually struck during the month was the $1 coin, which is not actually released for general circulation, but only sold by the US Mint via numismatic bags, rolls, and boxes.

There were apparently no quarters struck for circulation during the month. This denomination has been considered to be a workhorse within circulation, however it seems that existing stockpiles at Federal Reserve Banks continue to fulfill the needs of commerce. At the conclusion of the State Quarters Program, certain reports had revealed that large quantities of quarters had flowed back to reserve banks. Late in 2011, there seemed to be signs that the stockpiles were finally dwindling, but this year’s production figures suggest otherwise.

The US Mint has posted production totals by design for certain America the Beautiful Quarters and Presidential Dollars. In the past, typically when these totals had been posted, the Mint would begin production of the next design and not produce additional coins for any previous designs. In recent years, the US Mint has specifically reserved the right to restart production of any design within the year of issue based on demand and production capacity. Thus, the amounts provided below cannot be considered final until the end of the year.

The preliminary figures suggest another mintage low for the America the Beautiful Quarters Program, with just 22 million Chaco Culture Quarters struck at the Philadelphia and Denver Mints. This is the lowest mintage for a quarter since 1958.

The figures for the Chester Arthur Dollar show an increase of 1.12 million coins struck at the Philadelphia Mint. Orders for the US Mint’s bags, rolls, and boxes had already surpassed the initial production quantity for the coins. The latest weekly sales report shows total sales accounting for 7,088,500 Chester Arthur Dollars, which is once again higher than the indicated production level. This suggests the US Mint will need to revisit production for this coin once again.

Preliminary totals for the Grover Cleveland (first term) and Benjamin Harrison Presidential Dollars are 6.72 million and 7.14 million. Both coins have production heavily concentrated at Philadelphia, suggesting that more production may need to take place at Denver.

Each 2012 Proof Set includes the following coins struck at the San Francisco Mint and carrying the “S” mint mark:

• 2012-S Proof Lincoln Cent
• 2012-S Proof Jefferson Nickel
• 2012-S Proof Roosevelt Dime
• 2012-S Proof El Yunque Quarter
• 2012-S Proof Chaco Culture Quarter
• 2012-S Proof Acadia Quarter
• 2012-S Proof Hawaii Volcanoes Quarter
• 2012-S Proof Denali Quarter
• 2012-S Proof Kennedy Half Dollar
• 2012-S Proof Chester Arthur Dollar
• 2012-S Proof Grover Cleveland Dollar (first term)
• 2012-S Proof Benjamin Harrison Dollar
• 2012-S Proof Grover Cleveland Dollar (second term)
• 2012-S Proof Native American Dollar

Perhaps removing some of the significance of the current offering, the cent, nickel, dime, and half dollar have already been released within the 2012 Birth Set. The five quarters have already been released in the 2012 America the Beautiful Quarters Proof Set. Four of the dollar coins have already been released in the 2012 Presidential Dollars Proof Set.

The only coin that will be available for the first time within the current offering is the 2012-S Proof Native American Dollar.

Last year, the US Mint had taken the approach of releasing the full annual proof set first, and the various component sets afterwards. This year, they have reverted to the more frequently used practice of releasing component sets prior to the full set.

The 2012 Proof Set is priced at $31.95 per set, which is the same price level used for the prior year. There are no ordering limits and no stated product limit.

The financial crisis in 2008 brought renewed interest in precious metals as a safe haven asset and alternative investment. Gold and silver bullion coins began to experience “unprecedented demand” and the United States Mint was caught unprepared. During 2008, there were suspensions in the sale of gold, silver, and platinum bullion coins at various times, with sales only resumed on a rationed basis.

Under applicable law at the time, the Mint was required to mint and issue gold and silver bullion coins in quantities necessary to meet public demand. Since they were not able to meet full demand, they were forced to source all incoming precious metals blanks to the production of more bullion coins. This led to the suspension of production and early sell out of the 2008 Proof Silver Eagles, and later the cancellation of the 2009 Proof Gold and Silver Eagles. Meanwhile, production of platinum bullion coins was suspended to free up more manufacturing capacity and has not been resumed to the current date.

Throughout 2009 and 2010, bullion coins were frequently subject to rationing, and the precious metals numismatic offerings that were not canceled were often released late in the year and were quickly snapped up by collectors. For example, after almost a year of uncertainty about its status, the 2010 Proof Silver Eagle was released on November 19 and sold more than 700,000 coins in less than two weeks.

In 2011, the situation improved with rationing lifted for gold bullion coins and only periodically imposed for silver bullion coins. The release dates for precious metals products took place earlier in the year and the Mint was able to resume some previously canceled offerings like the 2011-W Uncirculated Gold and Silver Eagles. The Mint also began striking Silver Eagle bullion coins at the San Francisco Mint to increase capacity. For the fourth year running, annual sales for Silver Eagles set a new record.

This year, the US Mint was able to release the 2012-dated Gold and Silver Eagles on January 3, with no rationing imposed on authorized purchasers. Although sales were strong in January, through the first four months of the year, Silver Eagle bullion coin sales are down 23.53% from the prior year and Gold Eagle bullion coin sales are down 43.22%. On the numismatic front, the 2012 Proof Gold and Silver Eagles were launched early in the year and offered without household ordering limits. The Mint is even planning to offer a special San Francisco Silver Eagle Set with an unlimited mintage during a specified ordering period, among other expected precious metals numismatic offerings.

Does this close the chapter on Silver Eagle shortages and “unprecedented demand”? Or is this just a brief lull in a longer ongoing saga?

I have put together some comparative data for monthly sales of the United States Mint’s bullion coins for 2011 and 2012. In all cases where coins have been available in both years, the monthly sales are lower for 2012 when compared to 2011.

American Silver Eagle Bullion Sales

American Gold Eagle Bullion Sales (ounces)

American Gold Buffalo Bullion Sales

America the Beautiful Five Ounce Silver Bullion Sales

This represents a much slower start than experienced for the Chester Arthur Presidential Dollars. Within a comparable opening period, sales had reached 2,886,600 coins. As of the most recent sales report, sales have now swelled to 6,905,750 coins across the available options.

Here is a look at the breakdown of sales for the 2012 Native American Dollars including a calculation of the total number of coins sold.

As mentioned in a previous post, there is a legal requirement that the total number of Native American Dollars minted and issued each year shall be not less than 20% of the total number of $1 coins minted and issued during the year. If demand for the four different Presidential Dollars continues to be triple the demand for the Native American Dollars, the US Mint will have trouble fulfilling the requirement.

Will the US Mint seek other outlets for the excess 2012 Native American Dollars that are required to be issued? They could potentially issue the coins for circulation through the Federal Reserve Banks, despite the fact that more than a billion $1 coins are already held in storage. The Mint could also try to revive the Direct Ship Program, which in the past has been a somewhat successful outlet for issuing the required NA Dollars.

Or the US Mint could simply fail to meet the 20% requirement, since there doesn’t seem to be any recourse for not fulfilling the requirement. In fact during the 2010 calendar year, the US Mint failed to issue the required number of NA Dollars “because of low demand”. The 2011 Annual Report simply mentions that the Mint “did not fully comply with Public Law 110-82″ with no mention of repercussions.

Numismatic Gold Coins

It seems that there will not be a price increase for the US Mint’s numismatic gold coins today. In the last post, I had mentioned the strong possibility based on the available London Fix Prices.

With all of the final data points available, the average price of gold did fall into the higher range of $1,650 to $1,699.99. However, the Wednesday London PM Fix price was below $1,650, which prevented the price increase. In order for a price increase or decrease to take place, the average price from the prior Thursday AM London Fix to the current Wednesday AM London Fix must be within a different range and the Wednesday PM Fix price must agree directionally with the change.

2012 San Francisco Silver Eagle Two Coin Set

In a press release, the US Mint has officially announced the upcoming offering of the 2012 San Francisco Silver Eagle Two Coin Set. There had been previous indications of the product including preliminary information provided by Mint contacts and a preliminary product page posted on the Mint’s website.

Details provided in this earlier post are confirmed in the press release. The sets will contain proof and reverse proof Silver Eagles from the San Francisco Mint with the “S” mint mark. The sets will be available for sale during a four week period from June 7, 2012 12:00 Noon ET to July 5, 2012 at 5:00 PM ET. The mintage will be determined based on the orders received during the period.

The press release also establishes that there will be no household limit during the ordering period. Until now, this wasn’t clearly indicated. The sets will be mounted in a blue lacquer presentation case with certificate of authenticity. Shipping will begin in late July.