Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
A number of bills have been introduced lately looking to reduce the Federal Government’s deficit. The Savings, Accountability, Value, and Efficiency II (SAVE II) Act (H.R. 3146) is just such a bill.
Introduced by Representatives Patrick E. Murphy (D-FL) and Mike Coffman (R-CO) on September 19, 2013, the SAVE II Act includes a provision which would prohibit the non-cost effective minting and printing of coins and currency. For example, recent cost figures show that the nickel and penny would be prohibited under this act.
Closer examination of the bill has led investors in gold and silver coins to wonder if this measure would also prevent the minting of bullion coins, which cost far more than their denominations to produce. Mints will typically only produce bullion coins in order to meet demand, with the majority of the cost coming from obtaining the gold and silver. The rising cost of these metals has resulted in a production cost that far exceeds the face value of the coins.
Whether or not the SAVE II Act will prohibit production of bullion coins will largely depend on how the final bill is interpreted. Bullion coins do not derive their value from their denomination; the value is determined by the market price plus a mark up. The market value and the mark up make bullion coins a profitable venture for the US Mint.
On the other hand, the exact language of the bill reads:
(e) Prohibition on Certain Minting – Notwithstanding any other provision of this subchapter, the Secretary may not mint or issue any coin that costs more to produce than the denomination of the coin (including labor materials, dyes, use of machinery, overhead expenses, marketing, and shipping).
If this language is carried over to bullion coins, then the costs would far exceed the actual denomination of the gold and silver coins even if the denomination does not directly determine the coin’s value.
Gold and silver bullion investors will want to pay close attention to the progress of the SAVE II Act and how the final language of the bill is interpreted by lawmakers. The prohibition of the minting of bullion coins would cause the value of coins that are already in circulation to skyrocket.
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Source: Coin Update