A Bloomberg News dispatch reports, "The U.S. Mint ran out of its smallest American Eagle gold coin after demand surged…Sales of the coins weighing a 10th of an ounce were suspended after demand more than doubled in 2013 from a year earlier, the Mint said yesterday in a statement. Total sales of American Eagles in April have almost tripled from a month earlier, according to its website."
The Bloomberg article doesn't mention it, but one factor contributing to the demand for the coins may be their use as an estate-tax avoidance technique. (The tax went up this year.) I'm not endorsing or recommending this tactic or passing judgment on its legality, but I've heard of it. Basically, these American Eagle coins have a higher bullion value than face value. This tenth-of-an-ounce one that they ran out of, for example, has a face value of five dollars. That is what is printed on the face of the coin — "5 dollars." But the mint is selling it for $200, and with gold trading at $1,430 an ounce, the gold in the coin seems to be worth 143 dollars.
So what does this have to do with the estate tax?
Suppose you have a $10 million estate on which you owe estate tax. The way this tactic works, you buy 50,000 of these coins at $200 each. Then you declare their value to be 50,000 x $5, or $250,000. That, after all, is the face value that the U.S. government has printed on the coin. That puts you below the threshold for a taxable estate. Then, when you need the money, you can sell them for the bullion value rather than the face value.
One way for the government to put an end to this would be to get rid of the estate tax altogether; another would be to move to a gold standard, or a silver standard, under which the face value of a coin and the bullion value are identical. But so long as there exists a coin that the government says is worth $5 dollars while selling for $200, it's no wonder that it would be in such high demand. It's almost like the answer to a magic riddle: what can the same government claim is worth both $5 and $200 at the same time? Such a flexible yardstick of value may be useful to those facing an estate tax bill. But to the rest of us who would like our money to serve as a stable unit of value, the whole situation is just the latest example of the shortcomings of fiat currency. One almost hopes for an IRS challenge to someone who uses this tatic to minimize their taxable estate, if only for the spectacle of trying to watch some government lawyer try to argue that the money isn't really worth the dollar amount the mint has printed on it, but in fact is worth some larger amount tied to the market value of the metal of which it is made.