Tuesday, June 1, 2010

On U.S. Mint Gold Coin Pricing

Amazing. Even when it comes to gold coin pricing, the government manages to come up with some convoluted  bureaucratic regulations. Michael Zielinski reports:

Last week it seemed that the United States Mint should have reduced the prices for available numismatic gold coins based on a reading of their pricing policy. A notification published in the Federal Register documented a specific procedure by which the average of London Fix prices for a specified period would drive pricing changes. Applying this procedure would have resulted in a price decrease for the available First Spouse Gold Coins.


A response from the US Mint has revealed that there is more to the pricing policy than published in the Federal Register. There are additional criteria defined within an internal policy that can override the published policy. Until now, these additional criteria had not been provided or revealed to the public.

For more than a year, price changes have always followed the calculated average of the nine fix prices mentioned in the published policy. So apparently, this week was the first time that the internal policy guided the pricing determination.

The statement provided by the Mint follows:

On January 12, 2009, the United States Mint adopted a pricing policy which allows them to adjust prices for their numismatic gold and platinum products in order to mitigate the effect of the fluctuating prices of precious metals. The new policy was adopted to ensure that the United States Mint is able to recover all costs associated with gold and platinum products, while keeping changes in prices to a minimum. The new methodology is based primarily on the London Fix weekly average (using the nine fixes beginning Thursday morning and ending with the following Wednesday morning fix).

An internal policy defines the additional criteria that are used to determine price changes. These criteria use the Wednesday PM fix to determine the trend with the intention of minimizing changes to prices. Thus, if the average is above the existing range, but the Wednesday PM fix is in the existing range, prices will not be raised. Similarly, if the average is below the existing range and the Wednesday PM fix is still in the range, prices will not drop. Additional criteria based on the Wednesday PM fix address changes of more than one range, as well as spikes in the market, which could cause the average to be above the existing range, while the Wednesday PM fix is below the existing range, or vice-versa.

During the week that ended with the AM fix of May 26, 2010, the weekly average fell below the range that was in effect on that date. However, the Wednesday PM fix was within the range currently in effect, so the prices were not dropped.

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