Fear Grips the American Eagle Market As US Mint Desperately Seeks Solutions

If you are currently holding Gold or Silver American Eagle coins a devaluation in premium could soon hit the value of your assets.

The more complicated the problem, the easier the solution--often it’s to find a competitive alternative. And this problem-solution scenario easily applies to precious metals coins and bullion, as there are so many high-quality alternatives to choose from.

Silver American Eagle Coins Under Attack by Counterfeits from China

Numerous counterfeit US Silver American Eagle Proof coins have been turning up with greater frequency. It appears that an online seller in China has been selling counterfeits for $2.50 a coin. The real thing can fetch a price from $40 to $50.

As we mentioned in a previous post, counterfeit precious metals coins are very hard to produce and fairly easy to detect. Most of the fakes that are turning up are made of copper, their surfaces covered in a silver plating, and their diameter and weight matching that of a Proof American Eagle.

But the coin’s thickness is greater than that of its genuine counterpart. Its thickness being a dead giveaway, the counterfeits are difficult to inspect as they are packaged within a plastic capsule (as with most Proof coins). However, you can identify a fake if you were to compare its more nuanced features with the genuine coin--as coin orientation, lettering, and the Liberty features differ greatly from Proof coins.

But again, if you are not familiar with the real thing, you may have no reason to suspect that you’re in possession of a fake.

The US Mint Implements Security Micro-Engraving on top of CUSIP Listing

In response to these counterfeit coins, the Mint is planning to redesign the reverses of the American Eagle silver and gold coins. The original reverses, designed by sculptor Miley Busiek in 1986, will be replaced. The new reverses will be introduced in 2021--the bullion redesigns rolling out first, and the Proof coins following afterward.

But here’s the problem: in another remote corner of the banking industry, there’s a liquidity problem. Remember the repo markets, extended until November 4th? Remember the Federal Reserve--the lender of last resort--attempting to rein in short-term interest rates by injecting a consecutive series of billions into the market to add more liquidity?

Banks are short liquidity. Why is this a big deal? Both the bullion and Proof of Silver American Eagles, which are CUSIP listed, may be subject to Orderly Liquidation procedures:

• SEA1 7M5385AA2 SILVER COIN AMERICAN EAGLE ANY YEAR 1 OUNCE OTHER 0.9990

• SEA1P 7M5386AA0 SILVER COIN AMERICAN EAGLE ANY YEAR PROOF 1 OUNCE OTHER 0.9990

With the banking system short on liquidity, purchasing assets that are tracked by the American Bankers Association may not prove wise.

Buying physical gold and silver bullions or coins are wise, but if you buy CUSIP listed products, you’re taking a risk by making your assets vulnerable to the Dodd-Frank Orderly Liquidation Authority--an emergency procedure that can seize and convert your financial assets to capital to save failing banks.

OLA is essentially a “bail-in,” at which point your assets may no longer be yours. Instead, your money will be converted into bank stock. Should the economy undergo another financial crisis, one in which cash would serve you well, you’ll be stuck with bank shares, until the crisis is over.

It would be more prudent to solve the problem more simply (as we noted above) by avoiding assets that are vulnerable to risks in which you have no recourse, legal or otherwise.

If you need assistance in making this decision, contact one of our professionals at GSI Exchange. We can help you sort through high-quality coins and bullion that might better match your financial goals and risk tolerance.

But whatever you do, don’t purchase a product that might put you at a severe disadvantage down the line.