New US coin will try to capture a share of 'gold bugs'
New York — America's "gold bugs" is taking some brand new shapes. The madcap dash of Americans to sell gold -- even family heirlooms -- so evident earlier this year has dwindled down to a trickle with the sharp decline gold prices.
But now a flood of newly minted foreign gold coins, such as the Centenario from Mexico, are surfacing in US banks, coin and bullion shops, and eventually into American pocketbooks and safety deposits boxes.
Not to be outdone, the United States will be getting into the act early this summer, mass producing its first gold "coin" in 47 years. It will make its debut in mid-June.
Consumer advocates already are issuing the same warning about these new coins they have issued for buying or selling gold in other forms: Let the buyer -- or seller -- beware, if he or she doesn't want to wind up a loser.
"Buying these gold coins could be a good deal, but it's also a gamble," depending on which way the price of gold fluctuates, says Karen Borak, a spokesman for the New York City Consumer Affairs Department.
She warns consumers to watch out for exorbitant service charges that can add substantially to the price of the coins. Typically, the "markup" over and above the bullion value is "5 to 8 percent," including manufacturing and other costs, says Janet Machin, an assistant vice-president of Citibank here. Citibank has sold "several thousand" of the Mexican gold coins since the bank started to offer them on April 1 and the bank expects business to continue to be brisk, she says.
In 1976 and 1977, 3 million ounces of gold bullion were purchased by Americans in the form of foreign coins. In 1978 and 1979, this figure doubled to 6 million ounces. Industry indications are that this upward trend will continue and perhaps increase this year and next.
One factor heating up demand are massive advertising campaigns being launched by foreign governments to get Americans to buy their gold coins. A law passed by Congress in 1978 now is allowing the US to vie for a share of this market.
The Banco de Mexico is spending upward of $2 million for a national advertising campaign in this country for its newly minted "gold coins of Mexico." The coins are offered in six sizes, the smallest containing less than 1 /20th of an ounce of gold, the largest over an ounce.
"There already exists a stable world market for Mexican gold coins, and this [advertising] program is intended to broaden that market in the US," says Gustavo Romero- Kolbeck, director of the Banco de Mexico.
The US, in the meantime, is minting two sizes, one containing an ounce of gold, the other containing a half-ounce.One million of the half-ounce size will be cast; a half-million of the one-ounces.
Although the coins will not have any "denomination," and thus be more like medallions, they will be sold at only a "trifle," as one US Treasury spokesman said, over the actual bullion value. During the bicentennial, gold medals were cast and sold, but at a price several hundred percent over the bullion value.
The main purpose of selling these new coins, says Dr. George Hunter, director of the US Treasury Department task force in charge of issuing the coins, is to give "the individual," as well as the coin dealer or institutional investor, an opportunity to own gold bullion. "We are putting a limit on them of three per customer," Dr. Hunter says.
Orders for the US gold coin will be handled this way: Customers obtain order forms from post offices throughout the country. The price paid for the coins will be determined by the coins' value the day the order is postmarked. Those who lie about their names or addresses to buy more than the allowable limit could be charged with mail fraud and prosecuted, Dr. Hunter says.
If the demand is great for the coins -- and some Treasury officials think it may be -- a greater number will be minted in subsequent years, beginning in 1981 , under the current provisions of the law.
The half-ounce coin will feature a likeness of singer Marion Anderson and be roughly 27.5 millimeters in diameter and two millimeters thick; the larger coin will feature artist Grant Wood in relief and be some 32 millimeters in diameter and 2.5 millimeters thick.