Precious metal glitters for investors seeking to hedge financial chaos
SAN FRANCISCO -- Apart from a New York City phone book listing, gold dealer Manfra, Tordella & Brookes, Inc. does no advertising. Lights are on all day because the shop sits in a basement.
Yet MTB, as the firm is known, has never been busier. Every day, people find their way to the Manhattan store with one thing in mind: getting their hands on gold bullion coins, as soon as possible and as much as possible, before the financial Armageddon they fear renders the dollars in their pockets worthless.
Welcome to the world of bullion coin investing, a business that has soared alongside the popularity of gold despite its disadvantages. The world's thirst for gold coins has risen more than sovereign government mints can quench it, with demand on track this year to outpace 2009, itself a record.
Bullion coin investing may cost youInvesting in bullion coins has risen alongside gold's popularity, catering to a small subset of investors who want physical possession regardless of how much more they may pay. Claudia Assis reports.
The coin craze is part of gold's growing investment allure, based on fears of currency debasement, inflation, a debt debacle in Europe, and rising debt levels in the U.S. But the boon has also brought the practices of some retailers in the industry to question, with at least two U.S. companies under investigation for allegedly misleading consumers.
Bullion coin investing caters mostly to a subset of investors who want physical possession of gold and regard anything else as lesser investments, no matter how much more they have to pay, ounce per ounce, over gold futures prices or the difficulties they are likely to face when unloading their bullion.
Long having captured the hearts of a few in the periphery of the investment world, gold has won over some of Wall Street's elite. Investment stars such as Paul Tudor Jones, of giant hedge fund Tudor Investment Corp. and John Paulson, of Paulson & Co., all have invested heavily in gold in recent years.
Investing in bullion coins is not to be confused with investing in collectable coins, although both are manufactured and sold by mints across the world. Bullion coins are valued entirely for their metal content, not for their collectible value or the denomination hammered on them. For many, they are an affordable and portable way to invest in gold.
It's no coincidence that May was one of the best months in recent memory for the bullion coin business, and gold in general. It was also the month that concerns about a European debt crisis reached their highest note, and gold hit its first nominal record high since December.
"It's been unbelievable. May was phenomenal," with June sales and so far July a bit slower but still way above average, said Michael Kramer, one of the owners of MTB.
Precious-metals research firm GFMS estimated that 229 metric tons of gold coins were sold in 2009, up 22% from the 187 metric tons of 2008 and almost 70% from the 135 metric tons that moved in 2007.
"It looks as though we are going to surpass 2009," said Phillip Newman, research director of the U.K.-based firm.
The U.S. mint ran out of some bullion coins last year and in 2008, and the Austrian mint added a third shift to catch up on their stocks. In his Manhattan store, Kramer caters to about 45 coin buyers a day, up from fewer than 10 a day in previous years, as the firm's forte is wholesale.
MTB is one of only eight authorized firms in the U.S. able to purchase U.S. Mint bullion coins directly and sell them to coin shops nationwide and abroad. The U.S. Mint does not sell bullion coins to the public, as it does with commemorative and other coins.
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In addition to the new swarm of retail customers, MTB saw heightened interest from European coin retailers. "They couldn't find enough coins in Europe, and they were buying from us."
The Austrian mint, which, alongside Canada's mint and the U.S. Mint is a top mint by sales, had to add a night shift to its two day shifts to counter delivery delays of two to three weeks and depletion of stocks.
"We did run out of stocks, we were living off our daily production." said Kerry Tattersall, director of marketing at the Vienna-based mint. The third shift was recently discontinued after the mint built up its inventory.