Tucked away beside the ornate entrance of the Savoy hotel in London are the discreet premises of ATS Bullion. Over the last few days staff there have witnessed an unprecedented phenomenon: queues.
The US Mint, responsible for ensuring an adequate supply of American coinage since 1792, has been forced to halt sales of its American Buffalo solid 24 carat gold coin because it was running out of supplies. It is also limiting the availability of its 22 carat American Eagle alternative. [I don’t believe this is a fact. The US makes money on sale of these coins and will mint however many the public wants. Any lack of them is just temporary. But I do believe that demand for gold bullion has gone way up.]
Demand for gold coin is undoubtedly higher outside the US than inside. The reason is that in panics, foreign investors tend to buy US dollars. This raises the value of the dollar, which drops the price of gold, as priced in US dollars. The effect is that the US consumer does not see a big drop in the value of the dollar. Hence they have no reason to hedge with gold. (This will change if the Fed gives up and begins using inflation to save the banking system.) Foreigners, on the other hand, see the price of gold going up, and worry about the financial headlines about the US. So they move into gold.