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Does the US buy more gold as they sell American Gold Eagles?

MKUltra24MKUltra24 Posts: 652 ✭✭✭✭
edited January 23, 2021 10:26AM in Precious Metals

I’ve been wondering about this for a while.

Since 1986 the US Mint has made millions of American Gold Eagles of various sizes ranging from 1/10th oz to 1 oz.

The gold used for these coins must (by law) come from American sources.

But does this mean that every year the US government gold reserves are shrinking by millions of ounces due to making Gold bullion coins?

Or does the US government use the money they get from selling AGEs to replenish the gold stockpile?

If I recall correctly the law specifically says that the proceeds from bullion coins is to be used to pay off the national debt.

However I don’t know if this means ALL the proceeds or only the profits from selling them and not the actual value of the gold itself.

I can’t find any information on this online so if anyone has knowledge about this I’d appreciate hearing it.

Thanks!

Comments

  • HigashiyamaHigashiyama Posts: 2,133 ✭✭✭✭✭

    Yes, we are buying gold rather than depleting the stockpile.

    Higashiyama
  • derrybderryb Posts: 36,033 ✭✭✭✭✭
    edited January 23, 2021 11:17AM

    The mint gets it the same way as the rest of us.

    Seriously, West Point vaults store bullion owned by the US Treasury, with all minting of precious metal coinage taking place at the US mint's West Point facility. The Treasury buys the precious metals needed by the US Mint and supplies them to private contractor's who form their coin blanks. Sunshine Mint was at one time a primary provider of blank production services.

    US Code details the procurement of PMs for coinage, and authorizes private procurement methods when needed. I would assume that the US mint tells the Treasury how much of each precious metal it expects to use and Treasury buyers procure it well in advance using the procedures required by the above law.

    Many of us can remember and even profited greatly from the US Mint's gold shortage in 2008 by stocking up early with its products. In mid-year 2008 global crisis demand for gold caused the US mint to run out available gold. In addition to a world monetary crisis, demand for US mint gold products what higher because of it's one year 2008 two gold coin Propserity Set, It's introduction (and only year) of a four coin W proof and uncirculated gold buffalo sets, and the third year (which would be it's final year) of the four coin W mint mark uncirculated gold set.

    The decline from democracy to tyranny is both a natural and inevitable one.

  • MKUltra24MKUltra24 Posts: 652 ✭✭✭✭
    edited January 23, 2021 10:43AM

    @derryb said:
    The mint gets it the same way as the rest of us.

    Seriously, West Point vaults store bullion owned by the US Treasury, with all minting of precious metal coinage taking place at the US mint's West Point facility. As a branch of the US Treasury the mint "buys" is metal from the Treasury vaults and deposits proceeds for its PM product sales into the Treasury.

    US Code details the procurement of PMs for coinage, and authorizes private procurement methods when needed. I would assume that the US mint tells the Treasury how much of each precious metal it expects to use and Treasury buyers procure it well in advance using the procedures required by the above law.

    That I understand.

    As you said the US Mint “buys” it’s gold from the US Treasury.

    But what about the Treasury itself? Are its stockpiles being depleted every time the US Mint needs gold?

    Or does the US Mint actually pay the Treasury for the gold and the Treasury uses that money to buy more gold on the open market so the gold stockpile of the Treasury doesn’t shrink every year?

  • derrybderryb Posts: 36,033 ✭✭✭✭✭
    edited January 23, 2021 2:52PM

    Treasury is constantly buying to replenish supplies depleted by West Point Mint. Dig into the law linked above for the details of how this is done. I do know that the separate law establishing the American Eagle series requires that metal mined in the US only be used for American Eagles.

    The decline from democracy to tyranny is both a natural and inevitable one.

  • metalmeistermetalmeister Posts: 4,584 ✭✭✭✭✭

    US mined Gold. That is correct.

    email: [email protected]

    100% Positive BST transactions
  • derrybderryb Posts: 36,033 ✭✭✭✭✭
    edited January 23, 2021 3:21PM

    With PM prices (for both the raw material and the finished mint product) constantly on the rise in the long term, the mint's gold products return more dollars to the Treasury than the cost of the gold the Mint uses to strike them. Said another way, in the long term, precious metal products provide a net gain for the Treasury. In doing so, they provide jobs and nice shiny things for stackers and collectors. Looking at collector issues only made of all metals and sold at a mark-up It is probably one of the few, if not only, government services that does not operate at a loss. Circulation coinage sold to the Federal Reserve for distribution even at near face value, after all costs of production, is a net negative operation.

    The decline from democracy to tyranny is both a natural and inevitable one.

  • blitzdudeblitzdude Posts: 5,297 ✭✭✭✭✭

    I know they were accused of buying blanks from the Aussies about 10 years ago. They are sourced 3rd party so no telling. Could of been coming from the Russians for all we know. Not much made in the USA these days.

    The whole worlds off its rocker, buy Gold™.

  • MKUltra24MKUltra24 Posts: 652 ✭✭✭✭

    @blitzdude said:
    I know they were accused of buying blanks from the Aussies about 10 years ago. They are sourced 3rd party so no telling. Could of been coming from the Russians for all we know. Not much made in the USA these days.

    As long as they were still 1oz of gold as far as I’m concerned it doesn’t matter where the gold is from.

    I know the law says it has to be US sourced gold but as an AGE buyer I don’t really care where it’s from. Only that’s it’s 1 troy oz of gold. It’s not like anyone pays any more for US sourced gold.

    That’s just my feelings on it.

  • OPAOPA Posts: 17,104 ✭✭✭✭✭

    The Mint needs to get gold for not only the AGE's but also for the Buffaloes, commems and medals.

    "Bongo drive 1984 Lincoln that looks like old coin dug from ground."
  • MKUltra24MKUltra24 Posts: 652 ✭✭✭✭

    @OPA said:
    The Mint needs to get gold for not only the AGE's but also for the Buffaloes, commems and medals.

    I know that.

    My question is once they get that gold from the Treasury does the Treasury replenish it’s gold stores?

  • derrybderryb Posts: 36,033 ✭✭✭✭✭
    edited January 24, 2021 7:33AM

    @blitzdude said:
    I know they were accused of buying blanks from the Aussies about 10 years ago. They are sourced 3rd party so no telling. Could of been coming from the Russians for all we know. Not much made in the USA these days.

    In 2008 when they experienced a gold shortage the mint was authorized to purchase gold blanks from the Perth Mint. The blanks of course were required to meet US mint specifications.

    The decline from democracy to tyranny is both a natural and inevitable one.

  • derrybderryb Posts: 36,033 ✭✭✭✭✭

    @MKUltra24 said:

    My question is once they get that gold from the Treasury does the Treasury replenish it’s gold stores?

    Well, if they didn't the mint would soon run out of gold. The answer to your question is yes. Treasury maintains a stock at certain levels that the West Point mint draws from with 2008 being the exception due to extremely high gold demand.

    The decline from democracy to tyranny is both a natural and inevitable one.

  • johnny9434johnny9434 Posts: 27,330 ✭✭✭✭✭

    The government is always replenishing

  • MKUltra24MKUltra24 Posts: 652 ✭✭✭✭

    @derryb said:

    @MKUltra24 said:

    My question is once they get that gold from the Treasury does the Treasury replenish it’s gold stores?

    Well, if they didn't the mint would soon run out of gold. The answer to your question is yes. Treasury maintains a stock at certain levels that the West Point mint draws from with 2008 being the exception due to extremely high gold demand.

    That’s what I was saying. If AGEs were being minted and sold but the gold wasn’t being replenished the gold would eventually run out.

    But from what people are saying it seems they do replenish the nation’s gold reserves after using the gold reserves to mint and sell gold coins.

  • MetroDMetroD Posts: 1,914 ✭✭✭✭✭

    "UNITED STATES CUSTODIAL GOLD AND SILVER RESERVES

    United States gold and silver reserves consist of both “deep storage” and “working stock” gold and silver.

    Deep Storage is defined as that portion of the United States gold and silver reserves which the Mint secures in sealed vaults. Deep storage gold comprises the vast majority of the bullion reserve and consists primarily of gold bars. Deep storage silver is also primarily in bar form.

    Working Stock is defined as that portion of the United States gold and silver bullion reserves which the Mint can use as the raw material for minting coins. Working stock gold comprises only about one percent of the gold bullion reserve and consists of bars, blanks, unsold coins, and condemned coins. Similarly, working stock silver consists of bars, blanks, unsold coins, and condemned coins.

    Treasury allows the Mint to use some of its gold as working stock in the production of gold coins. This allows the Mint to avoid the market risk associated with buying gold in advance of the sales date of the gold coins. The Mint replenishes the Treasury gold working stock at or just prior to the time the coins are sold. Generally, the Mint does not deplete the working stock used in production. Instead, the Mint will purchase a like amount of gold on the open market to replace the working stock used.

    Treasury also allows the Mint to use silver as working stock. However, Treasury does not have enough silver to fulfill all Mint manufacturing needs. Accordingly, for the purpose of avoiding market risk associated with owning silver, the Mint has entered into a silver hedging arrangement (see Note 19)."

    Source: Page 45 of the '2019 Annual Report' at: https://www.usmint.gov/wordpress/wp-content/uploads/2020/01/2019-Annual-Report.pdf

  • derrybderryb Posts: 36,033 ✭✭✭✭✭
    edited January 24, 2021 7:32AM

    Do not confuse gold held by the central bank, the Federal Reserve, with gold held by the government, the US Treasury. While storage may be in the same vaults some of the time, the gold has two entirely different owners.

    world’s largest known depository of monetary gold is owned by the Federal Reserve Bank

    The decline from democracy to tyranny is both a natural and inevitable one.

  • MetroDMetroD Posts: 1,914 ✭✭✭✭✭

    @derryb said:
    Do not confuse gold held by the central bank, the Federal Reserve, with gold held by the government, the US Treasury. While storage may be in the same vaults some of the time, the gold has two entirely different owners.

    world’s largest known depository of monetary gold is owned by the Federal Reserve Bank

    An important distinction. Thanks for posting about it. :)

    If I read the excerpt from the '2019 Annual Report' correctly, it is the Treasury that allows the Mint to use some 'gold/silver' as "working stock" in the production of coins.

  • derrybderryb Posts: 36,033 ✭✭✭✭✭
    edited January 24, 2021 8:43AM

    @MetroD said:

    If I read the excerpt from the '2019 Annual Report' correctly, it is the Treasury that allows the Mint to use some 'gold/silver' as "working stock" in the production of coins.

    correct. the US Mint is a branch of the US Treasury. The central bank (Federal Reserve) is not part of the US government. It is owned by its private member banks. Now that we are going to have a Treasury Secretary who was once a Federal Reserve Chairman the gray line between the two is about to get a lot grayer. Some see this as the private banking cartel gaining a tighter grip on sovereign monetary policy/action. It will surely make money supply expansion more palatable.

    Next time you're in the big city, take notice of whose names are on the tallest buildings. lol

    The decline from democracy to tyranny is both a natural and inevitable one.

  • RobMRobM Posts: 527 ✭✭✭

    @derryb said:
    Do not confuse gold held by the central bank, the Federal Reserve, with gold held by the government, the US Treasury. While storage may be in the same vaults some of the time, the gold has two entirely different owners.

    world’s largest known depository of monetary gold is owned by the Federal Reserve Bank

    The Federal Reserve DOES NOT own gold, they merely provide custody of around 5% of the US Treasury's gold at the Federal Bank of NY plus a tiny amount that they display at other locations.

  • derrybderryb Posts: 36,033 ✭✭✭✭✭
    edited January 24, 2021 9:49AM

    Federal Reserve claims to own no gold, while many central banks around the world do own gold, much of which the Federal Reserve holds in their more secure vaults. JP Morgan says they don't own a lot of physical silver. I don't believe them either.

    If you are THE bank for the private commercial banks are you going to not include physical gold in you holdings?

    The decline from democracy to tyranny is both a natural and inevitable one.

  • HigashiyamaHigashiyama Posts: 2,133 ✭✭✭✭✭

    Keep in mind that the Fed, in spite of the nominal ownership structure, is not controlled by and is not owned in any material sense by private banks. The Fed reports to Congress, which is the ultimate authority. Also, all profits earned by the Fed are transferred to the Federal government.

    Higashiyama
  • derrybderryb Posts: 36,033 ✭✭✭✭✭
    edited January 24, 2021 12:20PM

    Member banks hold stock in the Federal Reserve Banks and earn dividends. While the Fed answers to congress, as do some other private entities, they are not a government agency. Profits? lol, the Fed has a balance sheet that shows a negative $7.5 Trillion and growing. While the Federal Reserve System is set up to be controlled by congress, many knowledgeable experts on such matters insist it is actual the Fed that controls congress when it comes to economic matters.

    The decline from democracy to tyranny is both a natural and inevitable one.

  • MKUltra24MKUltra24 Posts: 652 ✭✭✭✭

    @derryb said:
    Do not confuse gold held by the central bank, the Federal Reserve, with gold held by the government, the US Treasury. While storage may be in the same vaults some of the time, the gold has two entirely different owners.

    world’s largest known depository of monetary gold is owned by the Federal Reserve Bank

    Well the point I was trying to make is that all of that gold, regardless of which government institution holds it, is property of the US government & American people.

  • derrybderryb Posts: 36,033 ✭✭✭✭✭

    Only the gold held by someone else on behalf of the US Treasury belongs to the American people. Everything else in the same vault belongs to other owners.

    The decline from democracy to tyranny is both a natural and inevitable one.

  • blitzdudeblitzdude Posts: 5,297 ✭✭✭✭✭

    Some would say if you don't PHYSICALLY hold it you don't own it. RGDS!

    The whole worlds off its rocker, buy Gold™.

  • derrybderryb Posts: 36,033 ✭✭✭✭✭

    @blitzdude said:
    Some would say if you don't PHYSICALLY hold it you don't own it. RGDS!

    Until it becomes to large a stack to physically hold. Then you graduate into third party risk.

    The decline from democracy to tyranny is both a natural and inevitable one.

  • MKUltra24MKUltra24 Posts: 652 ✭✭✭✭

    @derryb said:
    Only the gold held by someone else on behalf of the US Treasury belongs to the American people. Everything else in the same vault belongs to other owners.

    I’m not so sure of that.

    Take a look at Fort Knox for example.

    Most of the gold in there is part of the United States Gold Reserves.

    It’s not like an individual can walk into Fort Knox and ask to withdraw their personal gold.

    I think there is a US Gold Reserve that belongs to the US government & thus Americans.

  • blitzdudeblitzdude Posts: 5,297 ✭✭✭✭✭

    @derryb said:

    @blitzdude said:
    Some would say if you don't PHYSICALLY hold it you don't own it. RGDS!

    Until it becomes to large a stack to physically hold. Then you graduate into third party risk.

    Actually that's when you sell the gutter and become a king. B) THKS!

    The whole worlds off its rocker, buy Gold™.

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