With so much unexplained behaviour in the gold and silver pits, I bet Ripley could write a few volumes alone on the very strange sector activity in his "Believe It Or Not" series.

Speaking of peculiarities, Tim Iacono identifies a few more oddities in his recent article below...

Regards - VHF

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Gold Prices Getting Fishier and Fishier

Tim Iacono

Friday, October 10, 2008

Michael Zielinski at the Mint News Blog sent me a note the other day regarding this item he recently published, an item that seems to be making the rounds on the internet over the last 24-hours and for good reason.

Michael wrote:

There’s one aspect to this entire situation that many people haven’t been discussing. The Mint is always citing “unprecedented demand” as the reason for suspensions, production halts, and allocation programs, but in 1999 gold sales were more than 4 times higher and none of these measures were necessary.

The story is not that the Mint is unable to produce enough gold coins, it’s that they are unable to obtain enough gold on the open market. This all plays into the puzzling situation of physical scarcity and high demand for gold, while the market price of gold remains stagnant.

Well, the price of gold wasn't exactly stagnant today - it was down $63!

Naturally, coin dealers are still desperate for inventory (check out the CNI bullion page which now shows American Eagles available at $80 over spot after having been "Out of Stock" for most of the week and probably "Out of Stock" again by the time you call).

Oh yeah, and the SPDR Gold Shares ETF (NYSEArca:GLD) added another five tonnes today after the price plummeted.

You know, I get the part about investment demand only accounting for about 20 percent of overall demand for gold bullion, but the deal with coin shop shortages really is smelling fishier with each passing day, particularly in light of this data assembled by Michael:

The following table shows the ounces of gold sold by the United States Mint in the form of American Eagle Gold bullion coins. These figures are taken from the US Mint website. You can visit the link for monthly data, as well as the figures for Silver and Platinum Eagles.

American Gold Eagle Bullion Sales (ounces)

1986	1,787,750
1987	1,253,000
1988	851,000
1989	839,000
1990	715,000
1991	472,000
1992	638,600
1993	796,000
1994	559,500
1995	600,500
1996	729,500
1997	1,317,000
1998	1,839,500
1999	2,055,500
2000	164,500
2001	325,000
2002	315,000
2003	484,500
2004	536,000
2005	449,000
2006	261,000
2007	198,500
2008	492,000*

*through October 2008

The demand for American Gold Eagles is clearly not unprecedented. What's actually unprecedented is the suspension and allocation of Gold Eagle coins. Even amidst the booming demand of the pre-Y2K years, the US Mint never resorted to suspensions or allocation programs. Why is the US Mint having so much trouble keeping pace with demand this year?
...
With unfulfilled physical demand, why has the market price of gold remained stagnant? I think we will see this situation play out with some interesting consequences during the remainder of the year.

Yes, the consequences could be quite interesting...