Demand Overwhelms Supply In UK Gold Coin Market

Although prompted in part by an expected hike in the capital gains tax (CGT), for which UK legal-tender bullion coins are exempt, the Eurocrisis is having its effect too. Sovereigns and Brittanias are getting harder to find, and delivery delays are growing longer. It's like the 100 oz silver bar shortage more than a year ago.

Dealers are reporting a backlog of orders for bullion coins recognised as UK legal tender, which are exempt from CGT.

Anthony Baird, managing director of gold dealer Baird & Co, says the company cannot deliver any Britannia coins until August due to lack of supply.

"We buy directly from the public," said Linda Warner, sales manager at bullion merchant ATS Bullion. "In the last couple of weeks, supply has been drying up because people hold on to what they've got in a situation like this."

The supply situation is worse from overseas sources, with European sales onto the market of coins and other forms of investment bullion particularly slack....

Another dealer quoted suggests that the supply squeeze is just as bad (if not worse) in Europe.


There's a veritable buying panic in place. Such panics are not the best time to buy, but the lack of supply is indicative of prices going higher. Not mentioned is any increase in premiums for those coins.

Premiums On U.K. Bullion Coins Rising

Formerly 3%, the premium for a U.K. sovereign has risen to above 7% over the last month and may rise further. There seems to be a supply squeeze developing.

In the U.S., sales fo American Eagles for May have beaten all months since January of 1999. "Tyler Durden" comments:

As the US Treasury will gladly tell you, there are some products for which demand increases proprtionally with price. While Tim Geithner would like you to believe this means Treasuries, gold is rapidly replacing Treasuries in this regard. As to questions about whether gold is in a bubble, we can’t claim to know the answer at this point. Please ask us again when gold trades at $5,000.

"Brown Bottom" Raked Over...By The Manchester Guardian

The opening of the Guardian article features an extended discussion of Gordon Brown's decision to sell off 395 tonnes of U.K. gold - right around the bottom of the market. His decision is already infamous as being the costliest decision made by a U.K. finance minister.

It would have taken a confirmed cynic - and/or a gold believer - to see that sale as a buying signal. At around the same time, the now-defunct show Sabrina, The Teenage Witch portrayed the principal of the school Sabrina attended - a normally buffonish character - as a goldbug. Market nuts take note: had it been read with a cynic's eye, that episode would have been a clarion buy signal for the metal, just as the "Brown bottom" was. Of course, few people of the mind to be contrarian investors would have seen that episode at the time.

The rest of the article uses the bad-Brown example as a hook to make people more aware of the real value of their gold when the "Cash for Gold" companies come calling. It's a very British way of making people look around for a better deal from a vendor.