Gold Bulls Lose Key Ally as Diehard Coin Buyers Vanish in U.S.

 Finding bullish gold investors is getting a lot harder, even in a place where demand has been almost a given in recent years: precious-metal coins.

Customers who were buying even as gold began slumping in 2013 are now so scarce at the Bullion Trading LLC shop in New York that owner Isaac Kahan says sales in May tumbled 35 percent. Purchases of American Eagle gold coins from the U.S. Mint, the world’s largest, were the weakest for the month in eight years. And global coin demand this year probably will slump to the lowest since 2008, TD Securities Inc. predicts.

“Some of the coin buyers are the diehard believers in gold, and seeing them stay away from the market means their faith may have been shaken,” said Phil Streible, a senior market strategist at RJO Futures in Chicago who has been following prices for 15 years. “Demand for all kinds of physical gold products has taken a hit.”

Bullion prices have been trapped in a bear market the past two years as inflation concerns proved overblown and U.S. equities and the dollar rose to records. Holdings in exchange- traded products backed by gold are the smallest since 2009, and global jewelry demand has petered out. With coin buyers heading for the exits, there aren’t many places left to find a bull.

‘Complete Capitulation’

“What we are seeing is complete capitulation,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $128 billion and is underweight in commodities, including gold. “Physical demand is very weak, and that lends to our expectations of lower prices.”

That marks an abrupt about-face for gold after jumping to a record $1,921.17 an ounce in September 2011. Buyers were betting that U.S. interest rates near zero percent would erode the value of the dollar and accelerate inflation. Instead, the U.S. currency surged and inflation was muted as energy and food costs fell. Futures were down 0.5 percent this year at $1,178.50 on Thursday on the Comex in New York.

Coin lovers were among the most optimistic. When gold plunged 28 percent in 2013, they expected prices to rebound and started buying. U.S. Mint sales rose 14 percent that year as the metal presses worked overtime. Since then, futures are down 2 percent and Mint sales fell 39 percent last year.

Not everyone is bearish. Bank of America Corp. expects prices will average $1,248 this year, and climb to $1,338 in 2016. The bank doesn’t expect Fed policy makers will be “aggressive” when it comes to raising rates, which will help to support prices, analysts led by Michael Widmer reiterated in a May 30 report. HSBC Securities (USA) Inc. and Commerzbank AG are also forecasting gains.