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Commems Collection: Question & Answer #09 - Impact Of Spot Prices

 
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 Posted 08/18/2022  07:15 am Show Profile   Bookmark this topic Add commems to your friends list Get a Link to this Message
This one was originally posted on CCF before I joined 11+ years ago, but I've seen versions of it over the years so I thought it merited inclusion in my resurrection list..

Coin Chaser asked:

Quote:
Are Old Commemoratives Effected By Price Gold Silver?


Note 1: I'm interpreting "Old Commemoratives" as the coins of the classic era (1892-1954).

Note 2: I believe in the old adage, "Give a man a fish, feed him for a day. Teach a man to fish, feed him for a lifetime." So, this post includes a bit more setup and math than some will like, but its all basic math and will enable a person with interest to apply the thinking to other scenarios. (At least I hope so!)

It would be good to begin the discussion with a statement of the weights/amounts of precious metals in each classic-era coin:

Coin                             Weight          Precious Metal Weight

Silver Quarter: 6.25 grams 5.125 grams Silver Half Dollar: 12.5 g 10.25 g Silver Dollar: 26.73 g 24.05 g Gold Dollar: 1.672 g 1.505 g Gold Quarter Eagle ($10): 4.18 g 3.76 g Gold Quintuple Eagle ($50): 83.59 g 75.23 g

Note: all coins are 0.900 fine, with the 0.100 balance being copper.

One other reference point: a troy ounce of silver or gold is 31.1035 grams.

The silver coins - quarter, half dollar and dollar - all contain just fractional amounts of a troy ounce of silver (16.477%, 32.954% and 77.322% , respectively). Because of the low weights involved, even significant increases in the spot price of silver do not have huge impacts on the intrinsic value of these classic coins. For example, the intrinsic/melt value of a US commemorative half dollar is $3.617 when silver is at $10 per ounce and $10.851 when silver is $30 an ounce - an intrinsic value increase of $7.234 per coin vs. a silver spot increase of $20.00 per ounce.

Even though the value percentage changes might seem significant, at the low intrinsic dollar values of these coins, most moves in silver spot price have no meaningful impact on the market price of classic US commemorative coins in higher grades. In contrast, a very common, lower grade (XF/AU) silver commemorative coin, such as the 1893 World's Columbian Exposition half dollar, which some dealers sell largely based on bullion levels, will likely be impacted by rising silver prices. But even if silver were to move to $100 per ounce, the change in its intrinsic value is not likely to appreciably effect the price of a Mint State-65 Battle of Antietam half dollar (though some dealers will increase their prices and blame the spot price increase!).

The much higher spot price of gold changes the story a bit.

Gold Dollars weight 4.839% of a troy ounce of gold, the Quarter Eagles weigh 12.089% and the Quintuple Eagles weigh 241.870% (i.e., ~2.42 ounces of gold). Converting to dollar values:

- At $800 an ounce for gold, the bullion value of each coin is: $38.70, $96.76 and $1,934.96, respectively.

- At $1,762 an ounce for gold (price on 8/17/22), the bullion value of each coin is: $85.23, $213.11 and $4,261.75, respectively.

Most dealers I know will reflect these types of intrinsic value increases in their market prices - and likely even add a bit to their overall increase! Even higher grade examples are likely to experience a price increase when gold goes up significantly (I'm not talking about increases of $10-$20-$30 an ounce).

It's fair to say that changes in gold spot prices have more of an impact on the selling price of classic-era gold coins than do fluctuations of silver spot on classic-era silver coins.

Note: weights, percentages and values quoted above are subject to slight rounding differences that do not change the conclusions presented.


Collecting history one coin or medal at a time! (c) commems. All rights reserved.
Edited by commems
08/18/2022 07:21 am
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 Posted 08/18/2022  08:49 am  Show Profile   Bookmark this reply Add Coinfrog to your friends list Get a Link to this Reply
Good read, thank you.
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 Posted 08/18/2022  09:52 am  Show Profile   Bookmark this reply Add NumisEd to your friends list Get a Link to this Reply
@Commems,
considering the above, what is in your opinion the most bullion-like, gold-containing Commemorative? "Bullion-like" in this sense meaning "a coin that closely tracks the price of bullion with a minimal markup".
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 Posted 08/18/2022  11:48 am  Show Profile   Bookmark this reply Add hfjacinto to your friends list Get a Link to this Reply
How are your feelings on the current crop of commemoratives? I know for example I picked up a bunch at spot plus $1-$2 precovid. I haven't purchased any recently so can't say what they sell for today, in the same vane most booker and carver commemorative in anything other than MS sell for bullion level plus a small premium.
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 Posted 08/18/2022  12:38 pm  Show Profile   Bookmark this reply Add commems to your friends list Get a Link to this Reply

Quote:
considering the above, what is in your opinion the most bullion-like, gold-containing Commemorative? "Bullion-like" in this sense meaning "a coin that closely tracks the price of bullion with a minimal markup".

In my experience, the market prices of all of the classic-era gold commemorative coins are predominantly driven by numismatic premium vs. intrinsic bullion value.

That said, the one gold commemorative coin the comes the closest (in my experience) to having its bullion value be considered a significant contributor to its market value is the 1926 American Independence Sesquicentennial Quarter Eagle (assuming the coin isn't a high-end mint state example). It's mintage of ~46,000 appears to exceed demand for the coin.



Collecting history one coin or medal at a time! (c) commems. All rights reserved.
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 Posted 08/18/2022  12:58 pm  Show Profile   Bookmark this reply Add commems to your friends list Get a Link to this Reply

Quote:
How are your feelings on the current crop of commemoratives?

Many of the modern silver commemorative coins from 1982 into the 2000s were sold at levels, especially the proof versions, to saturate the market and suppress price advances. As a result, the market value of many of these issues retreated toward bullion. IMO, unless there is a large uptick in the number of collectors looking to collect the modern US commemorative coin series, these issues will remain abundant in the market and likely never experience significant value appreciation independent of the spot price of silver.

The modern gold Half Eagle commemorative coins issued from 1986 through 1994 were sold in sufficient quantities to allow them to retreat to near bullion value in the years following their release. This began to change with 1995 releases, however, as the gold series began to experience lower sales volumes.

Note: It is very possible to encounter exceptions to everything I've said - I'm attempting to provide answers based on general market trends and my personal collecting experience.



Collecting history one coin or medal at a time! (c) commems. All rights reserved.
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