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Platinum sinking like the Titanic
nycounsel
Posts: 1,229 ✭✭
platinum at $1150 an ounce???
all I can say is OW. or wow. or both.
I've hedged my bets by only buying the lowest mintage coins-- those are dropping with everything else, but have a better chance at retaining some of the premium to melt than the more common dates. Still, a 50% drop since May? This kind of cut is so deep that the response is more numbness than pain.
Trying to look at my half-empty pockets as half-full, i guess this gives us a chance to determine the numismatic value, if any, of the rarer coins.
Okay, so WHY has platinum crashed back to earth?
Here are a few likely culprits:
1. credit crisis/crunch: the era of free credit is over. money is getting expensive, and consumers are cutting back.
2. rising unemployment: it's not too bad yet, but rising unemployment means less job security for those who are still employed. more reason to cut back.
3. declining auto sales (based, in part, on 1 and 2 above).
4. futures market predicting lower industrial demand
so, what to do now? Your guess is as good as mine.
First off, IF you are facing money problems, as some people are in this economy, it's probably best not to try to time the market.
For instance, if you have a 1 ounce platinum coin that a month or two ago was worth about $2000, and it's now worth $1150, believe me, I share the pain. But if you have high interest debts, you might be better off selling and paying down debt than hoping for a quick rebound. Selling at $1150 and putting the proceeds towards a debt at, say, 15% interest will result in $173 annual savings on interest (more if compounded) than you would otherwise pay. Heck, talk to your accountant, you might also be able to write off the loss on the platinum investment.
If you DON'T have any high interest debts to pay off, but don't have a lot of money to spare, I'd probably just ride this out. Hold what you have and don't make any speculative bets that things will immediately go up from here.
I won't pretend to know where the bottom is, but we are now at levels that seem sustainable
chart
If you not only don't have money problems, but you have tons of cash, congratulations! - you should be giving advice instead of reading it.
There are lots of areas where someone who is cash-rich can take advantage of opportunities presented by this kind of economic environment, coins are certainly one of them.
My personal preference is to stick to the good stuff where the downside is limited.
Coins with mintages of 5,000 or under, and/or top quality specimens, especially if you can get them at small premiums to melt.
Some will think this is just rearranging deck chairs on the Titanic.
I don't know, but just like Vegas, figure out what your limit is before you play. Don't bet more than you can afford to lose.
all I can say is OW. or wow. or both.
I've hedged my bets by only buying the lowest mintage coins-- those are dropping with everything else, but have a better chance at retaining some of the premium to melt than the more common dates. Still, a 50% drop since May? This kind of cut is so deep that the response is more numbness than pain.
Trying to look at my half-empty pockets as half-full, i guess this gives us a chance to determine the numismatic value, if any, of the rarer coins.
Okay, so WHY has platinum crashed back to earth?
Here are a few likely culprits:
1. credit crisis/crunch: the era of free credit is over. money is getting expensive, and consumers are cutting back.
2. rising unemployment: it's not too bad yet, but rising unemployment means less job security for those who are still employed. more reason to cut back.
3. declining auto sales (based, in part, on 1 and 2 above).
4. futures market predicting lower industrial demand
so, what to do now? Your guess is as good as mine.
First off, IF you are facing money problems, as some people are in this economy, it's probably best not to try to time the market.
For instance, if you have a 1 ounce platinum coin that a month or two ago was worth about $2000, and it's now worth $1150, believe me, I share the pain. But if you have high interest debts, you might be better off selling and paying down debt than hoping for a quick rebound. Selling at $1150 and putting the proceeds towards a debt at, say, 15% interest will result in $173 annual savings on interest (more if compounded) than you would otherwise pay. Heck, talk to your accountant, you might also be able to write off the loss on the platinum investment.
If you DON'T have any high interest debts to pay off, but don't have a lot of money to spare, I'd probably just ride this out. Hold what you have and don't make any speculative bets that things will immediately go up from here.
I won't pretend to know where the bottom is, but we are now at levels that seem sustainable
chart
If you not only don't have money problems, but you have tons of cash, congratulations! - you should be giving advice instead of reading it.
There are lots of areas where someone who is cash-rich can take advantage of opportunities presented by this kind of economic environment, coins are certainly one of them.
My personal preference is to stick to the good stuff where the downside is limited.
Coins with mintages of 5,000 or under, and/or top quality specimens, especially if you can get them at small premiums to melt.
Some will think this is just rearranging deck chairs on the Titanic.
I don't know, but just like Vegas, figure out what your limit is before you play. Don't bet more than you can afford to lose.
Dan
0
Comments
Probably a big drop in supply.
Mostly buy-it-now or reserve auctions on ebay.
People are going to be reluctant to sell unless absolutely necessary.
They held from 2000 to 1800 to 1500 to 1300 to 1150.
The people who can afford to will likely continue to hold and hope that platinum rebounds.
That strategy probably makes sense for those who can afford it.
Still, platinum's achilles heel has always been and continues to be a lack of demand.
The collector base shrank dramatically as bullion went up.
Now that bullion is declining, will the base start to grow?
I actually don't think it will, at least not in these market conditions.
The same factors that are driving the decline in bullion price -- tight credit, job uncertainty, expected decline in industry -- don't give me much hope that we will see a big influx of new collectors if the Mint reprices lower or issues the 2009 platinums at dramatically lower prices. IF that does happen, well, that can only be a good thing for the "keys". But I'm a pessimist by nature, and I think that collectors who were driven away as platinum skyrocketed will hesitate to return now that it's declined.
Long term, who knows. I've heard the Pan Pacific gold comparisons before, but I feel like coin collecting as a whole is going to be a lot different over the next few decades than it was from 1915 to 2008. I don't have any figures or research to back this up, but my impression is that coin collecting as a hobby grew tremendously during that time. Now people are more likely to pay with plastic than cash; my gut tells me that this is going to hurt the hobby.
For those who might care for my long-winded analysis on this, here are my thoughts:
Too many Mint issues dilute the market
The huge number of coins issued by the Mint in recent years is, in my opinion, not a good thing -- it fractionalizes the collector base and marginalizes the niche that they collect. Same thing with this message board -- we were once part of the general population, and now PMs are a separate group. Feels like the dynamic aspect of the forum has suffered, and maybe we've all lost a little because of it.
I think Gold modern collectors are going to suffer
Anyway, the Mint issues right now are overwhelming. Just on the gold coins, we have Buffalo golds, first spouse golds, american eagle golds (and soon a high relief gold coin). A lot of collectors can't afford to buy, or aren't interested in buying, all three, so they pick one and focus on that. I expect that there won't be a lot of cross polinization of these collector bases. So the Mint has take what used to be one strong collector base- American Eagle Golds - and effectively split it into 3 groups. Some of the longer standing American Eagle collectors will stick with those. But some will switch to Buffalo or First Spouse golds, and stop buying American Eagles. The keys for American Eagle golds are likely to be replaced- lower demand means lower sales/mintages. On top of that, some existing collectors will sell their American Eagles to fund their new interest. So existing keys will become more available and prices will decline. The price decline and decline in the collector base will also demoralize the remaining collectors, it's an ugly spiral.
Are platinums the 2 cent coins of tomorrow?
Seems to me that has happened with the platinums. Things were okay through 2006... the shrinking demand dynamic, which was bullion based, was almost under control - 2004 proofs were a bottom, and 2005 demand was a little higher. We enjoyed a short-lived stablization of the base. Then in 2006 all hell broke loose. The Mint, in its wisdom, tossed another coin into the platinum seas. The changing reverse burnished uncirculateds starting with the 2006 w. Now proof collectors could stick with proofs, or switch to uncirculateds, or double down and try to do both. We ended up with 2006 w mintages that were so far below recent figures it seemed hard to believe. 2007 ws increased somewhat, but we're still dealing with the fact that the introduction of the uncirculated ws are at some level lowering demand for the proofs. 2008 numbers are going to be insanely low if they don't reopen sales. There was no way to see that coming-- the Mint had priced the coins in the stratosphere, and then platinum tanked. There's still no word on what the Mint will do. If it reprices to market, the price drop will be huge. Some who purchased early will probably feel a little bitter. If the Mint doesn't reprice, those who bought early will have hit the lottery, at least if there are any collectors left to care. But the uncertainty about keys, the high cost barrier to entry, the lack of a stable collector base and the fractionalization of what base there is are all really taking their toll on this corner of the hobby. If the Mint decided to pull the plug on platinums at the end of this year, would we see more collectors take interest? I'm not sure that we will. No offense to those who collect 2 cent or 3 cent coins, but I feel like unless something changes, that's where we're headed; a small group of dedicated collectors of an obsolete issue.
It's difficult to address the numismatic aspects of the hobby without taking into account the metals market, since the fluctuation in bullion can dramatically impact affordability, collectibility and mintages. The facts don't always correspond neatly to the theory. For instance, 2006 and 2007 platinum proof figures did not decline to historic lows, and were clearly not impacted on a 1 to 1 ratio by the w uncirculated sales; but I still think that some of the w uncirculated sales were at a cost to the proofs.
i remember electricity problems for the mines was a point that
speculation went mad with plat that you failed to list in your first
post. they were thinking mines would be shutdown but that failed
to happen as they got more priority then expected.
i also think prices going up so fast was a mixed blessing. long time
collectors enjoyed it but it brought in speculators who also expected
the same type of returns.
with the price crashing these speculators no longer want any part
of it and many newbies looking into it will still find it extra-ordinarily
expensive to start even with the price drops.
i truly think collecting plat coins "rounds" is an aquired taste that
will have a small pool of people to appeal to.
And now that the Olympics are over, which is a stimulant of precious metal trinkets, perhaps we have some global economic hangovers to handle.
That should help with a floor, BUT the number still has further to fall.
The US Mint?! How many are they selling ???
How many rare Plats were lost at $2,250 Melt?
I don't care how rare they are, folks were melting them at $2,250.
Well, just perusing the number of posts to new threads on this forum the switch has only cost the main coin forum about 1400 posts so far, not counting the predictions thread posts.
As a platinum collector with no plans on selling I enjoy the drop in spot price. Bullish for my future purchasing budget.
If I was an investor i don't think I would be so happy.
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I guess it also "cost" the number of posts that would have been made,
if the PM-threads had remained at the "main coin forum."
At the coin shops I stop into, most of the conversation is about "metal prices."
Moving PMs to this forum was a good play, and it allows folks who are not
interested in the subject to avoid the "clutter."
In the final analysis, I don't think that things were so great in 2006. Too many flippers. The series (and the collector base) didn't have time to build to a crescendo because of the hot-white spotlight and all of the short hitters that never stuck it out once the prices stopped climbing on a daily basis.
The collector base was lifo - last in, first out. Now it's just the 23 of us left. If the Mint keeps raping us over and over, it will whittle the number down to about 8 of us.
I am hoping that the 2008's don't come back. If they don't come back, I can guarantee you that we will have lots of company in 2009. And frankly, that's about the only way that I see the series making a comeback in the near term. A few killer coins in 2008 would stimulate a frenzy that would make 2006 look boring.
The real kicker is that the series will be around whether or not collectors come back in the short term or not. The series is a winner, simply due to the subject matter and the high-end status. Our advantage is that we are here for it. 20 years from now, it will be nigh-impossible to do a set. Even a short set will be a challenge.
I think that Coinboy has a valid point - we won't ever know how many (and of which dates) were melted. Even now, I can't find the "common" issues that I need for a complete set - at least not at a price I'm willing to pay. So one type of challenge (pricing) has been replaced with a different type of challenge.
As you note, the dramatic price decline has probably raised the potential for numismatic premiums to develop once again. And, as jamakin points out, it will now be easier to continue collecting - at least, until the next price spike.
I could see Plats continuing to gain some momentum if the program were not continually mis-managed. If the Mint were to cut back the varieties to only a single finish for each year, I think that the series could gain some traction. Having a proof, a burnished and a regular unc option for such a high-cost series is ridiculous to the max. Two or Three 4-coin sets at 1.85 ounces each is wayyyy too much to sustain any type of collector interest. It's just that simple.
Same goes for the multiple, multiple, multiple gold coin options. The classic commemorative half dollars issued prior to 1954 had a trashy reputation for years and years, simply because the program was so badly managed that demand was spotty at best. The Mint should study some of it's own history and take heed.
I knew it would happen.
very much agree with this. some people think that options are a good thing, but they are missing the bigger picture- what it does to the hobby as a whole.
too many options are what, in my opinion, killed stamp collecting. Now, I admit I'm not a stamp collector. And maybe stamp collecting isn't dead, I'm not sure. But it doesn't SEEM to be the hobby it once was, and I'm not aware of stamps having the kind of following, forums, etc. as coins.
The Mint has taken a demoninational approach to bullion coins, which made sense.
But it has since expanded that into what is now a kind of bullion-commemorative hybrid- coins that are basically commemoratives, but are offered in different denominations and with different finishes on an annual basis..
The platinum proofs are that kind of hybrid. Most of the value is as bullion, at least when issued, but they are a collector item (because purely bullion interest would not need a proof finish or justify a higher premium). The w uncircualteds are the same thing. Bullion investors would just as easily take the regular non-w coins than pay a premium for a different reverse and packaging.
Gold buffalos might be offered each year, but in my mind they are more of a commemorative than a strictly bullion coin. If they were just a bullion coin, they wouldn't be needed, as redundant with the American Eagle series. Instead, they are offered not so much as a way to trade in measured amounts of gold, but with the most compelling feature being the design, and at a premium to melt that makes them a collector item more than a bullion item.
It was easier before they did that. One might collect $5 golds, or the commemorative halves, with the occassional $10 throw-in. The First Spouse golds, in unc and proof, automatically create 8 new additions to be considered each year. The fractional buffalos, another 8. The platinums, another 8 (12 if you count the non-w uncirculated). The American Eagle golds, another 8. So now, each year between platinum and gold offerings alone, we have about 32 new bullion-based commemorative type coins introduced to the collector market, plus whatever other commemoratives or special finishes the Mint dreams up. It's just too much. What do collectors do? The same thing everyone does when there are too many options. Most of us tune them out and just focus on one or two favorites. Kind of like cable TV-- in the old days, there were just a couple of channels available; everyone seemed okay with it. Cable TV created hundreds of channels (and I'm not complaining about that, it's a different market). But what do people do? For the most part, they have a couple of favorite channels that they primarily stick to, dabble in some of the other options if there is something of interest, and ignore most of the other options that don't appeal to them.
With coins -- my theory anyway-- what happens is we end up with a fractionalized collector base. Too many options makes us focus only on one or two. Dealers do this too-- how many collectors of modern coins approach dealers who know nothing about how to value modern coins? Not so long ago, the base was mostly unified, and almost any collector would be able to give a ballpark price on a key coin-- 1955 doubled die cent, or a 1942/1 mercury dime, or a 1950-D jefferson nickel. Those coins would have a broad market appeal. Now, with moderns anyway, we are all specialists. You can't sell a platinum coin to just any collector, it has to be to someone who knows the market. Offer what to you is a key date American Eagle gold coin to someone who doesn't know the mintage figures or understand the collector base, and it will be worth melt. The American Eagle silver coins have a broader market, so make the font on the U different and you end up with a huge windfall if you sell to one of the many silver eagle collectors... If that market was similarly fractionalized, to most buyers a $500 coin would just be $12 worth of silver.
Having a bunch of smaller collector bases instead of a large community makes all of us more vulnerable to changes in demand. A couple of collectors lose interest in collecting and you might see an impact in demand. The converse is true also, of course, but it's much harder to attract a new entrant to an existing niche market.
New collectors collect what's readily available-- they might start with 50 state quarters, and move on to other pocket change, then to proof sets, and then branch out to commemoratives. Few make the move to niche coins, especially if they are obsolete or have high barriers to entry (expensive). Collectors might start with lincoln cents, and progress backwards to wheat cents, then to indians, large cents... Most, as far as I can tell, rarely take interest in 2 cent or 3 cent coins; if they do, it's just to get one example for a type set. A new collector for American Eagle Gold or Platinum is taking on a tremendous task. Start with the current year, okay. But collecting back to the beginning of those series is a big commitment, especially when these coins lack the romantic/historical aspect of, say, Morgan Dollars (where it is also expensive to try to build a set, but most are readily available in circulated condition for a nominal investment). Anyway, I write too much and am probably repeating myself... don't have time to edit this down right now, so apologies to anyone still reading.
Especially true for expensive bullion-based coinage. Edmond, are you out there? Are you listening, at all?
I knew it would happen.
I look forward to $900 platinum, $500 gold and $8 silver as that would really help the collectors get back into some places they have been priced out of for a while.
Box of 20
<< <i>Seems past platinum issues may not be had on ebay for close to current melt. Most are priced at the $2000 levels and don't think this will change anytime soon. JMHO. >>
That may be true for PCGS 70's, but not true for anything else. If you peruse the completed listings, you'll notice that the Plats, which have sold, are getting no more than 5% over melt in most cases.
<< <i>The collector base shrank dramatically as bullion went up.
Now that bullion is declining, will the base start to grow?
I actually don't think it will, at least not in these market conditions.
>>
I think the only coin who's base will expand will be fresh Lincolns at face value from the Bank. Can't go wrong there, and who's to say that one less 2 micron scratch can't be a wonderful and exciting thing?
By the way, has anyone noticed the BOOM in the Chinese eBay market? I've seen 1909-S VDB's going for upwards of $25 !
Very impresive when you consider that 1804 dollars and 1913 nickels go for about $5.
I think the Mint's 2009 issues will really drive momentum away from or toward platinum. Almost everyone seems to hate the proposed design. Unless platinum drops pretty low, I probably won't get one. Will anyone care if it becomes a Super Key?
A final thought: will we see a flood of new material from axed Lehmann and Merrill Lynch employees?
GritsMan, I'm already holding my nose for 2009, and I'm not sure if I can really pull the trigger on that design.
I've been buying alot of their platinum issues for years, hoping for a Super Key, and after awhile, it simply becomes less important. Further - when platinum gets a 50% haircut (admittedly after a nice run), that 50% haircut makes it a whole lot less enticing.
I knew it would happen.
<< <i>I think the Mint's 2009 issues will really drive momentum away from or toward platinum. Almost everyone seems to hate the proposed design. Unless platinum drops pretty low, I probably won't get one. Will anyone care if it becomes a Super Key?
GritsMan, I'm already holding my nose for 2009, and I'm not sure if I can really pull the trigger on that design.
I've been buying alot of their platinum issues for years, hoping for a Super Key, and after awhile, it simply becomes less important. Further - when platinum gets a 50% haircut (admittedly after a nice run), that 50% haircut makes it a whole lot less enticing. >>
Yeah, the wonderful thing about platinum has been the designs. Without that...well, a LOT of nose-holding!
I always thought it was overpriced when it went to the moon anyway. I sold what I had near the top of the elevator, guess I should have bought more several years ago. Really though, I was just lucky when I bailed on it. Just a gut feeling and it went up a bit more after I sold, but now I feel pretty good about it.
I never really cared for them as collector pieces, it was just investment like silver and gold.
I think it's more far likely that silver and gold will climb back to near previous levels than platinum will.
Having said that, I do feel for those who have taken this hit. I know it all too well from silver and to a lesser degree gold.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff