Saturday, November 17, 2012

Strategies for Collecting Panda Coins

The ongoing financial crises is gradually leading many people to consider investment in hard assets, such as artwork, precious metals, and numismatic coins.  As a result, many people, both in the West and in Asia, are now entering the Chinese coin market.  Below is a basic outline of the Gold and Silver Chinese Panda coin market, along with some broad recommendations.

Panda Coin Overview

Beginning in 1982, the Chinese government began issuing gold bullion coins depicting the the China national symbol of the Panda Bear.  The coins were sold primarily to foreigners as a way to raise foreign exchange revenue and as a way to enhance Chinese prestige around the world.  At the time, gold was still near all-time highs and there was a shortage on coined gold bullion worldwide (only Krugerrand and Maple leafs were available).

Although initially intended as a pure bullion coin, the Pandas quickly began to appeal to collectors worldwide, especially in the US and Germany.  The coins feature and attractive new panda design each year, are available in several sizes of both gold and silver, and are produced in very limited quantities.
  • Gold panda sizes 1/20, 1/10. 1/4, 1/2, 1, 5 and 12 oz as well as 1 kg coins many years
  • Silver panda sizes:  1, 5 and 12 oz, 1 kg, and some 1/2 oz.
  • Most were issued as BU coins, with proof coins available on certain dates only, usually marked with a "P" on the coin.

Collector Appeal of Panda Coins
  • Attractive designs that change each year
  • Very Low mintages compared to other national bullion coins
  • Chinese legal tender status
  • .999 gold and silver purity
  • Availability in multiple sizes/denomination to match collector budgets
  • Many interesting varieties to explore and collect.
  • A very large and growing collector market in China and worldwide
  • A market that is not yet mature, where many rare types of coins are not yet prohibitively expensive
Identify Your Collecting Goals

Before diving into coin collecting of any type, it is important to evaluate your collecting goals, since this will help inform what you should buy.  There are three man categories on participants, you may overlap into more than one category, but one may be your primary interest:
  • The Collector
  • The Bullion Buyer
  • The Speculator / Investor

The Collector

The collector is interested in the beauty of the coins, the thrill of the chase to complete a collection, and the satisfaction and bragging rights achieved from building a great collection. 

For the collector, Pandas provide a bonanza of early stage opportunity.  Mintages of pandas are generally small, and there are many interesting types and varieties that are just now being discovered.  It is still possible to complete full collections of coins at reasonable prices to fit a budget when compared to low mintage US coins.  If you have sharp eye, you may be able to be one of the first identify a new/future rarity!

We highly recommend the Gold and Silver Panda Coin Buyer's Guide Book by Peter Anthony, and you can find many links to panda-related websites on the right side of this page.

How to collect:
  • Chinese collectors prefer collecting all coins from a single date (1/20, 1/10, 1/4, 1/2, and 1oz from a given year)
  • US collectors prefer to collect all dates of a given size (ex 1/2oz pandas from every date).  
  • Certified coins are preferred in the US and gaining interest in China

Collector Sets:
  • Date set - every date of a given coin size
  • Variety date set - every date and variety of a given size
  • Chinese set - all sizes of a given date
  • Grade set - all MS68 or MS69 (or all MS70 if you dare)
  • 1980's set
  • 1990s set
  • 2000's set
  • Proofs or Proof sets
  • Gold, silver, or platinum depending on budget and preference.

The Bullion Buyer

If you are looking to buy gold or silver bullion at a low premium, you may be too late to get into Chinese pandas.  While gold Maples, Eagles, and Krugerrands currently sell in a range of 3% to 4% over spot gold, current year pandas sell from major dealer at about 5% over spot.   Silver Maples and Eagles sell at $2 to $4 premium, while current year (2012) silver Pandas have a premium of $7 or more over spot silver.   This is  a function of strong collector demand and low mintage production.  These coins sell-out every year in recent times.

Furthermore, most older date Pandas trade at very hefty premiums.  20-30% is common and many dates can trade at 2x to 3x multiples of spot.  Special varieties trade even higher.   Lowest cost gold "common" dates are 1986-88 and 2010-2012.  Many silver pandas other then 2010-12 trade over $100 each.

As a bullion buyer, if you are looking for a little speculative zest in your portfolio, you way want to consider some pandas.  It is possible that even common dates may perform better than pure bullion.  Current year coins have historically gained 2-3% premium within 1-2 years. However, selling high-premium pandas requires a little patience.  The typical "we buy gold" outfit will not pay you any more than spot price for a panda, so you will need to sell to a specialist dealer or on ebay.

Recommended bullion-play pandas:
  • 1986-1988 and 2010-2012 gold.
  • Low-grade certified coins (MS66-MS68) or loose coins with slight marks usually trade below market.

The Investor and Speculator

If you are reading this, you are probably already convinced gold and silver are a good long term way to preserve and protect wealth, but you may be looking for something a little more interesting than gold bars, or  boring American Eagles. Chinese gold and silver pandas may have the extra potential you are looking for!

The Chinese coin market is still very young compared the mature, saturated, and well documented US coin market.  While US coins may do well in the future, most of the best rarities have already been identified and priced into the stratosphere.  It is unlikely you will make 2x or 3x your money on any US coin in a reasonable time period.   

Chinese coins, on the other hand, are just now being discovered.  New varieties of coins are being identified each year, and new collectors are entering the market daily.  The new and growing Chinese upper and middle class now have the money and the interest to buy their own national coins, and indeed they are buying heavily with government encouragement.  Over the past 3 years, numerous key panda varieties have more than doubled in market value.  We expect this trend may continue over the next several years.

For the investors, we recommend:
  • MS69 certified Pandas free of spots
  • Lower mintage varieties (mint types) and special issue pandas
  • Years 1990 to 2000 are established as the most scarce
  • 2001 to 2006 are showing speculative potential
  • 1982 is the first year and a key date always in demand
  • 83-85 and 89, and 86-90 proof sets also have potential as good value "sleepers"
  • 1986-88 trade closer to bullion but may see out-sized gains as gold gains momentum.
  • Platinum and Palladium coins were issued for a few years and are scarce

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