What happened at the end of 2006?

[Lastufka Collection]

I didn't start really collecting seriously until late 2010, so I wasn't around in 2006 and 2007. What happened during those years to cause a 50% price drop in classic gold commems? (chart below)

 

I see most of the charts look similar to this one. A 50% drop in retail value from 2006 to today, while gold itself did nothing but run up and up and up... seems odd. Also, this was before the housing crash and financial mess really hit, so I don't think that was the main cause, if it was a cause at all.

 

Can anyone point me to a reason for this kind of crash in classic gold commem pricing? Not sure if now's a great time to buy, or if this price trend can be expected to continue. Knowing what triggered it might help me better understand.

[physics-fan3.14]

It has been a trend for most gold coins, not just the commems, that numismatic premiums have been shrinking while the price of gold has been rising.

[World Colonial]

I'm not sure from that chart whether it is supposed to represent a specific coin in a specific grade or if it is an aggregate. But in any event, there was a prior post on these coins here once and when I looked at the prices and the census populations, I thought they were vastly overpriced. Except for the $50 Panama Pacific, none of those coins are remotely scarce to my knowledge except in grade and even these two are not really that rare either.

 

As for the premiums to bullion, I suppose it makes some sense to expect a correlation but I'm not sure that it really exists. If you can find longer terms data, it would be instructive to see what happened to these prices when gold was losing value between 1980 and 2001. Given the low proportion of the metal to the market value, it would not surprise me if the correlation was weak in both directions.

 

I also took a look at the prices of US Assay Office $20 gold in AU and low grade MS recently, on Heritage. Those prices have not been declining recently but the premium over spot has decreased dramatically during the entire gold run up. Prices do not seem to have moved much at all in the last 10 years. Now, I think they are very reasonably priced at about six times melt for an AU-58 and maybe eight for an MS-62.

[DaveG]

Which coins in what grades and which pricing source did you use?

[Lastufka Collection]

This was for the 1903 Jefferson in MS66, graded by NGC, and the price data was from NumisMedia.

 

But all the other classic gold commems I checked showed very similar data across various grades and years.

[James_OldeTowne]

I think these kinds of charts for coins are borderline-nonsense. Coins are NOT commodities, no matter how much the propaganda machines at various grading services would like to have you think so. Naturally, coin values ebb and flow, but not in the manner of corn, or wheat.... or gold.

[cpm9ball]

I think these kinds of charts for coins are borderline-nonsense. Coins are NOT commodities, no matter how much the propaganda machines at various grading services would like to have you think so. Naturally, coin values ebb and flow, but not in the manner of corn, or wheat.... or gold.

 

I'm with James. Every time somebody wants to sell you something, they come up with stats that show only what they want to show.

 

Chris

[DaveG]

I've never been serious about Classic Gold Commems, but I've heard and read from several sources that the coins are very subject to promotion by a small group of dealers and that there will be definite cycles in the prices of the coins.

 

Most likely, except for the $50 Pan Pacs, the price of gold isn't much a factor in the price of the coins, especially the high grade pieces.

 

If you're actually interested in one or more of these coins in high MS grades, then I'd suggest following the prices in Heritage (and other) auctions.

 

I've only used the archives on the Heritage website, but I understand that at least some of the other large auction houses maintain archives on their websites as well.

 

Edited to add: Actually, the spring of 2007 was the beginning of the financial crisis, so it's possible that the chart shows that the market for these coins started drying up then. On the other hand, the financial crisis hasn't seemed to have had that much affect on the coin market until recently, so who knows?