23/5/17: U.S. Mint Gold Coins Sales 1Q 2017

Updating, with a lag, my data for U.S. Mint sales of gold coins, here is 1Q 2017 in its full glory.

Total sales of U.S. Mint gold coins stood at 221,500 oz in 1Q 2017, down from 363,000 oz in 4Q 2016 and down on 305,500 oz in 1Q 2016. However, 1Q 2017 sales were better than 1Q sales in both 2014 and 2015.

Total number of coins sold by the U.S. Mint stood at 438,000 in 1Q 2017, down on 647,500 in 1Q 2016. In terms of number of coins sold, 1Q 2017 was the slowest of all 1Q periods since 1Q 2012.

Average weight per coin sold was 0.5057 oz/coin, stronger than in 1Q 2016 (0.4718 oz/coin) and stronger than 1Q average coin weight for 2014 and 2015.

Monthly data, plotted alongside historical and period averages shows that more recent months (especially April) posted weak sales performance.

Meanwhile, a look at quarterly aggregates indicates that while 1Q was weaker than 4Q 2016, it is still in line with the generally upward trend that has been present (with some serious volatility) since the end of 2013.

Both, the monthly series and the quarterly aggregates indicate relatively stable and strong negative correlations between the price of gold and the demand for U.S. Mint coinage over the last 6 months within the range of -0.62 and -0.84.

6/1/17: U.S. Mint Gold Coins Sales in 2016: One Solid Year for Hedging

Updating the data set for U.S. Mint sales of Gold coins (covering both Buffalos and Eagles) for 2016, here is the end-of-the-year data:

• In 2016, U.S. Mint sold 1,204,500 oz of gold coins, which is 17.9% increase on 2015. Remember that in 2015, sales of U.S. Mint gold rose 45.6% y/y. The series are generally quite volatile, but 2016 total sales by volume marked the best year of U.S. sales since 2010 and the third best year on record (since 2006).
• Sales of coins totalled 2,188,000 coins in 2016, up 6.2% y/y, following a 55.8% jump in sales in 2015. 2016 marked the busiest year on record for the U.S. Mint in terms of number of coins sold.
• Despite increase in the number of coins sold, average weight of coins sold came in at impressive 0.551 oz/coin in 2016, up on 0.496 oz/coin in 2015 and the highest average weight sold over the last three years.

Chart below illustrates the trends:

Gold prices tend to have very insignificant impact on demand for U.S. Mint coins, as much of purchasing of these assets is non-speculative and used for longer term store of wealth function. There is, statistically, zero relationship between changes in gold prices and changes in demand for gold coins. To see this, here is an updated chart plotting log-change (m/m) in demand for gold coins from the U.S. Mint against log-change (m/m) in gold prices:

Overall, 2016 has been a strong year for sales of gold coins.

While some of the improved demand is quite possibly being driven by increased interest in gold as a store of value and a longer term safe haven against such matters as increased geopolitical tensions, monetary and currency wars etc, much of this increase in demand is probably also down to more prudent savers taking some of their cash and putting it into the U.S. coinage.

Which, in turn, implies that gold is acting as a counter-cyclical buffer: taking out surplus savings during the period of recovery and setting these aside against potential larger scale risks.

Exactly as it should be, thus.

1/12/15: US Mint Gold Coins Sales: November

Following October fall-off, sales of U.S. Mint gold coins rose strongly in November to 135,000 oz by weight (+86.2% y/y) and 237,500 units (+95.5% y/y). These figures include sales of both Eagles and Buffalo coins. Average weight of coin sold also rose strongly to 0.5684 oz compared to 0.4709 oz in October and close to 0.5967 oz/coin in November 2014.

As noted in my note covering October sals, October decline was a correction reflective of volatile demand and also significant uplift in sales in previous months. As chart above shows, sales by weight are now well above period average and above peak period average. In 11 months of 2014, US Mint sold 679,500 oz of gold coins; over the same period of 2015 sales totalled 1,020,000 oz. November 2015 also marked 20th consecutive month of gold sales/price correlations (12mo running) being negative, suggesting strong and entrenched demand from buyers pursuing long hold strategy and taking advantage of improving cost of holding gold. 

7/11/15: U.S. Mint Sales of Gold Coins: October

Total sales of U.S. Mint gold coins came in at 44,500 oz per 94,500 coins sold (including both Eagles and Buffalos). This marked a significant decline in sales y/y, with volume by weight down 49.7% y/y and the number of units sold down 33.7%. Average weight of coin sold was down 24.2% y/y to 0.4709 oz per coin.

As chart above indicates, October fall-off in demand came after the end of 3Q that saw total volume of coding gold sold by the U.S. Mint rising incredible 234% y/y (compared to 3Q 2014) by weight and 305% y/y in terms of number of units sold. 

At a total of 471,000 oz sold over 934,500 units in 3Q 2015, last quarter was the best one since 2Q 2010 in terms of volume by weight sales and the best in history of the series (from 1Q 2006) in terms of number of coins sold.

Not surprisingly, scale fall off in demand in October can be explained by the moderation in demand back to cyclical normal. As shown in the chart above, overall October sales figures came in below the period average for May 2013 through present. However, stripping out three main outlier peaks in demand, the average comes to 49,978 oz - closer to the October reading of 44,500 oz. In historical comparatives, demand for gold coins in October was 38th lowest by total weight and 56th lowest by coins counts for any month from January 2006 though present.

Another point worth making is seasonality. Over 2006-present horizon, October saw significant decline sin demand for gold coins in seven out of 10 years, with insignificant changes m/m recorded in one month. In other words, October tends to be a more bearish month of U.S. Mint coins sales.

Final point worth making is that correlation between demand for U.S. Mint coins (by total oz weight) continued to show negative 12 months correlation with gold price. In October, this correlation stood at -0.58, slightly less in absolute value than in September (-0.59) and below -0.72 correlation in October 2014. Overall, negative correlation remained in every month from April 2014 on, suggesting stable demand interest from investors on foot of gold price declines.

5/5/15: US Mint Gold Coins Sales: April 2015

April sales of U.S. Mint gold coins came in at 39,500 oz, down 29.5% y/y. Over the first 4 months of 2015, total sales of U.S. Mint gold coins (by volume) is down 8.9% y/y. In terms of number of coins sold, April sales stood at 71,500 units, down 39.7% y/y and the first four months of 2015 cumulative sales are down 9.1% y/y. Meanwhile, average volume of coin sold in April stood at 0.552 oz per coin against 0.473 oz/coin a year ago. Still, average weight of coin sold in the first 4 months of 2015 is down 1.4% y/y.

As the chart above shows, current reading is well below the post-crisis period average of 58,542 oz and only marginally above the pre-crisis average of 38,016 oz. Historical average is 79,825 oz, and current reading is statistically below the historical average.

12 months dynamic correlation between prices and volume of U.S. Mint gold coins sales has remained negative in April, albeit at -0.08 not statistically significant. This means that over the last 12 months - from April 2014 through April 2015, investors and savers tended to purchase more U.S. Mint coins gold against falling prices, and less against rising prices. Historically, average 12mo correlation between gold prices and coins demand is -0.03.

Overall, the trend toward lower post-crisis sales for the U.S. Mint gold coins compared to the crisis period sales has been in place now since start of H2 2013 and remains in place. However, the trend is still to the upside compared to the pre-crisis period. Data from Q3 2014 on suggests some renewed weakening in demand trend, but confirming this will require more months coming in at below the post-crisis average reading. 

The reason for being cautious about calling the short-term trend change in Q4 2014 is that data for Gold Eagles sales (we have many more years worth of these sales) suggests a different signal to total U.S. Mint gold coins sales. Specifically, as can be seen in the chart below, there is actually some potential positive growth trend emerging in the Eagles sales data for Q2 2014-present.

1/1/2015: US Mint Gold Coins Sales: 2014

End of 2014 and Q4 2014, so time to update my relatively infrequent coverage of data for US Mint sales of gold coins. Here's the data for the sales of American Eagles and Buffalo coins.

Starting with quarterly data:

• Sales of US Mint gold coins in Q4 2014 reached 183,500 oz up on 141,000 oz in Q3 2014 and the highest reading since Q1 2014. However, y/y Q4 2014 sales were down 4.2% having posted a rise of 24.2% y/y in Q3 2014. There is quite a bit of volatility in Q4 sales. For example, Q4 2013 sales were down 29.5% y/y and Q4 2012 sales were up 74% y/y.
• Sales of US Mint gold coins also fell in terms of average coin weight. In Q4 2014, average coin sold carried 0.57 oz of gold per coin, down from 0.61 oz in Q3 and down from 0.71 oz/coin average in Q4 2013. Still, Q4 2014 reading was second highest in oz/coin sales terms in 2014.

Chart below illustrates.

Monthly trends were less favourable in December. Volume of gold sold via coinage sales by the US Mint fell well below the period average and the series have now been trending below historical averages (both across 2006-2014 range and 2012-2014 averages) since May 2013.

The same dynamics: falling oz/coin average, and falling number of coins sold can be traced in full year sales figures, as illustrated in the chart below.

As above clearly shows, the decline in total number of coins sold has been relatively moderate, compared to historical trend, with sales of 1,322,000 coins in 2014 running very close to 2006-2013 average of 1,361,625 coins. But sales in oz terms have been poor: in 2014 total sales of US Mint gold coins run at 702,000 oz against the 2006-2013 average of 983,250 oz. Thus 2014 was the third worst year on record (since 2006) in terms of sales of coinage gold, but ono the fifth worst year on record in terms of sales of coins by numbers. The average coin weight at 0.53 oz per coin in 2014 was the poorest on record.

Year on year full-year dynamics were poor as well: total coinage gold sold by oz fell 36% y/y in 2014 and there was a decline of 22% in the number of coins sold. Meanwhile price of gold declined (based on month-end USD denominated prices) by 9.94% y/y.

Most of the poor performance in US Mint sales took place in H1 2014, when coinage gold sales in oz terms fell from 790,500 oz in H1 2013 to 377,500 oz in H1 2014.

In the end, 2014 was a poor year for US Mint sales. Even stripping out the sales of the American Buffalo and looking at the American Eagle sales alone - thus allowing the data to cover 1986-2014 period - the trend remains to the downside for both oz sold and coin numbers, with oz sold under-performing the downward trend.

That said, sales of American Eagles remain above the averages for both coin numbers and gold volumes once we strip out 1998-1999 anomalies.

All in, the explanation for 2014 performance is continued decline in demand for gold coins from shorter-term investors seeking safe haven. In general, this is expected and is likely to continue: gold coins are normally the domain of collectors and longer-term long-only investors. We are witnessing a moderation in demand trends toward 1987-1997 and 2000-2008 averages. 

20/2/2014: Gold Demand 2013: US Mint Sales

I recently posted on the 2013 demand for gold:

• http://trueeconomics.blogspot.com/2014/02/1822014-gold-demand-trends-2013.html started with highlights of the World Gold Council report and was followed up with 
• http://trueeconomics.blogspot.com/2014/02/1822014-demand-for-gold-netting-out.html covering demand for gold stripping out changes in ETFs holdings.

To complete this analysis, let's take a look at another area of demand.

Sales of gold coins by the US Mint are usually seen as representing more stable, long-only and non-instrumented demand for gold. US Mint coins are first and foremost used by investors interested in a store of value and secondly as long term savings. These are principally non-speculative in nature and do not rely heavily on shorter term volatility in prices (as some o the statistics discussed below show).

The series covered here include American Eagles and American Buffalos. The data we have for both series goes back to the start of 2006.

We shall focus in this post on annual values.

In 2013,

• US Mint sold 1,095,500 oz of gold in the form of coins, marking the third largest demand in the series history. The demand in terms of total weight was up 29.8% y/y, reversing previous 3 consecutive years of annual declines.
• US Mint sold total of 1,697,500 gold coins in 2013, marking the third highest year of sales by coinage, and up 39.1% y/y.
• Average weight of coin sold in 2013 was 0.645oz/coin, down on 0.692oz/coin in 2012. Overall, this was the third lowest annual average oz/coin sold performance.

Correlation between price and weight of gold sold was 0.349, and between price and coins sold 0.450, while correlation between price of gold and oz/coin average weight was 0.137.

Monthly series confirm that there is little sustained correlation between prices and gold sales via US Mint coins:

Looking at longer-range series:

• Average sales of coins by total weight in 2005-2009 was 874,250 oz per annum, against 1,092,250 oz per annum for 2010-2013 period.
• Average sales of coins by total number in 2005-2009 was 1,174,625 coins per annum, against 1,548,625 coins per annum for 2010-2013 period.
• Average sales of coins by average weight per coin sold in 2005-2009 was 0.705 oz/coin, against 0.703 oz/coin for 2010-2013 period.

In conclusion: US Mint sales of gold coins suggest healthy demand for gold, strengthening in 2013 on foot of both - improved affordability and rebounding in the underlying demand toward the 2010-2013 average levels.

16/8/2013: US Mint gold sales: H1 2013

In the previous post I covered July 2013 monthly sales figures for US Mint Gold Coins. As promised, here is a more stable trends analysis using H1 aggregates from 1987 through June 2013.

In H1 2013, US Mint sold 629,000 oz of coinage gold, marking the 5th highest ranked H1 in sales terms since H1 1987. Year on year, H1 2013 sales were up 86.1% and relative to crisis period average, sales were up 22.0%, while relative to the pre-crisis period (2001-2007) H1 2013 coinage gold sales were up 261.5%. For comparison, historical H1 average sales are currently at 336,520 oz.

In H1 2013, US Mint sold 1,088,500 coins, marking the third busiest H1 sales period since 1987. For comparison, historical average sales for H1 are at 592,615 coins.

In terms of average gold volume per coin sold, H1 2013 came it at 0.578 oz/coin, which is relatively moderate, given the historical average of 0.577 oz/coin.

Chart below to illustrate the above:

Chart above shows that both coins sales and oz sales of coinage gold remained in H1 2013 on the upward trend established since 2007 and the overall 2009-2013 activity for H1 period remains at post-1999 highs. There is little indication of any serious long-term slowdown in demand for US Mint coins in the data and H1 2013 strengthened the trend away from such moderation. The correction sustained over 2011-2012 has now been more than reversed and H1 2013 numbers in terms of coins sold is sitting comfortably above previous post-1999 maximum attained in 2010.

At the same time, demand for coinage gold (oz sold), while partially correcting upward in H1 2013 remains below the local maxima set in 2009-2010.

The above is consistent with restricted buying-on-the-dip behaviour, with some upward momentum being sustained by considerations other than price movements. This is further supported by changes in correlations between sales and the spot price of gold (average of closing monthly prices in USD):

• For price vs oz correlation, correlation between H1 1987 - H1 2012 stood at +0.22 and this rose to +0.29 for the period H1 1987 - H1 2013, implying (recall that price fell for H1 2013 to USD1,484.50/oz compared to H1 2012 at USD1,664.00) some limited buying-on-the-dip behaviour.
• For coins sold vs price, correlation H1 1987 - H1 2012 stood at +0.04 and this rose to +0.11 for the period H1 1987 - H1 2013, also implying limited buying-on-the-dip behaviour.

It is worth noting that H1 2013 figures were driven largely by January )month 1 of Q1) and April (month 1 of Q2) sales. This dynamic did not replicate in July (month 1 of Q3), so we should tread cautiously in expecting robust continuation of the H1 sales in H2.

16/8/2013: US Mint gold sales: July 2013

It has been some time since I updated the data on sales of US Mint Gold Coins, so let's take a quick run through the data for July 2013.

• US Mint gold coins sales in July 2013 stood at 50,500 oz, dow 11.4% m/m (though there is little point looking at monthly figures which can be volatile) and up 65.6% y/y. The sales were close to historical average at 57,239 oz and below the crisis period average (since January 2008) of 88,694 oz.
• US mint sales of coins in July 2013 stood at 90,000 coins, down 20.4% m/m and up 97.8% y/y. This compares agains 100,286 coins sold on average per month over historical period and 124,731 coins sold on average per month over the crisis period.
• Average volume of gold sold per coin in July 2013 stood at 0.561 oz/coin, which is 11.2% ahead of June 2013 and 16.3% behind July 2012. In historical comparatives, July sales were behind 0.59 oz/coin monthly average over the historical period and well behind 0.77 oz/coin average for the crisis period.
• 24mo rolling correlation between volume sold (oz) and gold price (end of month spot price) stood at 0.009 in July 2013, up on -0.045 in June 2013 and ahead of -0.09 average rolling correlation for the historical period covered by data, but virtually identical to the 0.01 average rolling correlation for the crisis period. In basic terms, the zero correlation between gold coins sales and gold spot price remained intact in July 2013.

Charts to illustrate:

Overall, analysis above confirms a short-term trend toward increased demand for gold coins, driven by changes in prices. This trend is more directly evident in 6mo sales data (next post). In total coins sales, there is a nice reversion to the up-sloping trend (first chart above), while oz/coin sold remains below the longer-term up-sloping trend line, potentially reflective of speculative purchasing running at more subdued volumes (second chart). Per third chart, there is a clear negative correlation between demand for coinage gold and the price of gold, suggesting some 'buying-on-the-dips', although this correlation is weak (last chart above) and is getting weaker (in absolute terms). There is a long-term trend toward positive (or at least much less-negative) correlation between the price of gold and coins sales.

Tune in for the H1 2013 cumulative data analysis next.

2/4/2013: US Mint Gold Coins vs Gold Prices

In the previous post I covered some Q1 2013 trends in US Mint gold coins sales and mentioned correlations between spot price of gold and volume of coinage gold sold. Here's a bit more beef on the latter.

As charts above clearly show, there is not much of a statistically significant relationship between price of gold and volumes of coinage gold demanded, neither in levels terms, nor growth terms. Which, of course, strongly suggests that the demand for coinage gold is based on longer-term considerations than those underpinned by simple price reactions.

Looking at H1 data over the same time horizon confirms the main observation:

There is zero relationship in smoother data (H1 cumulated) between demand for coinage and price of gold, while there is a relatively weak positive correlation between demand for gold content per coin purchased and the price of gold.

Key point here is that there is absolutely no hard evidence that gold coins demand is bubble-prone or bubble-driven.

2/4/2013: US Mint gold sales: Q1 2013

Q1 2013 data for gold coins sales by US Mint is out and is worth a look. Here are some top trends:

Per chart above, number of US Mint coins sold in March 2013 declined to 103,000 compared to 155,000 in February. Controlling somewhat for seasonal changes, y/y number of coins sold rose 3.52% from 99,500 in sales in March 2012. Looking at Q1 totals, Q1 2013 sales added to 533,500 coins, up 39.3% on Q1 2012, 10.57% on Q1 2011 and 96.86% on Q1 2010. Healthy uplifts against generally flat-trend prices. And, crucially, coins sales do not appear to be tracking 'risk-on' and 'risk-off' signals from equity markets. As I always maintained, coins sales have much more to do with steady risk-averse savers than with speculative buyers.

Chart below details relationship between volumes of gold sold via US Mint coins and price of gold (monthly final). In terms of volumes sold, March 2013 clocked sales of 62,000 oz, down from 80,500 in February 2013, and down 0.8% on March 2012 (62,500 oz). In quarterly totals, Q1 2013 came in at 292,500 oz and this was up 38.95% on Q1 2012, down 2.34% on Q1 2011 and up 7.93% on Q1 2010. In other words, much steadier demand growth in volumes of sales was also broken in 2013.

Meanwhile, price of gold rose 1.21% m/m in March and slipped 3.29% y/y. (More on correlations below).

The following chart details trend in average gold content per coin sold (oz/coin): in March 2013, average gold content stood at 0.602 oz/coin, up on 0.519 oz/coin in February 2013 and not far off from the 0.628 oz/coin in March 2012. However, overall trend remains relatively flat at around 0.65 oz/coin since mid-2006. Longer term trend is gently upward, indicating that over time, investors and savers started to allocated slightly more of their investable savings into coinage gold.

 Chart below shows correlation between volumes of coinage gold sold and gold price:

Two things worth noting in the above:

1. Since approximately Q2 2012 we are experiencing steady upward momentum in 12 months rolling correlations, and these are rising toward +0.5. This trend was confirmed in March 2013 and it is consistent with 24mo rolling correlations, but is still far off on 36mo or 50mo rolling basis.
2. Linear long-term trend is also upward and is now in the positive correlation territory. This can potentially suggest that gradual financialisation of the gold markets in general is having a long term impact on gold's shorter-range hedging properties, since positive correlation is consistent with higher propensity of 'buy-on-dips' and 'book profit' behaviour. However, as 60mo chart shows below, we are still in solid hedging territory for now when it comes to longer investment horizons. Furthermore, correlations trends are negligible in size. So something to watch in the future and to blog on next... stay tuned.

Chart with 60mo rolling correlations

7/1/2013: Falling speculative investment interest in gold

In two recent posts I covered US Mint sales data (annual and monthly) for gold coins. The core theme of both was the return to fundamentals in demand as signaled by sales volumes. Such a return, of course, is the flip-side of the retrenchment by speculative investors. Here's a chart from BCA from November 2012 showing just that process working through:

Note: Disclosure in the first link above.

5/1/2013: US Mint December 2012 sales

In the previous post (here), I looked at the annual data for US Mint gold coins sales. Here, let's take a quick look at the shorter-term, monthly trends and dynamics for December 2012.

Following a robust monthly rise in sales of coins by oz (weight) totals to 136,500 oz in November, December sales moderated to 76,000 oz (down 44.32% m/m), still posting a healthy 16.92% increase y/y. Compared to historical average of 56,346 oz the sales are still up, although December 2012 is below 87,717 oz average sales for the crisis period (since January 2008). However, while difference to historical (1987-2012) average is significant statistically, it is not significant relative to crisis period average. Furthermore, 6mo MA is at 68,250 which is well below the December sales levels.

For those thinking of a 'big fall-off in sales', December 2012 marked the highest volume (by weight) of sales since December 2009 and the fourth highest volume since January 2000.

In terms of number of coins sold, December 2012 came in at 82,000, or 52.74% down on November robust sales of 173,500, but monthly sales were up 26.15% y/y. Compared to historical averages, December 2012 sales are statistically indifferent from historical average sales of 98,758 coins per month, and from crisis-period average of 119,642. 6mo MA sales are at 93,500, ahead of December sales, while H1 2012 average sales were at 93,750, also well ahead of December 2012 volumes.

The relative moderation in the number of coins sold compared to the trends in the volume of coinage gold sold (oz) can be explained by the increased oz content of average coin sold. In terms of oz/coin sold, December 2012 sales stood at 0.927, well ahead of 0.787 in November, posting the highest gold content reading for any month since December 2011. Historical average content is at 0.590 oz/coin and crisis period at 0.790 oz/coin, both statistically significantly lower than December 2012 figure.

Charts and dynamics:

As above clearly shows, the historical trend is upward sloping and the current reading is comfortably at the trend levels both in terms of 6mo MA and actual level reading for December 2012.

The chart above shows contemporaneous negative correlation in price of gold v volume of gold coins sales between September 2009 and April 2012, with exception of December 2010 - August 2010. This correlation has now been broken down and turned positive since April 2012 - a new sub-trend that remained consistent since then and was reinforced in December 2012 figures. Chart below illustrates this much more clearly:

A little more statistical 'beef' on these: 12mo dynamic correlation between gold prices and total gold sales via coins (total oz weight of sales) rose to +0.34 in December from +0.28 in November 2012, so declined prices (y/y) have been associated with some increase in demand. Recall that in November-December 2011, gold prices fell from $1,746 to $1,531, while in the same period 2012 they moderated from $1,726 to $1,657.50. December marked 4th consecutive month of positive 12mo dynamic correlations. Historical 12mo dynamic correlation of +0.17. Looking at longer-range correlations, 24mo dynamic correlation in December 2012 stood at -0.23 against the historical average of -0.10 and up (in absolute terms) of -0.19 in November.

Per average coin sold gold content:

As mentioned above, December 2012 sales were characterised by a substantial increase in average gold weight of coins sold which is running well ahead of the historical (upward sloping) trend. More significantly, this year sales fell below the historic trend in 6 months out of 12. Hence, neither trend direction, nor current deviation from the trend are indicative of any severe downward demand pressures.

Overall, sales dynamics show that since February 2012, volumes of sales in oz have recovered nicely back to their historical trend (upward sloping) and are currently running above the January 2000-July 2008 averages.

Note:
Historical, long-term relationship between gold prices and demand:

While December 2012 observation is to the downside of the trend, it is clear from the picture overall that changes in gold prices during a given month have statistically no discernable relation to the demand for gold via US Mint coins sales. This simply confirms the nature of fundamentals driving demand for coins as discussed in my previous posts on the issue (see previous post linked above for one such link).

5/1/2012: US Mint Gold Coins Sales: 1986-2012 data

The readers of this blog would be familiar with the exclusive time series on US Mint sales of Gold coins that I have maintained for some years now. With December 2012 sales finalised, it is time to update the annual and monthly data analysis on these.

Here is the analysis for January 2012 - to open the year - that predicted 'return to fundamentals' theme for coin sales. And here is my article for Globe & Mail on what fundamentals relate to gold coins sales.

I am happy to note that my prediction of moderating trend in speculative buying and restoration of stronger link to long-term behavioural demand and savings fundamentals has been confirmed through 2012.

Looking at annual data for 2012 (note: subsequent post will provide more shorter-term dynamics analysis for December data), first in weight terms:

• In 2012 the US Mint sold 747,500 oz of gold in form of coins, down 25.25% y/y, with demand for coinage gold declining below 2008 levels of 860,500, but well-ahead of the 2005-2009 average annual sales of 640,800 oz per annum.
• In terms of longer-term averages, 1990-1994 average was at 384,050 oz, 1995-1999 average at 1,047,800 oz, 2000-2004 average run at 386,550 oz, 2005-2009 average at 640,800 oz per annum and 2010-2012 average is currently at 989,333 oz per annum. 
• 2012 was the 10th highest demand year in history in terms of volume of gold coins sold in oz of gold, with series covering 1986-2012 period. In other words, 2012 was not a good year for Gold Bears and for Gold Speculators alike. This doesn't make it a great year for Gold Bulls, but, given that the average annual gold price in 2012 stood at $1,678/oz - ahead of any on the record and up  7.0% on 2011 - it does appear to have been another year when fundamentals seemed to triumph over shorter-term psychosis. 
• My annual forecast for sales in 2012 was 694,050, which means that simple dynamic trend of moderating sales expectations based on previous years' price effects was bearish.

In terms of number of coins sold:

• US Mint sold 1,123,500 coins in total in 2012, down 21.27% on 2011. The demand for actual coins was at the levels compatible with 2008 when the Mint sold 1,172,000 coins and well ahead of all annual sales in 2000-2007 period.
• In terms of longer-term averages, 1990-1994 average was at 637,620 coins, 1995-1999 average at 2,246,300 coins, 2000-2004 average run at 738,700 coins, 2005-2009 average at 955,800 coins per annum and 2010-2012 average is currently at 1,397,167 coins per annum. In other terms, current sales are annually bang on at the annual average for the last 8 years.
• 2012 ranks as the 10th most successful year for coins sales in terms of the number of coins sold, confirming my view in the third bullet point above regarding sales of coinage gold in oz.
• My forecast for 2012 sales was at 1,21,223 coins - a much closer call than on oz of gold sold via coinage, suggesting that the demand remains closely driven by long-term dynamics.

In terms of both - sales in coins numbers (1,123,500 coins) and oz (747,500 oz), 2012 results stand in close comparative to the historical averages. Historical average (1986-2012) for coins sold is 1,261,170 and for oz of gold sold through US Mint coins is at 717,343 oz.

In terms of average gold content of coins sold:

• 2012 average coin sold by the US Mint contained 0.665 oz of gold per coin, down slightly on 0.701 oz/coin in 2011 and well-ahead of the historical average of 0.574 oz/coin.
• 2012 ranks as the fifth highest year on record in terms of average oz/coin sales.

Charts:

Historical dynamics:

As charts above illustrate, all time series have shown convergence to the long-term upward trend:

• There is, so far, no overshooting of the trend to the downside - something that could have been expected if demand for gold coins was showing speculative bubble deflation dynamics or post-bubble correction, although, of course, we cannot say with 100% accuracy that this is not going to materialize with some lag.
• There is no acceleration in the convergence trend in 2012 or since convergence began in 2009.
• This episode of convergence is shallower (in terms of annual speed to target) than in 1997-2002 period and 1986-1991 period.

Historical correlations:

• In terms of historical correlations, the following matrix holds, showing overall zero to low level negative correlations between prices and demand for coins and coinage gold:

The above, of course, implies that given moderating price increases in gold (+7% for annual monthly average in 2012 compared to 22.21% rise in 2011, 25.61% in 2010, 11.44% in 2009 and so on), we can expect a slowdown in overall oz and coins volume demand, which can lag price changes. This is exactly what appears to have taken place in 2012.

As before, I remain comfortable with the 2012 trend and am looking forward toward more stabilised demand dynamics in 2013, with volume of sales declining in 2013 to ca 500,000 marker in oz terms and 850,000 in coins numbers terms, assuming no major volatility in gold price and in line with continued stabilisation in the world economy.

Disclaimer:
1) I am a non-executive member of the Heinz GAM Investment Committee, with no allocations to any specific individual commodities
2) I am long gold in fixed amount over at least the last 5 years with my allocation being extremely moderate. I hold no assets linked to gold mining or processing companies or gold ETFs.

3) I receive no compensation for anything that appears on this blog. Everything your read here is my own personal opinion and not the opinion of any of my employers, current, past or future.

1/7/2012: H1 2012 US Mint data: demand for gold coins

Based on data from the US Mint we can now update H1 2012 figures for sales of the US-minted gold coins. As the background - new coins issued by the US Mint, in my opinion, represent a much more fundamentals-linked asset as the demand for these coins differs, if only subtly, from the demand for gold as an asset:

• Coins are purchased by long-hold collectors;
• Coins are easier to purchase and store than gold bars, attracting more demand from savers, rather than speculative investors; and
• Coins are used frequently to store inter-generational wealth and start family savings schemes

All of this means that correlations between demand for coins and gold price should be less pronounced and that is exactly what we observe throughout the historical and current data:

So with that in mind, what should we expect from the gold coins sales. Price of gold has been trending side-ways with some correlation over the 20-day averages since April 2011 ranging between USD1505.5 low in June 2011 to the high of USD1813.5 in August 2011 and into USD1570 in June 2012. With this, we should expect some moderation in demand for gold coins coming from the reduced speculative demand. Since this speculative demand forms a smaller component of overall coins demand, we should expect moderation in demand for coins to bring us down toward historical averages for the crisis period. 

At the same time, outside the euro area, global crisis has entered a stage of stabilization (not growth, yet), which means that demand for gold as safe haven (rather than a hedge) should be moderating as well. This can be expected to have a more modest impact on coins sales than on gold sales and especially ETFs-instrumented gold sales.

In other words, fundamentals (inflation expectations, longer-term savings and investment objectives) should be driving current demand for gold coins.

And, this is exactly what we are seeing. In June 2012, the US Mint sold 54,500oz of coinage gold, up on 53,000 in May 2012. Total for H1 2012, US Mint sales of gold coins in terms of total weight sold are down 41.3% on H1 2011 and it is down 49.8% on H1 2010 and 50.3% on H1 2009. Dramatic? Sure, when one disregards consideration of drivers for 2009-2011 demand for coins being coincident with extreme risks in other markets. 

Total H1 2012 demand was at 338,000oz still well ahead of H1 average demand for 2000-2007 period when it was 165,679oz, but down on 531,750oz average for H1 2008-2011 crisis period.

Exactly the same picture - return to fundamentals - is seen in the number of coins sold. 

Consistent with still robust demand drivers, H1 2012 average coin sold contained 0.60 oz, while H1 2000-2007 period average was 0.51oz and H1 2008-2011 period average was 0.76oz.

Here's a summary of H1 changes and a chart highlighting dynamics:

All three parameters (coins sold, oz total sold and oz/coin) are showing that H1 2012 was continuing moderation in demand away from short-term safe haven considerations toward fundamentals-driven consideration and basics of long-term hold demand. All three also show that current demand dynamics for gold coins remain ahead of historical averages. There is neither a panic buying, nor a panic selling and should demand stabilize at around 10% upside to the historical average ex-1999 spike, and recall that this is NEW demand, we will be in the comfortable longer term range that can take us well into global economic growth cycle once it resumes.

PS: This continues to confirm my long-term view on gold coins as more fundamentals-driven and fundamentals-reverting instrument.

Disclaimer:
1) I am a non-executive member of the GoldCore Investment Committee
2) I am a Director and Head of Research with St.Columbanus AG, where we do not invest in any specific individual commodity
3) I am long gold in fixed amount over at least the last 5 years with my allocation being extremely moderate. I hold no assets linked to gold mining or processing companies.

4) I receive no compensation for anything that appears on this blog. Never did and not planning to start now either. Everything your read here is my own personal opinion and not the opinion of any of my employers, current, past or future.

2/4/2012: Q1 2012 US Mint Gold coins sales

Time to update the data for Q1 2012 US Mint gold coins sales - something I have been doing as a sort of an ongoing project.

As before, there is much volatility sloshing around, and as before, there is less drama when one takes a closer look at the data.

Q1 2012 volume of sales (oz) of US Mint coins fell 29.7% year on year, and 22.3% on 2010. The demand is also down 38.5% on 2009. Total volume of sales stood at 210,500 oz in Q1 2012, 17% below the average demand for Q1 over 2008-2011 period, but much stronger (+89%) on pre-crisis average for 2000-2007.

Much of the downside to the demand was driven by February sales, which run 21,000 oz against March sales of 62,500 oz.

Chart below illustrates:

Note that stabilization of the price trend along the flat line above US$1,660/oz since H2 2011 is not associated with establishment of a similarly flat trend for volume of US Mint sales. More on this below, but in basic terms this confirms that the demand for gold coins has little to do with the price in general. In other words, no hysteria and no bubble here. Something other than price movements drives demand for coins. 

It is worth noting, that, as consistent with the above observations 6mo MA for volume demand is now at 95,083 oz which is below the March demand of 99,500. Again, no drama - rather mean reversion in the short run.

On the side of coinage sold, demand for coins fell 20.6% in Q1 2012 compared to Q1 2011, but it up 41.3% on Q1 2010 and 12.0% on Q1 2009. Total demand was 383,000 coins in Q1 2012 of which 256,500 came in January. Compared to this, 2000-2007 Q1 average is 216,929 and 2008-present Q1 average is 313,000. So current first quarter is well ahead of the historical averages, but on a moderate side compared to 2011.

 Looking at the two charts above, it is clear that while volume demand is following a pronounced down-sloping trend, coinage demand is relatively flat. Which is consistent with a decrease in average gold content per coin sold. In Q1 2012, average oz/coin sold fell to 0.63 from 0.82 average for Q1 2008-2011. Average weight per coin is down 0.1% in Q1 2012 year on year, and down 37% on Q1 2010 and Q1 2009 (in both of these years, average oz/coin content of US Mint coins sold was 1.0). However, this decline has itself been mean-reverting as the chart below clearly shows.

One point to be made in addition to the above is the increased volatility in the series since the mid-2007 through 2010 that is now abating since the beginning of 2011. This reinforces the general historical trend established since 1987.

As mentioned above, correlations between price and volume of gold demanded (via US Mint coinage sales) are now running consistently below the historical trend for some time - primarily since H2 2010. This continues today. The 12mo rolling correlation is negative on-average since July 2010 and this remains the case for Q1 2012. However, Q1 2012 negative correlation is moderate - averaging just -0.05, which is statistically indistinguishable from the Q1 2011 (+0.1) and more moderate than -0.4 correlation for Q1 2010. The average for 12mo rolling correlations for Q1 period over 2000-2007 was +0.18 and during the crisis period it fell to +0.03. With standard deviation of 0.36 none of these correlations suggest any dramatic departures in price-demand relationship from a stable long-term zero correlation trend. Chart below illustrates:

The point that the above adata suggests is best glimpsed by directly relating the levels and the rates of change in gold price and the overall demand for gold via US Mint coins. Both exercises are illustrated below:

And guess what: historically - that is since 1987 - gold price has virtually nothing to do with demand for US Mint coins (in terms of volume of gold sold via coins) neither in terms of levels of price effect on levels of demand for gold, nor in terms of rate of change in price effect on rates of change in demand.

Which means that at least in the case of the US Mint sales, there is no hype, and no madness. What there is instead, is a rather volatile demand with gentle upward slope imposed against a robustly positive exponential relationship in gold price:

The fact that in recent months demand for gold has been oscillating around the historic trend (as opposed to resting above that trend in August 2008-August 2011 period) is the good news - the current levels of demand are historically sustainable, trend reversion-consistent and show neither hype, nor panic buying.

As I have noted in January post (here): "Welcome back to ‘normalcy’ in US Mint sales." Yep, still holds.




Disclaimer:

1) I am a non-executive member of the GoldCore Investment Committee
2) I am a Director and Head of Research with St.Columbanus AG, where we do not invest in any specific individual commodity
3) I am long gold in fixed amount over at least the last 5 years with my allocation being extremely moderate. I hold no assets linked to gold mining or processing companies.
4) I have done and am continuing doing academic work on gold as an asset class, but also on other asset classes. You can see my research on my ssrn page the link to which is provided on this blog front page.

5) Yes, you can find points (1)-(3) disclosed properly and permanently on my public profiles. 

6) I receive no compensation for anything that appears on this blog. Never did and not planning to start now either. Everything your read here is my own personal opinion and not the opinion of any of my employers, current, past or future.