"Numismatic Premiums" in a skyrocketing gold market
TommyType
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Pardon the long question......
Here’s a question which probably has no ‘right’ answer, but maybe a historical precedent to provide some good guesses:
What happens to the numismatic premium of common date gold if/when gold prices skyrocket?
Some definitions and assumptions to help frame the question:
1) Define Numismatic premium: the $ paid over and above the actual gold content of a coin.
2) Assume gold is now roughly $410.
3) For argument sake, we’ll only consider common date Saints in the grade of MS-63.
4) Assume for simplicity, (and because I don’t want to do the math), that a Saint contains exactly 1 ounce of gold.
5) Common date MS-63 Saints are listed at $800 in trends, $650 in PCGS. Again, for sake of this argument, we’ll just peg the current value at $650.
Therefore, the current “Numismatic Premium” for a common date, MS-63 Saint is about $240, ($650-$410). Or stated as a percentage, 58.5% over bullion value.
Now, let’s say the wildest predictions come true, and gold doubles in value to $820. What would you guess that a common date MS-63 Saint will be selling for?
a) $1060. The going rate of gold + $240 numismatic premium.
b) $1300. The going rate of gold + 58.5% premium.
c) $1500+. More than the current premium because of renewed collector/investor interest in gold coins
d) $820. Because the gold value has outstripped the numismatic value, and the coins are viewed as melting pot candidates.
e) Something else....
Personally, I’m of the opinion that c) might be the most realistic. Bull markets tend to pull people in. But I can see some merit in the other arguments as well.
Opinions? (Or did I lose everyone while stating my assumptions.....
)
Here’s a question which probably has no ‘right’ answer, but maybe a historical precedent to provide some good guesses:
What happens to the numismatic premium of common date gold if/when gold prices skyrocket?
Some definitions and assumptions to help frame the question:
1) Define Numismatic premium: the $ paid over and above the actual gold content of a coin.
2) Assume gold is now roughly $410.
3) For argument sake, we’ll only consider common date Saints in the grade of MS-63.
4) Assume for simplicity, (and because I don’t want to do the math), that a Saint contains exactly 1 ounce of gold.
5) Common date MS-63 Saints are listed at $800 in trends, $650 in PCGS. Again, for sake of this argument, we’ll just peg the current value at $650.
Therefore, the current “Numismatic Premium” for a common date, MS-63 Saint is about $240, ($650-$410). Or stated as a percentage, 58.5% over bullion value.
Now, let’s say the wildest predictions come true, and gold doubles in value to $820. What would you guess that a common date MS-63 Saint will be selling for?
a) $1060. The going rate of gold + $240 numismatic premium.
b) $1300. The going rate of gold + 58.5% premium.
c) $1500+. More than the current premium because of renewed collector/investor interest in gold coins
d) $820. Because the gold value has outstripped the numismatic value, and the coins are viewed as melting pot candidates.
e) Something else....
Personally, I’m of the opinion that c) might be the most realistic. Bull markets tend to pull people in. But I can see some merit in the other arguments as well.
Opinions? (Or did I lose everyone while stating my assumptions.....
)Easily distracted Type Collector
0
Comments
I believe the price of common gold coins will still be driven by collector/speculator demand. A very high bullion price will likely somewhat reduce the collector demand and thus lower the collector premiun for the coin. Unfortunately it looks as if we will likely find out the answer to your question in the next couple of years.
The individual should consider the premium as the numismatic value and this shouldn't change
no matter how high or low the price of gold goes. In real life though there would tend to be
a change in this premium based on the available supply of the coins and the amount of specific
demand for them. It willl tend to mirror the price of gold in both up and down markets.
I'd guess that for every $100 increase there would be about a 5% increase in the premium for
common gold. This increases will tend to kick in in fits and starts so would not be straight line.
As William Wooden, Sec. of the Treasury for FDR and a true "rennaissance-man" aptly put, "Coins are the footsteps of the history of nations". That's a small piece of the wisdom that makes these coins so desireable.
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
For example, on 8/27/99, when gold was $255.00, an MS-63 Saint was Bid at $450 (an 82% premium); on 9/10/04, with gold at $397.40, an MS-63 Saint was Bid at $525 (a 36% premium).
(Since it's published every week, I consider the Grey Sheet much more timely for measuring the numismatic premium than Trends, which is only published monthly, plus, it's a wholesale guide, so it should more accurately reflect what the more liquid dealer-to-dealer market is rather than Trends, which is for the retail market.)
Check out the Southern Gold Society
I would guess between (a) and (b). I think if I were going to pay $820 for a common ounce of gold, I would look at am MS63 Saint as a bargain for $1000, but if it got over $1200, $1300 or so, a person may consider just the gold ounce again. That's just my opinion.
JJacks
<< <i>(Since it's published every week, I consider the Grey Sheet much more timely for measuring the numismatic premium than Trends, which is only published monthly, plus, it's a wholesale guide, so it should more accurately reflect what the more liquid dealer-to-dealer market is rather than Trends, which is for the retail market.) >>
Couldn't agree more....But I work with what I have handy.
I used to swear by Trends, now more appropriately known as CoinValues. But lately it's lost my trust. I'm not sure if my change in attitude is because I'm now chasing more expensive coins, or if Trends has somehow slipped.
Might have to check into getting Grey Sheet.......But that costs real money!
(BTW....For those who complain everytime someone quotes PCGS values in Ebay auctions, would you REALLY prefer they quote Trends ???)
f) all of the above, depending on who the buyers and sellers are.
John Maben
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Numismatic premium (for both gold and silver coins) is always a moving target, since it depends on the bullion price and demand. For example, the numismatic premium for gold coins really widened in early 1999 due to the excitement over "Y2K" (lots of people buying gold and silver coins) and then it really narrowed in early 2000, when nothing happened (and people dumped their holdings).
As far as the Grey Sheet, I buy the "monthly option", which gives me the quarterly, monthly and one weekly sheet each month. It's $60/year. You can also get a few sample issues throughout the year, if your needs are less frequent.
In general, I find that I swear "at" price guides more than I swear "by" them, especially in a reasonably mobile coin market, like this one.
Check out the Southern Gold Society
only time will tell if this will happen in the future
michael
Premium saints in the 63/64/65 range have outpaced the gold price.
However, in each successive move, the pace has tailed off some. And I attribute this to the "getting burned" syndrome on the subsequent price drop when all the newbies get burned or feel taken. This group also included dealers and seasoned investor/collectors who got smoked and realize that gold doesn't run up in one great wave like traditional coins. They don't return quite as bullish the next time. But this is like a coiled spring, and once everyone says full steam ahead, the coil can unwind quickly.
In previous bull markets such as 1988-90, the better grade saints far outkicked the gold price.
Now that gold is at the same levels that we hit in the spring (MS 64 saints reached $775 wholesale at $425/oz gold)....MS64 saints are only at $675 wholesale. And this time....so far....they have moved about $50-75/coin vs about $35-50/oz in the gold price, depending on what time frame you start from. The fact that Heritage can move the common date Saint market 5-20% by themselves do to their massive buying from Europe, impacts the Saint market almost as much as the gold price moves...for now at least. If Heritage is low on Saints, and gold is moving up, then look out.
For my money, I'll take a near gem MS64 saint at $675 right now, than a hunk of gold costing $435/0z that has no numismatic value and therefore no chance of leverage. MS64 and 65 saints are the gold futures of the coin "bullion" market. You get a coin that is no longer being minted, is fresh as the day it was minted, and is 80 years old, reflecting a time when gold was the only "real" money.
Should gold break the $430-435 barrier, I would expect MS64 saints to uncoil and go up multiples of the $10/oz gold gain. Probably from $675 to $725-750 once the psychological barrier of $435 is broken, the gold banks and cartel lose their mojo, saints will uncoil rapidly.
Of course at some point, if gold goes high enough, the premium should entirely disappear, at that point I would want to be out of anything but pure bullion, and probably not even that. Lots of factors can influence the spread at any time. And how it is today, will not be exactly how it works the next time.
roadrunner