By David Bogoslaw Dow Jones Newswires September 21, 2001 NEW YORK -- While the price of gold has disappointed some traders by not rising further on the financial and political uncertainty arising from last week's terrorist attacks, physical demand for bullion coins has skyrocketed in recent days. "Retail demand is through the roof," Frank McGhee, a dealer at Alliance Financial LLC in Chicago, said. "I want them, I want them in my possession, I want to bury them in the backyard," is the overriding sentiment by small investors who, for the most part have, haven't shown much interest in the coin market in recent years, he explained. While bullion coins have a face value, such as $50 for the American Gold Eagle, they are priced according to the market value of the metal they contain. The Gold Eagle contains 1 troy ounce of gold. Michael Alster, marketing director for coin dealer Eastern Numismatis, Inc. in Garden City, N.Y., estimated demand for bullion coins has risen by 30 percent over normal levels during the past week, with nine out of 10 calls being for Gold Eagles. "People are walking in and buying them right off of the counter," he said. Mike Tordella, president of Manfra Tordella and Brooke (MTB Inc.), a New York-based wholesaler and retailer of precious metal coins and bars, averred that volume had increased at least fivefold since the attacks. He saw gold fulfilling its role as a safe haven in times of crisis. "We're getting calls from financial planners who are looking for a half million or even a million dollars' worth of gold for their clients," Tordella said. "That represents a rather small portion of an individual portfolio, but it's a lot more than what people had been considering previously." Many investment managers agree that by holding between 5 and 10 percent of their portfolios in the form of precious metals, individual investors can reduce the overall risk in their portfolios. But until recently the monetary returns on holding gold, silver and platinum have been small compared with returns realized from equity investments, which limited demand. While coin demand vaulted higher last week, now that equity markers have lost more than 13 percent of their value this week, people have begun to pull back, reluctant to buy much of anything, noted Mike Fuljenz, president of Universal Coin and Bullion in Beaumont, Texas. "This is what happens historically. Going back to Black Monday (on the New York Stock Exchange in October 1987), whenever you have crisis, you see an initial surge, then a little pullback, because people get a little worried because they may have lost 15 to 20 percent of their net worth in the stock market," he explained. As the equity markets find their footing and stabilize in the months ahead, more investors will flock to coins, however, he predicted. "Three to six months after the events occur, we go into major bull demand," he said, citing historical precedents such as the aftermath of President Nixon's resignation in 1974 and the Iran hostage crisis in 1980. "People become more willing to diversify." When they do, he added, taking only a little bit out of equities investments gives a large boost to the value of precious metals. The surge in bullion coin demand may result in a shortage for a while, as the U.S. Mint was caught unprepared for the run on coins, having been maintaining a minimal inventory over the last year due to lack of demand, according to McGhee at Alliance Financial. The Mint has had problems getting enough planchets, or striking blanks, for the minting of the bullion coins, Alster at Eastern Numismatics, agreed. No comment was available from the Mint. MTB's Tordella didn't see the Mint's low supply as a lasting problem, however. "The Mint can keep minting as much as demand requires. It can crank up production very quickly," he said. Nor was he concerned, he said, with the expanded supply of gold bullion in private investors' hands that could easily flow back into the market and force prices down once the financial and political threats had abated. "Traditionally, gold has been a one-way metal," he said. "People buy it and hold it for a very long time. I don't often sell people half a million dollars' (worth of gold) for their portfolio and have them sell it back in six months' time." Alliance's McGhee cited an increase in the premium of coins to the underlying spot gold price from $5 an ounce before the attacks to $10.50 to $15 an ounce afterwards. But Tordella at MTB hadn't seen premiums rise that much. "The market tends to spread itself a lot between bids and offers," he explained. "Dealers are working over the phone rather than working off a stable pricing system. We've been having trouble getting (price updates) because communication lines have been damaged. -END- ------------------------ Yahoo! Groups Sponsor ---------------------~--> <FONT COLOR="#000099">Get your FREE credit report with a FREE CreditCheck Monitoring Service trial </FONT><A HREF="http://us.click.yahoo.com/MDsVHB/bQ8CAA/ySSFAA/WfTolB/TM"><B>Click Here!</B></A> ---------------------------------------------------------------------~-> Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/