GOVERNMENTS CAN'T HANDLE GLOBAL RUN ON GOLD COINS

THERE'S a worldwide run on gold coins.

Even as the price of the precious metal itself comes under pressure along with commodities like oil and copper, people around the world are demanding so many of the valuable coins that government mints are having difficulty filling orders.

A spokesperson for the US Mint tells me that gold coins in this country, for the past month, "are being allocated because of an increased demand."

And the price that the government charges coin dealers has recently been increased by as much as 10 percent for a 10-ounce coin.

Robert Mish, a coin dealer in Menlo Park, Calif., says customers who want to purchase 200 gold coins often have to wait up to two weeks. Six months ago, he said, a purchase that size could have been filled immediately.

Someone who recently tried to purchase 100 one-ounce American Eagle gold coins in the New York City-area was turned away, even though he'd uneventfully made purchases before through the same dealer.

And even when gold coins are available, dealers report that customers are paying a bigger premium than they would have just a few months ago.

Previously, American Eagle coins were going for 5 percent over the market price of gold on the Commodity Exchange (Comex). Now the premium can be anywhere from 10 percent to 15 percent, even though the US Mint raised its price to dealers by just 3 percent for an ounce coin.

In one sense, the attraction for gold coins isn't surprising. Since ancient times, gold has been considered the safest investment to hold in times of uncertainty.

With fears of future inflation rising and concern about the value of paper currency and government-debt increasing with each new recovery plan announced in Washington and in foreign capitals, the desire to hold gold grows.

That part makes perfect sense. But there's another more puzzling aspect to the recent gold rush.

Even as the demand for gold coins such as the Canadian Maple Leaf or the Krugerrand of South Africa has grown, the market price of the precious metal itself is off its highs.

In early October, the price of an ounce of gold on the spot market was about $930 an ounce. With the commodities bubble bursting in recent months, gold declined into the upper $600 range. Spot gold closed yesterday at $739.90, down $2.60.

Bill Murphy, chairman of the Gold Anti-Trust Action Committee, says the price of spot gold is even more perplexing given the demand for coins and the fact that central banks in Europe have stopped selling gold into the open market.

"Gold should be moving up," Murphy says. "How could there be such a dichotomy between the historic high premium for coins all over the world and the low Comex price?"