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Old 23-05-2008, 10:57 PM
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Post Curb On Coin Sales Angers Collectors

23 May 2008 03:38 GMT
DJ WSJ(5/23) Losing A Mint: Curb On Coin Sales Angers Collectors

(From THE WALL STREET JOURNAL)
By Ianthe Jeanne Dugan

The government rationed food during World War II and gasoline in the 1970s.
Now, it's imposing quotas on another precious commodity: 2008 dollar coins
known as silver eagles.

The coins, each containing about an ounce of silver, have become so popular
among investors seeking alternatives to stocks and real estate that the U.S.
Mint can't make them fast enough. In March, the mint stopped taking orders for
the bullion coins. Late last month, it began limiting how many coins its 13
authorized buyers world-wide are allowed to purchase.

"This came out of nowhere," says Mark Oliari, owner of Coins 'N Things Inc.
in Bridgewater, Mass., one of the biggest buyer of silver eagles. With
customers demanding twice as many as they did last year, Mr. Oliari would like
to buy 500,000 a week. But the mint will sell him only around 100,000.

The coins have a face value of $1. But the mint sells them for the going
price of silver, plus a small premium, to a handful of wholesalers, brokerage
companies, precious-metals firms, coin dealers and banks. The dealers mark the
coins up a bit more and sell them to the public. Currently, the coins are
fetching about $19 apiece, with some sellers seeking more than $20.

For Coins 'N Things alone, the shortage is costing hundreds of thousands of
dollars in lost sales of silver eagles. The firm sells about $1 billion worth
of precious metal every year, including silver, gold and platinum coins. Mr.
Oliari, a 50-year-old numismatist who has been in the business since 1973,
sniffs: "You can't print what I want to say about the mint."

The mint, a bureau of the U.S. Treasury, has offered little explanation
beyond a memo last month to its dealers. "The unprecedented demand for American
Eagle Silver Bullion Coins necessitates our allocating these coins on a weekly
basis until we are able to meet demand," the mint wrote. A spokesman declined
to elaborate.

The rare shortage offers a glimpse into the growing love of a commodity known
as "poor man's gold." With more silver mined than gold traditionally, silver
has always been far cheaper than gold and today has less than 2% of gold's
value.

But silver is growing in popularity, and some investors are betting that its
value will surge as inventory shrinks. Big investors are loading up on silver
eagles, which are the only American silver coins allowed in individual
retirement plans. For small investors, they are an accessible way to get into
the metal boom.

"Unlike gold, these coins can be bought by regular citizens," says J.R.
Roland, a Brownsville, Tenn., judge who recently began buying the coins -- and
trading them on eBay. "In these economic hard times, silver coins are a great
way to invest."

In March, sales of silver eagles surged more than ninefold from the previous
month, to 1.85 million. This year, the mint has sold 6.8 million, representing
more than twice last year's pace. Still, numismatists are clamoring for
millions more as the price of silver soars. It has more than doubled in the
past three years and now trades at around $17 a troy ounce, which is slightly
heavier than a traditional ounce.

Linda Wood, a 57-year-old Pittsburgh accountant, scours eBay, coin shops and
flea markets in search of silver eagles. One by one, she has accumulated about
300 in the past few months and stores them in a bank safe-deposit box.

Traditional coin collectors may be impressed with the government's written
description of silver eagles as "one of the most beautiful coins ever minted."
But Ms. Wood isn't in it for aesthetics. She became a silver bug after she and
her husband saw the value of their individual retirement accounts decline by
$2,500 -- a "significant" chunk. "I just need bullion," she says. "I wouldn't
care if the coins were ugly."

Amid the mint caps, shady silver-eagle hawkers are thriving. Some coins are
priced at $25 and higher. Mr. Roland says that he had to wait a month after
ordering some on eBay recently, because the sellers didn't even have the goods.
"I can't wait long, because you never know what's going to happen with the
price," he says.

In Manitowoc, Wis., Dan Zirk, owner of Manitowoc Card & Coin, has sold twice
as many silver eagles as he did last year. So he has stashed away his remaining
handful of 2008 coins, betting the price will rise. "I want $22 apiece," says
Mr. Zirk. He says customers, meanwhile, are asking for earlier years and other
forms of silver.

The government began producing silver eagles in 1986, basing its design on
Adolph Weinman's 1916 "Walking Liberty" half dollar. The front features a
flag-draped Lady Liberty striding toward the sunrise, carrying branches of
laurel and oak symbolizing civil and military glory. On the reverse, a design
by John Mercanti features an eagle with a shield, olive branch, and talon and
arrows.

The coins are made at an armored facility in West Point, N.Y., alongside the
military academy. Dealers say they heard the mint had run out of planchets --
round metal disks ready to be struck into coins. The disks are used for various
coins, and the companies producing the blanks also are busy, limiting the
mint's ability to increase production. The mint won't comment on the planchets.

Each Monday morning now, the mint divides its silver coins into two pools. It
divvies up the first equally among authorized purchasers. The second is
allocated proportionately, based on the buyer's past purchases. The mint
limited purchases once before -- in the late 1990s, when investors loaded up on
silver, wrongly anticipating that a failure by the world's computers to adjust
to the new millennium would cripple the economy.

Jim Hausman, head of the Gold Center in Springfield, Ill., one of eight
companies in the U.S. authorized to buy silver eagles, estimates that the
rationing will cut his expected annual sales of four million silver eagles in
half.

And the result, he says, is almost un-American. Increasingly, investors are
taking a shine to alternatives. The Royal Canadian Mint saw its sales of silver
Canadian maple-leaf bullion coins rise 40% last year, to 3.5 million, according
to a spokesman.

Some investors expect the craze to end badly. They draw comparisons to what
happened to silver in the 1970s. A rich Texas family poured billions of dollars
into silver, and prices surged above $50 an ounce in 1980, only to plunge again
after government intervention.

"It's akin to what happened when the Hunt Brothers tried to corner the silver
market," says Wendell Curry, who owns McAllen Gold & Silver Exchange in
McAllen, Texas. "The silver hawks are now trying to corner silver American
eagles. And it's making it harder for mom and pop to buy these for their
grandchildren."
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