Tuesday, August 20, 2013

The Chinese Coin Market - Where Next?

After the big run-up of gold Pandas this last spring, many market participants are now cautiously standing on the sidelines wondering where things are headed next. Here we present some analysis and food for thought.

As I have written in previous posts, there is a tendency toward sector rotation in many markets, coins included. This means that after one sector has a bull run resulting in high prices, buyers will begin to look for undervalued bargains elsewhere.  Often in sectors that have been ignored for a while.

Chinese coin sectors for consideration:  Gold Pandas (BU, Proofs, Medals), Silver Pandas, Lunar Animals, Cultural.

Gold BU Pandas
Having just finished a very heated run, many of the most appreciated coins have cooled. Many buyers and sellers are waiting to see how prices settle-out.  Sales have slowed, but prices on most Pandas have not plunged. Crazy exceptions like 2002 1/10 are down quite a bit, but good solid 1990's gold pandas seem to be holding steady. There are just not many coins available to be sold, and most are now in strong hands. These coins seem quiet now, but key dates like 1995 and 1998 will be increasingly scarce and may eventually command very high prices

Gold Panda Proofs
The gold proofs were not part of the Spring 2013 frenzy and are very cheap right now. The scarce 1995 and 1996 1oz proofs are down 50% off their highs of over $20K a few years ago. With mintages ~1000 coins, these look very cheap compared to BU pandas. 1990-1993 proofs are cheap as well. The bimetals are in the same category. A 1986 to 1996 proof set is a nice long term buy.

Panda Medals
The Panda Medals are non-monetary "coins" issued by the China Mint to commemorate major coin shows around the world. Medals were issued regularly from 1987 though the mid 1990s, usually with very low mintages; 500 - 2000 coins for gold, 10K or less for silver. These are not technically coins, since they have no face value, but they are generally considered part of the official Pandas series.

After a long hiatus, minting of the medals resumed in 2012 at the Singapore show, followed by Philadelphia ANA, Berlin, and Long Beach. More are expected to follow. The arrival of new medals has brought new attention to the series overall. After years of neglect, and given the very low mintages, the medals a ripe for a resurgence. The Panda medals appear undervalued and are a key series to watch.

Silver Pandas
Silver pandas are still well below highs of 2011. Key dates are still in demand. I don't expect fireworks in silver until silver bullion resumes its ascent toward $100/oz.

Lunar Animals
The Chinese Lunar Animals are a very beautiful, unique, and well made series proof coins. Each year several
are issued depicting one of the 12 Chinese animal zodiac symbols. They have been made in various interesting shapes and sizes, such as plum flower, fan, rectangular, as well as round. Some are colorized. The designs are intricate, distinctive and very attractive. Chinese collectors tend to buy one each year and then put it away forever...  And very importantly, the mintages are very low.

These coins have had run-ups before, but not for several years. The availability of coins for sale is low, so there is real potential for price spikes.  These coins are very marketable in China, so any promotional programs would have a powerful affect. They are easy to like. We place these high on our list of coins to watch and accumulate.