By Steve Roach – First published in the Aug. 30, 2010, issue of Coin World

Proof American Eagle gold coins have provided some sparks in the marketplace this past year, but the fast fall in prices over the past several weeks serves as a reminder that what goes up usually comes down.

Some major buyers have stopped buying these and prices have fallen sharply.

For some smaller dealers who were stockpiling the coins in anticipation of continued demand, the change in the market means they have lost substantial money, for now, as the coins are now worth substantially less than what the dealers paid for them.

During July, several large dealers were paying between $1,950 and $2,000 per ounce for Proof American Eagle gold coins in original Mint packaging – the inner and outer boxes, original capsules and original certificate of authenticity with the same year as the coins.

For example, on July 14 a major wholesaler was paying $2,025 per ounce; the dealer’s price gradually declined to $1,900 July 26. Then on July 27 the dealer’s buy price went down to $1,850. On July 29 in the morning the dealer’s buy price was $1,830 and by the afternoon it went to $1,800. On Aug. 3, the price hit $1,750 and then, with orders filled, that dealer stopped buying.

Incidentally, the price of gold on July 26 was $1,189 per ounce and the price on Aug. 3 was $1,184, meaning that the drop in demand was not directly related to the bullion market.

On Aug. 6, when gold increased to $1,205 per ounce, one dealer offered $1,650 per ounce for coins with original packaging, and for coins without the packaging, the price dropped sharply to $1,400 per ounce.

If those who are closest to the market are not buying at the high levels that have characterized these Proof issues for the last year, are they doing this because they know something that we at Coin World don’t know?

On Aug. 6, the U.S. Mint told Coin World that no decision has been made as to whether Proof 2010-W American Eagle 1-ounce gold coins would be struck.

If the U.S. Mint releases Proof American Eagle gold bullion coins in 2010, supplies will increase and less pressure will be placed on the current supply, likely ending the bull market for these issues.

Mr. Roach maintains a website/blog titled The Rare Coin Market Report

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