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From Golden Opportunity to White Elephant U.S. Mint Should Rethink...

When the U.S. Mint announced it was adding a .9999 gold bullion coin to its line of offerings, it looked like the Mint could capture a big chunk of 24-karat gold coin market. When legislation was passed mandating that the new coin bear James Earle Fraser'ss designs that graced the legendary Buffalo/Indian Head nickels from 1913 through 1938, the new coin'ss future looked even brighter.



However, on release of the new Buffalo gold coin, the Mint'ss offering is looking more like fools's8217; gold.



The coin itself is quite striking, according to metals expert Bill Haynes, founder of CMI Gold & Silver: 's8220;They have a matte finish and beautifully show off the Fraser designs's8212;but the packaging makes the coins a nightmare.'s8221;



Haynes lays the bulk of the blame on Congress for attempting to micro-manage production and distribution of the coins. But the Mint deserves some blame, too.



's8220;The Mint should consider the retail aspects of their packaging,'s8221; says Haynes.



Congress mandated that the coins be individually encapsulated to protect them from damage, apparently to avoid problems that have risen with 1-oz Canadian Maple Leafs. Further, Congress mandated that the Mint have the coins ready for distribution by the end of June. To meet the deadline, the Mint had to choose a method of packaging that was readily available and that would accommodate anticipated large volume sales.



The semi-rigid Mylar packaging they used contains twenty coins to a sheet: five across, four down. In addition to wide spacing between the coins (a sheet of Buffalos measures 16 X 12), the packaging causes several additional problems.



Buffalos cannot be folded into a tall bundle. Orders for fewer than twenty coins mean that sheets must be cut in order to be packed compactly, which is desired's8212;and expected's8212;for gold bullion coins.



Undoubtedly, the semi-rigid packaging for the Buffalos is durable, however, the Mylar is so rigid that an original sheet of twenty Buffaloes cannot be conveniently stored. A sheet of twenty can be rolled like a magazine and then rubber-banded, but then storage would take a lot of space.



's8220;The smallest of safe deposit box will hold hundreds of 1-oz Gold Eagles because they come in compact tubes, but perhaps only sixty or so Gold Buffalos would fill a small safe deposit box,'s8221; notes Haynes. 's8220;The packaging works against volume sales.'s8221;



Because of the problems that have arisen with the packaging, Buffalos will not appeal to many large bullion buyers but only to collectors who, over the long-run, may want only a few coins.



's8220;Despite the initial strong demand for the new Buffalos, with the present packaging it is unlikely the Mint will capture much of the .9999 fine bullion coin market,'s8221; concludes Haynes.



Studies show that pure gold coins claim sixty percent of the world's8217;s gold bullion coin market, with the huge Indian and Asian markets clearly preferring pure gold coins while alloyed gold coins are more popular in the West. Gold Buffalos could have made big inroads into the .9999 gold bullion coin markets, but the packaging puts that opportunity in jeopardy.



's8220;Compactness is critical for investors,'s8221; insists Haynes. 's8220;To really go after the .9999 bullion coin market, the Mint should encapsulate the coins individually and put them in tubes of ten. Then ten tubes should be put in small, sealed, durable boxes. And, finally, five small boxes should be put in a larger box of 500, which is how the Mint ships its best-selling Gold Eagles.



's8220;Boxes of 500 are popular with large investors, and the boxes of 100 would be attractive to medium-size investors,'s8221; notes Haynes.



's8220;This packaging method has proven to be successful for both investors and for retail dealers,'s8221; says Haynes. 's8220;The Mint needs to think retail in order to successfully deliver Gold Buffalos to pure bullion coin investors.'s8221;

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