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Author Topic: Why You Should Collect (or Invest) in Gold Panda Fractional BUs  (Read 153 times)
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Batman
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« on: 2011 Jul 10, 07:21:51 pm »



I found it very interesting that several weeks ago Panda America sold all of their gold panda BU's from 1990 thru 2004, both ungraded and graded.  I understand this purchase was made by one investor.  While this sale occurred about 5, maybe 6 weeks ago, it is more interesting that since then PA has not replenished any of their inventory of coins in this time block.  There could be two possible explanations for this 1) the coins  are not available, or 2) they are stuck in the NGC pipeline.  Personally, I have to believe the former.  PA is not offering any ungraded coins in these years, which means that while some maybe in NGC, you would have thought that some amount of ungraded coins would have been posted for sale in the past 4 or 5 weeks given PA's distribution dominance.  Additionally  I have noticed that inventory is just not available in the US with other dealers, and as Peter mentioned in his last pricepedia, pricing for many coins are not available in China.  Also, in the current pricepedia issue, Peter put together a list of how to invest $50k.  You will notice that 50%  of the recommendations were for gold Panda fractional BU's.  This should tell you something.  

As a result of this, I wanted to share my observations regarding the slow deterioration of inventory in the gold panda BU market.  In particular, the 1 oz. to ¼ oz range.  As previously mentioned, not only is inventory non-existent on ebay, but other websites have nothing to pick from. In other words you can’t find this stuff.

Over the past couple of months, new high prices have been set for certain years, especially for PCGS graded coins.  You might say someone is building a registry set… maybe, but maybe not….or it’s feeding time for the coin lion, maybe, but maybe not….I think collectors (new and old) are starting to realize just how scarce some of these coins/years  actually are and grabbing the best specimens for their collections before they disappear forever.  Also, a couple of months ago, Jays Rare Panda's was experiencing several significant sales whereby the entire stock was sold.  Jay has since replenished his inventory, but a lot of good years and sizes are gone.  We will see what happens in the near future to Jay’s inventory.   Even AU3000 has sold a couple of coins, which is a historic event in and of itself!!

Recently, about two issues ago, Peter wrote a recommendation focusing on ½ ounce BU’s in the Pricepedia and I want to expand on his recommendations.  While Peter was discussing in particular the ½ ounce 1994 gold BU, Peter also mentioned other fractional BU’s for 1994.  I believe Peter was using 1994 as a proxy and if you do a little bit of research you will probably conclude his recommendation was possibly focusing on many other fractional gold BU’s for many dates (just my opinion).  I also believe the one ounce variety is in very tight supply and will get scarcer as the months progress and as pricing suggests.

Back to fractional BU’s.  Let’s first start with actual mintages:  Obviously, the actual mintage may give you a clue about how many were produced, but it’s what they don’t tell you is where you should focus.  For example, is it reasonable to conclude that the mint actually sold/distributed all the coins they minted???    For reference, gold prices, in terms of US$, were about $300 in 1986, peaked in 1989 at about $500 ounce (hence probably the reason for the peak in gold BU production by the Chinese Mint) and ended below $300 ounce back in 2001 (plunging thru the early 90’s)(hopefully I got the pricing correct, either way gold was cheap in comparison to today and was not moving or moving in the wrong direction).  Given this lack of price movement over the years, how did China distribute all of these coins to investors???  Also, if you were buying gold back then wouldn’t you want the 1oz. instead of the fractional?   Furthermore, in my opinion,  China was not the most favored nation in 1989 and probably had a hard time distributing their coins for years to come (this was confirmed by Peter Panda several weeks ago on CCF whereby Peter was talking about melting his own stock).

 As reference point, the following are some published actual mintages for selected years for ½ ounce BU’s

1989- 120K, 1990-35K, 1991-32K, 1992 – 26K

My conclusion:  all these coins did not sell, because if they did, there would be a lot more quantity on the market given gold’s recent increase in price to the $1500/ounce level.

So if the mint did not actually distribute all these coins, where can one find reliable population estimates?  I turn to Peter’s book “Gold and Silver Panda Coin Buyer’s Guide “….IF YOU DON’T HAVE ONE…GET ONE!! (I am thinking about purchasing a second one, since my first one is starting to wear out and it would be nice to have one for upstairs and one for downstairs…if you know what I mean).   Peter  used actual sales data on tens of thousands of transactions compiled over the years to determine estimates.  

Is he right….I firmly believe so, and personally I think his estimates are probably too high in some cases, but this is just my opinion.  

Case in point, let’s examine the 1996 ½ gold BU (you can apply this logic to any year and any size but I particularly like 1996 because it seems to be one of the scarcest years (along with 1995 & 1994)).  Gold was about $400 ounce back in 1996 and had not moved for years.  The China Mint says they actually produced over 13,000 ½ ounce BU’s.  Do you really think investors bought all of these coins (if you do, then please stop reading).  Peter estimates the population of the 1996 ½ ounce BU at less than 1,750.  The key is "less than", and I believe this is correct.  

First, I just have not seen that many. Every once in a while one comes up for sale on ebay, but not of the frequency of a coin the mint said they produced over 13,000 of.  You would also think that given the recent appreciation in gold, more would  have been brought to market.  Also, NGC has only graded 62 of these coins over the years (not that this is a good indication, but just a data point..Take a look at other years and you will realize just a small amount have been graded).  How is this possible for a published actual mintage of 13,000??  Are they all stuck in safe deposit boxes? Not sure, but the best is yet to come;  Peter’s estimated population needs to be split into two different date varieties; large and small (1750 divided by two at best, but not likely !!!).  

So if you think of the BU’s as just an investment in bullion, you are sadly mistaken, as these coins are much rarer than many of their silver counterparts, but receive no recognition ( hence, the collector in you should be salivating).    Just try and locate a ½ BU for 1994 or 1995 either raw or investment grade.  Even the 1989 – 1993 are getting scarce ungraded or in investment grade  and some are not available, especially 1992 for some odd reason.  My estimate is that it can take at least a year or more to complete a 1/2 BU set from 1990 - 2003/2004 inclusive of both large and small dates (and that probably would not include the 2000 mirror).   Furthermore, the same case can be made for the 1/4 ounce BU.  Some of the years for the ¼ ounce have populations that are very small as well.

It's obvious that while silver panda’s have enjoyed significant price appreciation and a lot of attention, their gold counterparts have not kept up (probably the bullion stigmatism).  Many proof silver coins, and for that matter silver panda BU's sell for significant multiples over their precious metal content mainly due to low published/actual mintages, popularity and to a certain extent the perception of the affordability of silver.  For example, a 1995 silver proof panda raw sells for about $700, or roughly 20 times its metal value (using $35/ounce) with a published mintage of around 10,000 (but actual is probably a lot less, ok maybe 4 or 5 thousand but don't quote me).  In comparison a 1995 ½ ounce gold BU sells for about $2200, or about 3 times its metal value with a population estimate of less than 1,750, with two date varieties to consider (this could put either the small date or large date under a population of 1,000).   Also, another interesting fact is that almost all the 1/2 and 1/4 Gold BU's from 1991 - 2003 have populations less than 1) 2000 Silver Mirror Panda,  2) 1999 Silver Panda large date w/Serif, and 3) 1995 Silver Panda Micro Date, yet sell for a fraction of the multiple.  Obviously gold has a higher dollar entry point, but it is clear that if the gold BU's ever catch up to their silver counterparts, there will be significant price adjustments occurring in the future.   So while silver panda's seem cheaper because they cost less dollars, on a relative basis, they are much more expensive than their gold counterparts.  I could go on and on about the price disparity, but I think the one example drives home the point.  The gold BU's are sort of like the Rodney Dangerfield's of the panda collecting world!!!
 
Then you have to ask, are we going to start seeing a rotation away from silver into gold?  I believe so.  You might ask when will this happen?  I honestly don’t know.  However, sometime next year, I believe Peter plans on publishing a second edition of the book. I believe Peter mentioned he is working on more detailed population estimates on date varieties.  This will probably bring more attention to this area, but if I were you, I would not wait.  I recall KonaJim once saying that when Peter published his first book, he made a $100,000.  

Bottom line, don’t focus on actual mintages and do some homework.   If not, you’re going to miss the gold BUs.
« Last Edit: 2011 Jul 11, 05:53:40 pm by tamo42 » Logged
tamo42
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« Reply #1 on: 2011 Jul 10, 07:53:40 pm »

Quote
Obviously gold has a higher dollar entry point, but it is clear that if the gold BU's ever catch up to their silver counterparts, there will be significant price adjustments occurring in the future.   So while silver panda's seem cheaper because they cost less dollars, on a relative basis, they are much more expensive than their gold counterparts.  I could go on and on about the price disparity, but I think the one example drives home the point.  The gold BU's are sort of like the Rodney Dangerfield's of the panda collecting world!!!

I think this is the main sticking point. Silver has an extremely affordable entry point, whereas gold coins do not. This is why I think silver will continue to have much higher numismatic value as compared to melt value than gold coins and medals. After all, a new collector might be very comfortable buying $1,000 worth of 200x BU pandas but balk at spending $700 on a single fractional gold BU panda.

Nonetheless, I think you are right that fractional gold's turn will come. They just won't reach the multiples that rarer silvers do.
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Neal McSpadden
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« Reply #2 on: 2011 Jul 11, 06:27:20 am »

WHY YOU SHOULD COLLECT (OR INVEST) IN GOLD PANDA FRACTIONAL BU'S

I found it very interesting that several weeks ago Panda America sold all of their gold panda BU's from 1990 thru 2004, both ungraded and graded.  I understand this purchase was made by one investor.  While this sale occurred about 5, maybe 6 weeks ago, it is more interesting that since then PA has not replenished any of their inventory of coins in this time block.  There could be two possible explanations for this 1) the coins  are not available, or 2) they are stuck in the NGC pipeline.  Personally, I have to believe the former.  PA is not offering any ungraded coins in these years, which means that while some maybe in NGC, you would have thought that some amount of ungraded coins would have been posted for sale in the past 4 or 5 weeks given PA's distribution dominance.  Additionally  I have noticed that inventory is just not available in the US with other dealers, and as Peter mentioned in his last pricepedia, pricing for many coins are not available in China.  Also, in the current pricepedia issue, Peter put together a list of how to invest $50k.  You will notice that 50%  of the recommendations were for gold Panda fractional BU's.  This should tell you something. 

As a result of this, I wanted to share my observations regarding the slow deterioration of inventory in the gold panda BU market.  In particular, the 1 oz. to ¼ oz range.  As previously mentioned, not only is inventory non-existent on ebay, but other websites have nothing to pick from. In other words you can’t find this stuff.

Over the past couple of months, new high prices have been set for certain years, especially for PCGS graded coins.  You might say someone is building a registry set… maybe, but maybe not….or it’s feeding time for the coin lion, maybe, but maybe not….I think collectors (new and old) are starting to realize just how scarce some of these coins/years  actually are and grabbing the best specimens for their collections before they disappear forever.  Also, a couple of months ago, Jays Rare Panda's was experiencing several significant sales whereby the entire stock was sold.  Jay has since replenished his inventory, but a lot of good years and sizes are gone.  We will see what happens in the near future to Jay’s inventory.   Even AU3000 has sold a couple of coins, which is a historic event in and of itself!!

Recently, about two issues ago, Peter wrote a recommendation focusing on ½ ounce BU’s in the Pricepedia and I want to expand on his recommendations.  While Peter was discussing in particular the ½ ounce 1994 gold BU, Peter also mentioned other fractional BU’s for 1994.  I believe Peter was using 1994 as a proxy and if you do a little bit of research you will probably conclude his recommendation was possibly focusing on many other fractional gold BU’s for many dates (just my opinion).  I also believe the one ounce variety is in very tight supply and will get scarcer as the months progress and as pricing suggests.

Back to fractional BU’s.  Let’s first start with actual mintages:  Obviously, the actual mintage may give you a clue about how many were produced, but it’s what they don’t tell you is where you should focus.  For example, is it reasonable to conclude that the mint actually sold/distributed all the coins they minted???    For reference, gold prices, in terms of US$, were about $300 in 1986, peaked in 1989 at about $500 ounce (hence probably the reason for the peak in gold BU production by the Chinese Mint) and ended below $300 ounce back in 2001 (plunging thru the early 90’s)(hopefully I got the pricing correct, either way gold was cheap in comparison to today and was not moving or moving in the wrong direction).  Given this lack of price movement over the years, how did China distribute all of these coins to investors???  Also, if you were buying gold back then wouldn’t you want the 1oz. instead of the fractional?   Furthermore, in my opinion,  China was not the most favored nation in 1989 and probably had a hard time distributing their coins for years to come (this was confirmed by Peter Panda several weeks ago on CCF whereby Peter was talking about melting his own stock).

 As reference point, the following are some published actual mintages for selected years for ½ ounce BU’s

1989- 120K, 1990-35K, 1991-32K, 1992 – 26K

My conclusion:  all these coins did not sell, because if they did, there would be a lot more quantity on the market given gold’s recent increase in price to the $1500/ounce level.

So if the mint did not actually distribute all these coins, where can one find reliable population estimates?  I turn to Peter’s book “Gold and Silver Panda Coin Buyer’s Guide “….IF YOU DON’T HAVE ONE…GET ONE!! (I am thinking about purchasing a second one, since my first one is starting to wear out and it would be nice to have one for upstairs and one for downstairs…if you know what I mean).   Peter  used actual sales data on tens of thousands of transactions compiled over the years to determine estimates. 

Is he right….I firmly believe so, and personally I think his estimates are probably too high in some cases, but this is just my opinion. 

Case in point, let’s examine the 1996 ½ gold BU (you can apply this logic to any year and any size but I particularly like 1996 because it seems to be one of the scarcest years (along with 1995 & 1994)).  Gold was about $400 ounce back in 1996 and had not moved for years.  The China Mint says they actually produced over 13,000 ½ ounce BU’s.  Do you really think investors bought all of these coins (if you do, then please stop reading).  Peter estimates the population of the 1996 ½ ounce BU at less than 1,750.  The key is "less than", and I believe this is correct. 

First, I just have not seen that many. Every once in a while one comes up for sale on ebay, but not of the frequency of a coin the mint said they produced over 13,000 of.  You would also think that given the recent appreciation in gold, more would  have been brought to market.  Also, NGC has only graded 62 of these coins over the years (not that this is a good indication, but just a data point..Take a look at other years and you will realize just a small amount have been graded).  How is this possible for a published actual mintage of 13,000??  Are they all stuck in safe deposit boxes? Not sure, but the best is yet to come;  Peter’s estimated population needs to be split into two different date varieties; large and small (1750 divided by two at best, but not likely !!!). 

So if you think of the BU’s as just an investment in bullion, you are sadly mistaken, as these coins are much rarer than many of their silver counterparts, but receive no recognition ( hence, the collector in you should be salivating).    Just try and locate a ½ BU for 1994 or 1995 either raw or investment grade.  Even the 1989 – 1993 are getting scarce ungraded or in investment grade  and some are not available, especially 1992 for some odd reason.  My estimate is that it can take at least a year or more to complete a 1/2 BU set from 1990 - 2003/2004 inclusive of both large and small dates (and that probably would not include the 2000 mirror).   Furthermore, the same case can be made for the 1/4 ounce BU.  Some of the years for the ¼ ounce have populations that are very small as well.

It's obvious that while silver panda’s have enjoyed significant price appreciation and a lot of attention, their gold counterparts have not kept up (probably the bullion stigmatism).  Many proof silver coins, and for that matter silver panda BU's sell for significant multiples over their precious metal content mainly due to low published/actual mintages, popularity and to a certain extent the perception of the affordability of silver.  For example, a 1995 silver proof panda raw sells for about $700, or roughly 20 times its metal value (using $35/ounce) with a published mintage of around 10,000 (but actual is probably a lot less, ok maybe 4 or 5 thousand but don't quote me).  In comparison a 1995 ½ ounce gold BU sells for about $2200, or about 3 times its metal value with a population estimate of less than 1,750, with two date varieties to consider (this could put either the small date or large date under a population of 1,000).   Also, another interesting fact is that almost all the 1/2 and 1/4 Gold BU's from 1991 - 2003 have populations less than 1) 2000 Silver Mirror Panda,  2) 1999 Silver Panda large date w/Serif, and 3) 1995 Silver Panda Micro Date, yet sell for a fraction of the multiple.  Obviously gold has a higher dollar entry point, but it is clear that if the gold BU's ever catch up to their silver counterparts, there will be significant price adjustments occurring in the future.   So while silver panda's seem cheaper because they cost less dollars, on a relative basis, they are much more expensive than their gold counterparts.  I could go on and on about the price disparity, but I think the one example drives home the point.  The gold BU's are sort of like the Rodney Dangerfield's of the panda collecting world!!!
 
Then you have to ask, are we going to start seeing a rotation away from silver into gold?  I believe so.  You might ask when will this happen?  I honestly don’t know.  However, sometime next year, I believe Peter plans on publishing a second edition of the book. I believe Peter mentioned he is working on more detailed population estimates on date varieties.  This will probably bring more attention to this area, but if I were you, I would not wait.  I recall KonaJim once saying that when Peter published his first book, he made a $100,000. 

Bottom line, don’t focus on actual mintages and do some homework.   If not, you’re going to miss the gold BUs.



Bravo, Im with you on this Batman.  As a small time collector I cant phantom spending over $1500 on a silver coin much less over $5,000 but Gold Im going to have to say, yes.   Silver sells for many multiples over its intrinsic value so Gold is the obvious better value by default.  In fact, from now on Im buying only Gold Coins and nothing else, however, if a really good deal comes around for a rare silver coin of course I'm going to bite BUT it needs to be a really REALLY good deal.  I don't like the thought of carrying 50-100 plus silver coins with me when I can carry < 10 rare Gold coins if and when I need to get out of dodge.  On another note, its funny you mentioned Jay cause I asked him to hold me two Gold coins until the end of this month.  Anyhow, good read, cheers. 
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« Reply #3 on: 2011 Jul 11, 06:50:56 am »

thanks....Maybe Tamo42 can break this out into a separate topic.
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« Reply #4 on: 2011 Jul 11, 07:16:28 am »

Batman strikes again...and right on! GR808 is being too modest. Tamo's got a good point. All I need now is more cash.
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« Reply #5 on: 2011 Jul 12, 10:53:18 am »

Very well articulated article. Then again, I am biased. There is even more truth to what you say than I care to admit presently. Maybe when my one-per date 1/2 PF/MS set is complete I'd expound some. Good work.
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« Reply #6 on: 2011 Jul 12, 10:53:52 pm »

I think this is the main sticking point. Silver has an extremely affordable entry point, whereas gold coins do not. This is why I think silver will continue to have much higher numismatic value as compared to melt value than gold coins and medals. After all, a new collector might be very comfortable buying $1,000 worth of 200x BU pandas but balk at spending $700 on a single fractional gold BU panda.

Nonetheless, I think you are right that fractional gold's turn will come. They just won't reach the multiples that rarer silvers do.

I think you're grouping two very different class of buyers to make that point. In my opinion on this matter, batman has it all as I had calculated it. In fact, I was discussing the same within the past week and even used the $35 and $700 price points in my argument. Batman, are you me or did you overhear me (LOL)?

The collector who will spend $7,000 on a rare coin in a good grade vs. the intrinsic value of < $35, is the same potential buyer who can power a 1/20 oz high graded 2000 gold mirror or other rarer items into the stratosphere. That buyer pays no mind to the starting entry point of the market. That buyer only heeds the spot values for bullion stacking purposes and does the stacking through other means than small weighted coinage.
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« Reply #7 on: 2011 Jul 13, 04:47:54 am »

I see what you're saying, but a 2000 1/20 oz gold mirror panda is very different than, say, a 1986 1/20 oz gold panda. The 2000 coin has extreme mintage rarity for its type. The 1986 has some mintage rarity and some grade rarity, but it's not in the same league as the 2000.

I think that's why the fractional gold BUs are in that low-interest zone between entry buyers and rarity buyers.

But again, I'm not really disagreeing with Batman's thesis. I'm just saying that while the fractional golds will appreciate, I don't think they will reach the same multiples as silver coins of similar mintages.
« Last Edit: 2011 Jul 15, 07:48:03 am by tamo42 » Logged

Neal McSpadden
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« Reply #8 on: 2011 Jul 14, 08:43:07 pm »

Thanks for all the kind words and feedback.... I like to call it like I see it.
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