Y2K worries are spun into gold

Fears of apocalypse fuel precious metal boom

June 13, 1999|By Tom Pelton | Tom Pelton,SUN STAFF

The Peruvian sol failed to shine. The Tongan pa'anga was no big thing. People at the coin convention did not notice the ceramic notgeld minted during the German hyperinflation of the 1920s and did not flip over the 1909 Lincoln penny.

Gold coins captured most of the attention Friday at the Atlantic Rarities Coin Exposition, which ends today at the Baltimore Convention Center.

Driven by fears that widespread computer failures will cause the international banking system to collapse on Jan. 1, survivalists preparing the barter economy of the apocalypse are fueling reported rises in precious metal sales from coin dealers in Baltimore and nationally.

"I think people should have lots of hard currency on hand because the Y2K problem is going to be much worse than people suspect," said Dave Hodge, 38, who was buying silver coins from dealers. "Better safe than sorry."

The "gloom-and-doom" coin collectors believe that only gold and silver will be worth anything after poorly programmed computer clocks on Jan. 1 roll to 1900 instead of 2000, confusing electronic commerce worldwide.

The ensuing financial chaos, they say, will hurl the United States into a Dark Age marketplace in which people will swap gold bullion for Spam and Snickers bars.

Longtime numismatists (or coin collectors) and economic experts view these gold hoarders with contempt, saying they've fallen for the self-serving propaganda of unscrupulous coin dealers trying to boost sales by spreading panic.

But the fears -- irrational or not -- seem to be having an impact on the sales of gold coins.

Despite a 22-year low in the price of gold, the U.S. Mint last year sold an all-time high number of gold coins -- 1.8 million ounces, almost seven times the 275,000 ounces sold in 1996, said Michael White, spokesman for the U.S. Mint in Washington.

"We don't normally comment on Y2K issues, but what we're hearing from dealers is that the concerns about Y2K and the low price of gold are driving the sales up," said White.

Thomas A. Palmer, organizer of coin dealer exhibits for the Maryland State Numismatic Association, predicted that sales of gold coins at this year's event could be double what they were last year. More than 1,500 buyers and 200 dealers are expected this year, he said.

"I am not a gloom-and-doomer myself, but there are a number of people who believe that Y2K will freeze up their bank accounts," said Palmer.

Such distrust may seem strange, but people have hoarded gold during uncertain times in America's past, Palmer said.

During the rampant inflation of the late 1970s and early 1980s, people bought so much gold that its price rocketed and then crashed. Wild fluctuations were spurred by the billionaire Hunt brothers of Texas, who bought enormous amounts of silver in an attempt to corner the world's silver market.

Most of the 300 people on the convention floor Friday -- some of whom squinted through magnifying glasses at ancient Roman coins -- waved off questions about the year 2000 with a laugh.

"Do these people really think they are going to walk into a Best Buy on Jan. 3 and buy a VCR with a silver British sovereign?" asked Steve Salembene, 34, an Indian head penny collector from Baltimore.

Serious numismatists at the show were fascinated by a 1943 Lincoln-head penny, mistakenly minted with copper during a period of World War II when the U.S. government switched to zinc-coated steel to save copper for bullet casings.

Others were buzzing about a rare 1914 D penny spent at a shop near the Inner Harbor on Wednesday. The convention organizers put the coin in circulation as a publicity stunt, offering $100 to anyone who finds it and brings it to convention.

But the millennium was on the minds of many of those wandering among the glittering trays of coins with lamps suspended over them.

"I might actually pull all my money out of the bank," said Lee Epperson, a 30-year-old martial arts instructor. "It's pretty scary, and the closer it gets to January, the more I'm going to think about it," he said.

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