Dr. Constantin Gurdgiev, a non Executive member of the GoldCore Investment Committee, has analysed the data of US Mint coin sales in January and has looked at them in their important historical context going back to 1987.
January data from the US Mint on sales of gold coins presents an interesting picture, both in terms of seasonality and overall demand for the asset class.
Some background to start with. Gold prices have been moving sideways with some relatively moderate volatility in recent months. Between August 2011 - the monthly peak in US Dollar-quoted price and January 2012, price has fallen 4.55%, but in the last month, monthly move was 10.82% and year on year prices are up 30.4%.
Crisis-period average price is now at USD1,154/oz and the standard deviation in prices is around 337 against the historical (1987-present) standard deviation of 330. In 2011 standard deviation for monthly prices stood at 144(small sample-adjusted), well below historical volatility, due to a relatively established trend through August 2011. However, prices returned to elevated volatility in August 2011-January 2012.
These price dynamics would normally suggest rising caution and buyer demand reductions over time. And to some extent, this sub-trend was traceable in the data for US Mint sales in some recent months too.
For example, unadjusted for seasonal variation, August 2011 sales of Mint coins peaked at 112,000 oz with relatively moderate 0.67 oz/coin sold gold content. By November 2011, sales slowed down to a relative trickle of 41,000 oz at 0.71 oz/coin sold. December sales came in at 65,000 oz with gold content on average of 1 oz per coin sold.
Much media hullabaloo ensued with calls for catastrophic fall off in demand. There were renewed claims that a gold bubble is now in action and the decline in coinage sales is evidence of that.
In reality, there was very little surprising in the sales trends overall.
Above chart shows US Mint sales in terms of the number of coins sold. Care to spot any dramatic bubble-formation or bubble-deflation here? Not really. There is a gentle historical upward trend since January 1987. There is volatility around that trend in 2010 and far less of it in 2011. There is seasonality around the trend with Q1 sales uplifts in January, some Christmas season buying supports in early Q4 etc. There is also a slightly elevated sub-trend starting from early 2009 and continuing through today. More interestingly, the sub-trend is mean-reverting (heading down) which is - dynamically-speaking stabilizing, rather than 'bubble-expanding' or 'bubble-deflating'.
Now, January sales are strong in the historical context and within the sub-trend since 2009. January 2012 sales of US Mint coins came in at 127,000 oz with relatively low 0.50 oz/coin sales. So coinage sales in terms of oz weight are 95.4% up on December, but 4.9% down on January 2011. For comparison, 2011 average monthly sales were 83,292 and crisis-period average monthly sales were 94,745 all at least 0.5 standard deviations below January 2012 sales. As chart above clearly shows, sales are now well ahead of historical averages and above 6 months moving average.
However, as chart below shows, sales in January were well below the trend line for average coin weight for sold coins: oz per coin sold is down 50.5% mom and down 43.1% year on year. Significantly, smaller coins were sold in January this year than in 2011. 2011 average oz/coin sold was 1.0 and the latest sales are closer to 0.59 oz/coin historical average.
There is no panic in the overall trends in demand for coins when set against the price changes, with negative general trend in correlations between demand and gold price established in mid-2009 continuing unabated, as shown in below chart.
