*I originally wrote this on September 23rd 2013 and its in its original form. Mistakes and all. If you haven’t had a chance read “THE BRITISH INDIA COIN MARKET AND CHINESE COIN DEMAND PARALLELS – PART ONE.” You may want to consider it. The same charades carried over in the scenario below by the same players. Funny. The game never changes. Only the players. Thank for reading my thoughts.
So why did the title above happen last year? How did a common gold coin that sold for maybe a little over bullion make a run? But that run was very brief, and puzzling to me somewhat. Why would a coin with a population at NGC of 500+ coins all of the sudden rise in value? The price had been frozen for years, and/or pegged to the bullion price of gold somewhat. Where is the demand coming from suddenly?
Prices for this coin last year (2012) were probably $345 a coin raw/ungraded or so on average. But if it went into an NGC/PCGS slab the price reached as high as $700+ in MS 64, and the low $600’s for MS 63. But that’s how a market functions, fluctuates, and I sold a sovereign somewhere in this run up. I still have a sovereign I didnt sell as well, and I also bought an MS 64 1918 sovereign two years ago for $500+ or so in 2011. These coins were being absorbed at $575 a crack raw in 2012! But how did this happen? Did the demand for these coins suddenly explode? Yeah. By maybe 4-5 people I suspect. So how could the price spike for a coin that had such massive availability, and really no numismatic value?
I recall speaking to a buyer sometime last year, he was ferociously purchasing these coins, and to each his own. I never sold him one of the 7+ gram value traps, rather I mentioned how there were “tons” of them graded at NGC, and it was a “Sovereign”. Again, I have no interest in buying these coins, and never encouraged anyone to buy these coins either. I kept hearing the term “i mints” being used, and it was synonymous with the 1918 Sovereign minted in Bombay.
Before the price started rising for this coin, the market for this coin was a thin market, and started rising rampantly for no reason. Gold was actually on the way down, and why would this coin suddenly rise in value, and after all it is a “bullion” coin? India had been on a very slow rise in numismatic terms since the Fall of 2010. By summer of 2012 the market was on red hot fire, and anyone could sell any British India fairly easily as they were being snapped up. Thin markets are the easiest markets to push around in extreme directions at all times. The British India Coin market was fairly thin to begin with which could be pushed around like a paper airplane at anytime, and is still susceptible. As is any thinly traded market.
How does this work again?
Sellers are always looking for new ways to make money, and so are buyers. One guy has to start the selling, and offer a coin. The cycle keeps continuing until other sellers take notice, more supply is offered, and the prices slowly creep back another lower standard deviation to the mean or new mean. Know what I mean? Generally speaking when these anomalies transpire they do not go unnoticed. But sellers are always more eager to fulfill demand when it is insatiable because it can disappear very quickly.
I think a few guys thought they could corner the market, and it just didn’t happen like they envisioned. Nor were they aware of the supply that was about to hit in the coming months, and the price of gold dropped which was unforeseeable as well. I must admit I was bullish on gold in the fall of 2012, but quickly changed my mind, and sold my biggest gold coin holding in terms of value. You never know with speculative markets folks, and unfortunately the rebound of gold didn’t last very long for those that were buying “i” mints. So did all this happen because of a hot market? Yep-
It is our nature as humans to always ask : Why? And the nature of a salesman is to ask : Why Not? Generally speaking all boats rise with the tide, but not all boats stay afloat. There is always debate amongst people that collect anything, and what is very interesting about the speculative bubble described above is that it had happen in the past within another coin market. More specifically with 1902 5 Ruble gold coins in say an MS67 grade, raw, and other grades as well.
In 2008 the Russian coin market had scaled heights only seen by….well…The Russian Coin Market. These 5 Ruble Gold cons were trading at 4-6 times what they were trading for three years ago, and the rise came from pure speculation I suspect. Did the rise/fall take place in a similar fashion? Probably. The average price of gold was $444 in 2005 and $871 in 2008 respectively. Do gold coins exponentially rise in these bull markets? Yes. But not bullion coins such as 5 Roubels, and 1918 India Sovereigns. Whatever happen to the price of the 1902 MS 67 5 Rouble you ask? The last one sold in April 2013 for $470, and the price of gold stood at $1,425 an ounce.
So why did common Russian bullion coins in 2008/2009 rise in value by 380%-600% from 2005 prices? The same reason 1918 “I” Mint Sovereigns went up in value. One guy told another guy, that guy told another, and another guy sold the other guy. The Russian bullion bubble went up on a greater scale than the 1918 “I” coins because there were more players, and more money being thrown around. The guys that were playing in the 1918 Sovereign run up should be thankful that coin only went up 70% from it’s mean value.
All of the above makes me wonder who was trying to corner the market, why they thought they could corner the market, and who convinced who to buy this “i” stuff. Was it Apple? Maybe someone with experience in one of the past run ups acted as a catalyst or an agent? Did someone say to someone else that, “The gold coins always rise in bull markets within numismatics, and I’ve seen this before. Trust Me! Now sign your name by the “X”, I’ll give you a box of Newports, and some PUMA sweats.”
Speculative salesman claim to know the future, and it’s still an educated guess on their behalf. Ask “Why”, and the salesman may counter with “Why Not”. “Why Not?, because you can only guarantee me one thing Mr. Salesman”. Salesman: “What’s that?” That I can certainly incur a loss by speculating. Mr. Salesman: “Yes, that is true.” But, it’s easy to be “Hindsight Harry” as I call one of my dear friends, and human behavior is quite interesting. As is the practice of speculation.
Speaking about Deja Vu how about this speculative choice somebody made below on September 20th 2013:
$836.50 if you can’t sign in to the above site-
What comes to mind?
WTF? Comes to mind-
Now look at this:
What changed in the past 26 days up until September 20th with this coin?
Consider listening to this song from Public Enemy:
The speculative Pied Piper is presented to us time, and time again. Do we follow him? Or do we lead ourselves to the pier or stay put?