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Why is the ZAR Coin market so low currently?

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ZAR Coins

Hi there,

 

Went overseas for business and attended some coin shows. Came across some very nice coins and decided to purchase as it would be a good investment. On my return I looked at the market in South Africa and saw that there is almost no movement in this country as the demand for ZAR Coins are so low. Why is this? Surely the recession of 2008 can't still possibly play a part.

 

On a side note I would also like to know why Scoin is so extreme with their ZAR Coin prices. Considering the current market they are asking what we would consider high for 2008. I received a list of their available coins and prices and it's marked up by at least 300%

 

Would like some input from the veterans on this forum please.

 

Thanks

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JohnBenn

It appears that consumer confidence is down across the board - New uncertain land claims, corruption, destructive strikes, Ebola, Isis rising in the Middle East, Russia + Ukraine, Israel + Palestine, Syria, Egypt, Libya (oil). People are holding their money a little tighter.

 

As for Scoin, no Idea; I don't collect coins.

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jwither
Hi there,

 

Went overseas for business and attended some coin shows. Came across some very nice coins and decided to purchase as it would be a good investment. On my return I looked at the market in South Africa and saw that there is almost no movement in this country as the demand for ZAR Coins are so low. Why is this? Surely the recession of 2008 can't still possibly play a part.

 

On a side note I would also like to know why Scoin is so extreme with their ZAR Coin prices. Considering the current market they are asking what we would consider high for 2008. I received a list of their available coins and prices and it's marked up by at least 300%

 

Would like some input from the veterans on this forum please.

 

Thanks

 

In my opinion, you inadvertantly answered your own question without even realizing it. I have highlighted the reason from your post in bold.

 

Coins were not, are not and never will be "investments", even though I and others have made speculative gains through them. No one should buy any coin as an "investment" without being prepared to lose most or all of their outlay. I have covered this topic in my prior posts on this forum but no one wants to hear it.

 

The reason I made this statement on your post is that likely, there aren't as many real collectors as there appeared to be at the market peak in late 2011. A disproportionate number or percentage of buyers of the more expensive coins in your country were almost certainly speculators with little or even no real interest in collecting at all. I do not expect anyone to spend thousands of USD or more on coins without some expectation of at least getting their money back, but by my standards, anyone who primarily buys coins for this reason is not much of a collector to begin with. The reason I make this second comment is because the obsession (and yes, it is exactly that) with slab grades for trivial differences in actual quality (which predominates with both ZAR and Union now) has nothing to do with actual collecting at all.

 

I don't believe the economy really has that much to do with it either, at least in the aggregate. There isn't ever going to be any country where people don't have enough funds to pay higher prices at any given time. I explained this concept in a recent topic on the NGC Message Boards but the other party to the debate didn't get it. I myself could spend more or a lot more if chose to do so. I choose otherwise because I have better things to do with my money, it would be financially imprudent and I don't think the prices of any coins I collect are financially compelling anyway from the "investment" aspect. This includes SA coins at the current time (both ZAR and Union).

 

The question I have for you is, what do you think the current market should look like since you apparently believe ZAR prices are lower than you want them to be?

 

In recent posts, I have expressed the sentiments that some of the better coins in recent auctions (such as the Mitchell collection of ZAR) sold for less than i would have anticipated, but I still don't see anything unusual about it.

 

Even if it unusual, since the coins most others own don't compare to these anyway, another reason I can give is that the census populations for many of them have both increased a lot in the last 5+ years which means that many of them are likely a lot more common and available than many of you believed. Which coins exactly do you have in mind?

 

To give you a few examples, coins like the pennies (all of them) and the 1892 silver, I don't see that the prices are abnormally low at all. The only thing surprising to me is that they remained as elevated as they did for so long given how common they actually are.

Edited by jwither

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SADiamondsrus
In my opinion, you inadvertantly answered your own question without even realizing it. I have highlighted the reason from your post in bold.

 

Coins were not, are not and never will be "investments", even though I and others have made speculative gains through them. No one should buy any coin as an "investment" without being prepared to lose most or all of their outlay. I have covered this topic in my prior posts on this forum but no one wants to hear it.

 

The reason I made this statement on your post is that likely, there aren't as many real collectors as there appeared to be at the market peak in late 2011. A disproportionate number or percentage of buyers of the more expensive coins in your country were almost certainly speculators with little or even no real interest in collecting at all. I do not expect anyone to spend thousands of USD or more on coins without some expectation of at least getting their money back, but by my standards, anyone who primarily buys coins for this reason is not much of a collector to begin with. The reason I make this second comment is because the obsession (and yes, it is exactly that) with slab grades for trivial differences in actual quality (which predominates with both ZAR and Union now) has nothing to do with actual collecting at all.

 

I don't believe the economy really has that much to do with it either, at least in the aggregate. There isn't ever going to be any country where people don't have enough funds to pay higher prices at any given time. I explained this concept in a recent topic on the NGC Message Boards but the other party to the debate didn't get it. I myself could spend more or a lot more if chose to do so. I choose otherwise because I have better things to do with my money, it would be financially imprudent and I don't think the prices of any coins I collect are financially compelling anyway from the "investment" aspect. This includes SA coins at the current time (both ZAR and Union).

 

The question I have for you is, what do you think the current market should look like since you apparently believe ZAR prices are lower than you want them to be?

 

In recent posts, I have expressed the sentiments that some of the better coins in recent auctions (such as the Mitchell collection of ZAR) sold for less than i would have anticipated, but I still don't see anything unusual about it.

 

Even if it unusual, since the coins most others own don't compare to these anyway, another reason I can give is that the census populations for many of them have both increased a lot in the last 5+ years which means that many of them are likely a lot more common and available than many of you believed. Which coins exactly do you have in mind?

 

To give you a few examples, coins like the pennies (all of them) and the 1892 silver, I don't see that the prices are abnormally low at all. The only thing surprising to me is that they remained as elevated as they did for so long given how common they actually are.

 

 

I do agree with this, I bought a Mandela coin with intention of it being investment. Then similar (actually identical) coins popped up everywhere, and to me it did not seem like the "investment" would pay, rather lose. Funny, recently I read on one thread that the madela coin (I know there are various coins) on average has lost its worth, thus when the late ex-president was barely breathing, the coins were over-marketed , and to the person like me who knows nada about coins, I was sold on the idea it may be worth a lot one day.

 

Also, RE the economy, I also agree it does not give value.... I always say, (as I sell jewellery+diamonds) if its a great piece, the money will make itself available.

 

Goodluck! and best wishes

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jwither
Also, RE the economy, I also agree it does not give value.... I always say, (as I sell jewellery+diamonds) if its a great piece, the money will make itself available.

 

Goodluck! and best wishes

 

Correct. People use this as a reason often for any number of areas, including with coins both on this forum and on the NGC/PCGS forums in the US. At the individual level, inadequate funds is accurate. In the aggregate, it is not. The total value of all "investment" coins in existence in the context of the "wealth" (financial assets) to buy them is an absolute pittance.

 

There are always more collectors who are able buy a coin and pay more for it if they want to do so. There are also any number of non-collectors who can and could buy coins. They choose not to for a variety of reasons.

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SADiamondsrus

Yes, for me its a lack of knowledge (not buying)

 

Fair market value? The fairness would lie in what one (or many) is prepared to pay for a piece. I have seen UGLY pieces sell for a lot. and stunning pieces for less.

 

Goodluck!

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ZAR Coins

jwither, your response is accurate and I agree with most of what you said. But the simple fact is I am comparing the prices of the coins today vs what they sold for in 2008. The proof is there, many coins went for alot more than they are going for today. I got the coins for a steal, picked them up for less than a quarter of what they are worth. So they are definitely an investment. They are all "scarce" in the sense that the circulation is either unknown or there are only one or two graded higher.

 

The simple question was, why is the market so much lower vs what it was 2004 to 2008.

 

Thanks

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ZAR Coins
I do agree with this, I bought a Mandela coin with intention of it being investment. Then similar (actually identical) coins popped up everywhere, and to me it did not seem like the "investment" would pay, rather lose. Funny, recently I read on one thread that the madela coin (I know there are various coins) on average has lost its worth, thus when the late ex-president was barely breathing, the coins were over-marketed , and to the person like me who knows nada about coins, I was sold on the idea it may be worth a lot one day.

 

Also, RE the economy, I also agree it does not give value.... I always say, (as I sell jewellery+diamonds) if its a great piece, the money will make itself available.

 

Goodluck! and best wishes

 

Thanks for the feedback and I agree that the money will make itself available. Just wondering why so little people are making the money available :-)

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jwither
Thanks for the feedback and I agree that the money will make itself available. Just wondering why so little people are making the money available :-)

 

They would rather spend it somewhere else.

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jwither
jwither, your response is accurate and I agree with most of what you said. But the simple fact is I am comparing the prices of the coins today vs what they sold for in 2008. The proof is there, many coins went for alot more than they are going for today. I got the coins for a steal, picked them up for less than a quarter of what they are worth. So they are definitely an investment. They are all "scarce" in the sense that the circulation is either unknown or there are only one or two graded higher.

 

The simple question was, why is the market so much lower vs what it was 2004 to 2008.

 

Thanks

 

There isn't a definitive answer to your question but I will add some additional thoughts.

 

I am not sure where you get your prices because ZAR is definitely not lower today than in 2004 from what I know, at least for the better coins. Depending upon the coin, prices may be lower than in 2008 but from those I followed, the market generally peaked around December 2011 or January 2012 approximately with the Heritage NYINC sale and if not then, with the DNW sale a few months earlier.

 

I would also like to know what your opinion is based upon that you bought the coins for a quarter of what they are worth. Can you provide an example, including exactly what you bought and when you bought it?

 

I am aware that many prices are lower now versus early 2012 but the primary point I was trying to make is that the prior prices weren't justified. They were artificially inflated by speculative demand and these buyers have disappeared.

 

I disagree that ANY coin is actually an investment, though this is debating semantics. I ackowledge that it is possible to make money off of them, but as I have explained before, this is a rationalization to psychologically justify buying it or paying more for something which the buyer would not do otherwise.

 

I am not sure what your experience or background in buying and collecting coins is, but if you have followed posts on this forum, its my opinion that the real (though unstated) opinion from a financial standpoint of most who post here is unrealistic and distorted.

 

I resumed collecting in 1998 and actively collected SA from about 2002 to early 2010. Since 2010, I have decreased my buying of Union almost completely and I never actively bought ZAR except to "flip" them to use the money to buy other coins. The reason for this is not just the falling market (since I never paid market prices for graded coins anyway except in isolation) but because I am not interested in paying market prices for these coins when the same money can buy better coins. From 2008-2010, I sold almost all of my better SA coins since I believed their prices would fall and have mostly been proven correct. My primary regret is that I didn't dump many I still own which I could have mostly replaced later at lower prices.

 

While SA coins are cheaper than they were in late 2011, I really don't see that most of the more expensive are relatively cheap versus those from elsewhere, except in isolation such as the United States and maybe Australia. However, these coins are either very expensive or absurdly overpriced on a relative basis given their numismatic merits. Otherwise, SA coins are disproportinately more expensive than those from elsewhere, at least when compared to coins that any number of collectors would consider comporable.

 

The reason I make these last comments leads me to my next question to you or anyone else who is reading my post. If the market was artificially inflated in late 2011 as I claim, then why would anyone expect prices now to be what they were then? Also, if I am wrong and prices were generally higher in 2008, what did I miss and where is the data? I certainly do not recall it on Heritage, eBay or other foreign auctions. If it is on BoB or purchases from local dealers, I did not buy on BoB then and I don't believe dealer prices were or are representative of market prices for the better coins anyway.

 

Unless the collecting of SA coins is going to become "widget" trading, there is a limit to how much real collectors can or will actually pay for a collectible which is what coins are supposed to be. As elsewhere, I don't believe that non-collectors in South Africa with the money to pay more are disproportionately interested in buying coins except to profit from them. That is why they are not collectors. I certainly don't believe that foreign collectors such as myself are interested in paying more for SA coins than most others because this is contrary to general collector behaviour. And lastly, I strongly suspect that a disproportionate number or percentage of collectors in your country can't afford to pay more, even if they wanted to do so. The balance who can, they just do not want to for a variety of reasons.

 

Lastly, another factor you need to consider is that many coins sell infrequently and don't have a fixed market price. The coins in the Mitchell collection such as the 1895 NGC MS-64 2/ which is one I thought could have sold for more, it is entirely possible that it has already or will sell in the near future for a lot more than the DNW prices. if you have followed prices for any length of time, you should be aware that prices of the same coin can and do sell for wildly different amounts for no apparent valid reason. its more a function of the whims of the buyers competing for it at that particular time than anything else.

Edited by jwither

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ZAR Coins
There isn't a definitive answer to your question but I will add some additional thoughts.

 

I would also like to know what your opinion is based upon that you bought the coins for a quarter of what they are worth. Can you provide an example, including exactly what you bought and when you bought it?

 

As an example I bought a 1893 Half Pond Graded XF-45 (PCGS) for R45,000 3 weeks ago. Looking at Heritage Auctions and similar websites they sold for over R200,000 in 2010, 2011. Now I know R45,000 is a bargain considering it is a rare coin and hence I will sell it for as much as possible. I agree with most of what you said once again but I do see value as a short term investment in coins if you can get it at the right price. The best part though is I find that the local dealer market wants everything at a steal and make 100% or more on their items instead of a justifiable profit. I might be guilty of the same thing on the 1893 Half Pond but the difference is I know it's a sought after coin. I don't do it on every ZAR Coin I have. As an example once I got back I sent out an email to interested dealers to buy this coin, one particular company, which I won't mention here... offered me R20,000 for this coin stating that it was over graded and that the market is flooded with the 1893 Half Pond.

 

I wasn't born under a rock, I know it's scarce and I know that PCGS isn't a mickey mouse grading company so why insult and belittle the coin to try and get it at a better price? It seems that a big problem is the fact that dealers want to insult what you have but once they bought it then they sell it for 5 times what they paid for it. Nothing wrong by trying to bargain but don't lie about the coin or scarcity regarding it. Scoin is a perfect example. They add 500% to some coin values and tell you they won't buy from you unless you bought from them. Could it possibly be the sellers of the ZAR coins that is killing the market? The fact that they aren't happy with a 20% to 40% profit?

Edited by ZAR Coins

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geejay50
Hi there,

 

Went overseas for business and attended some coin shows. Came across some very nice coins and decided to purchase as it would be a good investment. On my return I looked at the market in South Africa and saw that there is almost no movement in this country as the demand for ZAR Coins are so low. Why is this? Surely the recession of 2008 can't still possibly play a part.

 

On a side note I would also like to know why Scoin is so extreme with their ZAR Coin prices. Considering the current market they are asking what we would consider high for 2008. I received a list of their available coins and prices and it's marked up by at least 300%

 

Would like some input from the veterans on this forum please.

 

Thanks

 

Thanks SA Coin and Jwither for your useful contributions. Could I ask SA coin what very nice coins you found overseas? Were they South African? Information I got from a friend who went to a truly massive coin show in Germany involving hundreds of dealers and queues of interested buyers tended to show to me that in Europe at least, there is still massive interest in Numismatics with coins being sold for quite big prices and NO or little bargaining around that price. Perhaps overseas the real history of those countries is well taught and often goes back centuries at school level so that buyers can impartially decide that which is relevant in a coin. My friend interestingly found very few old South African coins for sale in that German market but paradoxically there was a lot of interest in South African coins amongst some dealers spoken to - they were very keen to get literature on them especially.

 

Perhaps our local pessimism and low overall ZAR prices is really a grass roots anger at the rip offs we have had in our small numismatic market with the likes of Scoin shop SA Coin and others who have lied to us about modern SA Mint offerings that they call scarce with an oversold Mandela brand on them and their derivatives. These buyers who have been hurt by inflated modern prices now take their anger out on all SA Numismatics and spend their money elsewhere. In the meantime real value for money coins that come for sale like the 1895 2/- MS64 as mentioned by Ernesto do not get the price they should.

 

I also think that the design of the Mitchell collection with the Gold coins being sold first like the incredible MS67 Fine beard, left not enough buyers with money to bid on the 1895 2/- and other coins of similar scarcity later.The market just ran out of money in my view. Perhaps retrospectively too much was offered in one go to get decent individual prices in the Mitchell Collection.

 

What we can say that such coins as the 1895 and 1894 MS64 2/- together with say the Mint State ZAR Ponden in the ZAR Group with possibly the 1898 Pond except will always be assured of market support in their present prices if you take a longer view at prices fetched here and overseas.

 

The 1893 Halfpond did get a setback some 6 or 7 years ago I noticed where the NGC pop report went blank on the number graded such that the graded coins from then did not reflect the number actually out there in graded state. An "apparent " relative scarcity was created by data loss that caused unrealistically high prices.

 

I have reported to NGC customer support other SA coins that suddenly and for no apparent reason are not found on the NGC pop report for example recently the 1924 Two Shilling just vanished in toto. Fortunately Lisa Berzins whom I have had dealings with before took note and had the loss of data corrected.

 

Geejay

Edited by geejay50

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jwither
As an example I bought a 1893 Half Pond Graded XF-45 (PCGS) for R45,000 3 weeks ago. Looking at Heritage Auctions and similar websites they sold for over R200,000 in 2010, 2011. Now I know R45,000 is a bargain considering it is a rare coin and hence I will sell it for as much as possible. I agree with most of what you said once again but I do see value as a short term investment in coins if you can get it at the right price. The best part though is I find that the local dealer market wants everything at a steal and make 100% or more on their items instead of a justifiable profit. I might be guilty of the same thing on the 1893 Half Pond but the difference is I know it's a sought after coin. I don't do it on every ZAR Coin I have. As an example once I got back I sent out an email to interested dealers to buy this coin, one particular company, which I won't mention here... offered me R20,000 for this coin stating that it was over graded and that the market is flooded with the 1893 Half Pond.

 

I wasn't born under a rock, I know it's scarce and I know that PCGS isn't a mickey mouse grading company so why insult and belittle the coin to try and get it at a better price? It seems that a big problem is the fact that dealers want to insult what you have but once they bought it then they sell it for 5 times what they paid for it. Nothing wrong by trying to bargain but don't lie about the coin or scarcity regarding it. Scoin is a perfect example. They add 500% to some coin values and tell you they won't buy from you unless you bought from them. Could it possibly be the sellers of the ZAR coins that is killing the market? The fact that they aren't happy with a 20% to 40% profit?

 

Not sure where you bought that 1893 half pond but I agree it appears to be a rather low price versus a few years ago.

 

On the other hand, you also need to consider that the census pops even on this coin have increased a lot proportionately in the last few years. I just checked the census and the NGC count is now 38 with 13 in XF-45. PCGS has a count of 31 with nine in XF-45. Though I suspect given its value that there are some duplicates and maybe many proportionately, is $4000+ USD really that cheap for a circulated ZAR with 22 in grade and 15 higher? My answer is that it isn't, especially considering that SA collectors have demonstrated a very low propensity to pay high prices for circulated coins, regardless of rarity.

 

As for dealers, there isn't any reason that I can see to sell a coin like this one to any of them. I ocassionally buy from dealers on eBay, a few times I have bought from them on BoB and "every blue moon" from their websites here in the US but for the most part, I have no use for them.

 

On the buying side, I have seldom seen a coin in any series I collect listed on their websites that I really wanted. South Africa is more available than my other series even here in the US. When I do see something I want, it is invariably at a stupid money ask price which will leave the buyer hopelessly buried in it. As I wrote on the NGC Message Boards recently, I would far prefer to compete against dealers at public auction where i buy most of my better coins anyway. I have nothing to gain by buying a graded coin from them at a higher price that I could have bought for less directly myself. I am willing to let them buy a raw coin and then buy it from them for somewhat more graded later, but that is all.

 

If you look on BoB, there are also many dealer listings with absurd stupid money ask prices. Some of these coins have been there for years. I am speaking more to Union because I seldom check ZAR. Some of these coins are offered in the vicinity of 10 TIMES what is probably their actual market value. Unless they are ignorant, they know they are trying to rip off their potential buyers but presumably rationalize at least some of these ridiculous prices by basing it near the irrelevant Hern list price.

 

When I have sold coins, I have only done so with a dealer once. It was for a Swiss gold coin I bought in 2006 which had little numismatic value and never should have bought. I lost about 1/3 of my outlay. Otherwise, I have sold my coins (almost all South Africa ZAR and Union) either on eBay or through private transaction. If you want to sell this coin now, I would offer it on BoB or go the private sale route.

Edited by jwither

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jwither

Geejay,

 

I am dubious that the bursting of the Mandela bubble is a significnat factor in current ZAR pricing. How many of these people spent any real money on anything else? I suspect not many.

 

If it is true that the Mitchell collection disproprotionately absorbed available funds, then this certainly does not bode well for the ZAR in the Bakewell collection on September 22.

 

As I mentioned in a prior post, I suspect that if Heritage had offered the Mitchell collection, it would have sold for more. I cannot explain it but this appears to be true in prior sales, even discounting that one Fine Beard pond in the SANGS holder which Heritage later sold in a PCGS slab. If you look at the listing on Heritage now, there are already some Mitchell coins right now. Its obvious that some of these buyers specifically bought these coins just to "flip" them and the same thing happens on BoB all the time. What kind collecting is that?

 

To summarize my recent posts here:

 

There was a lot of speculation in all SA coins up to late 2011, mostly in Mandela but also in ZAR and Union. Its apparent that many of these former speculators have either left collecting or possibly are also holding coins with large proportional unrealized lossses. But in any event, they aren't buying now.

 

The census counts have increased significantly for many coins since 2008 and especially 2004. This is true either in a proportional sense but in many instances even in absolute terms. I have written about this many times. For ZAR in particular, many of the counts are quite high by all but US standards.

 

I don't believe that many collectors could afford to pay the prior prices, at least for the coins they actually wanted to buy which is disproportionately MS. Many of the better circulated "key" dates in Union sell for what I think are low prices, but nobody seems to want them except in isolation.

 

What I have included in these three points, its the same message I have communicated many times before. Its easy enough to discuss the price of any coin in the abstract but the fact is that a real person has to pay it and frankly, the prior prices weren't good deals and I really don't see why anyone would have thought they were or that most collectors could afford them.

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Pierre_Henri

I have been collecting coins since I was 9 years old (Iwas born in 1960).

And in all the years since I have never found a better hobby or a better way to invest my money in.

I have never believed or trusted the Mandela coin frenzy and so escaped the horrible consequences of that ultimate bursted bubble.

 

The path for me was always the ZAR or Union route but I always loved the latter more. There is just no coin in the world that can compare to, for example, a lustrous Union George V 2/- of the Union of South Africa.

 

Obviously, knowledge is the key, and many fingers are burnt daily, but if you know your way about, and are willing to learn, the most wonderful ROI ‘s are to be made on basic numismatic knowledge.

 

In the past, and so many times, I have bought raw coins on BidorBuy & other internet auction sites for a few hundred rand and sold them (after grading) for ten times that – and many buyers have done the same buying from me.

 

We are all happy most (obviously not always) of the time.

 

Don’t get distracted by negative postings on this forum regarding investing in coins

 

I have NEVER invested in anything better with a bigger return than something as simple as a coin...

 

Pierre

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jwither

Pierre,

 

There is a big difference between buying Union or ZAR at current or even recent prices versus buying them when I did starting in 2002, much less when you did. Up to maybe 2002 ZAR and Union as late as 2006 (the Remick sale), they were undiscovered and artifically cheap. Today, they are no longer remotely undiscovered and aren't "cheap" either, at least for the coins which are disproportionately discussed on this forum.

 

I am also aware that it is possible to "cherrypick" coins. I was able to do it as late as early 2010. I would buy a coin ungraded and later sell it for a large multiple of my cost. Many of these coins I bought on eBay and public auction where anyone could have done the same. Those of you in South Africa had and have an advantage over me because you have access to these coins while I do not.

 

Having said this, only a low percentage have or ever will be successfull "cherrypickers". Most will buy retail or at the current open market price for a graded coin, certainly if they are buying the better or more expensive coins.

 

At current prices, ZAR and Union are better economic values in many instances than they were at the peak in late 2011. But since I don't believe the economy in your country is the primary reason for the current market weakness, I don't see that most of the coins that are profiled on this forum have favorable much less outsized "investment" potential either.

 

Reading historical comments on this board, someone might get the idea that the prices I have termed absurd were excellent values for the sellers and even better ones for the buyers. Its what I have called rampant "cheeleading". It doesn't matter that the actual differences in quality between these coins and those in slightly lower grades are trivial and that they are beyond the reach of most collectors in your country, apparently they were (and are) still such great values, they are going to sell for a lot more later anyway.

 

In the United States, most collectors lose money. Partly, its a function of knowledge but also the result of much greater competition and the far more developed and "efficient" market". Except in isolation, its almost impossible to make the returns you and I did with so little effort. As far as I am concerned, even when pricing improves, those days are mostly over. Future collectors and "investors" will generally have to buy already graded coins closer to their "real" open market price relatively early in a market cycle. Those who do not will find themselves in the same position as the typical US collector.

Edited by jwither

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geejay50
Pierre,

 

There is a big difference between buying Union or ZAR at current or even recent prices versus buying them when I did starting in 2002, much less when you did.

 

.

 

Hi Ernesto,

 

I dont think the collector base for ZAR is the same as that of Union coins and can be mentioned in the same sentence.

 

The back to wall against the British colonisation that the Boers went through in the late 1800s and early 1900s just is not there in the often scarcer Union coins. It is just this survival background that is being recreated as I write for many real people in this country with echoes going back to Boer times.

 

If one has seen at first hand the huge economic losses at farming level in Zimbabwe as I have you will realise that here in Africa, security of asset is not something to be taken for granted unlike in developed countries like the USA. To be blunt, some of our collectors are farmers who might stand to lose 50% or more of their farms. That is why a scarce ZAR coin has a deeper appeal than an even scarcer Union coin.

 

I know of a careful collector of limited funds who could see very clearly the bargains on offer at the Mitchell collection auction in the form of the 1893 Halfcrown AU58 and others but chose to forgo the opportunity of making lets say R10 or R20 K profit by buying and reselling those coins just because he knew he had to keep his reserves for such coins as the 1895 Two Shilling MS64 which would almost definitely never come up for sale again in his lifetime (at that price). Let the speculators make their profits .....that is not what coin collecting or life is about.

 

I also know of a serious high end ZAR collector who has made his living from insurance. When I asked him why he didnt invest in the insurance products he sold , his reply was that he has never made money from anything like he has made from coins and that the big insurance companies just take too much of the money invested. That supports what Pierre has said before in a different way.

 

In the Chinese Cultural Revolution under Mao tse Dong in the sixties with the death of an estimated 30 million people, one of the ways of preserving assets that families had was to buy a few high value numismatic coins (often gold) and hide them under obvious risk of death. If one cannot trust banks or governments , that is what people may need to do.

 

My thoughts

 

Geejay

Edited by geejay50

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jwither

Geejay,

 

I am aware of what you are talking about. That is, the cultural preference which makes ZAR more popular than Union which is why these coins are generally worth more, even when Union is scarcer. I have made many cultural references in my prior posts on this forum and if you are interested, you can read the extensive comments (not specifically directed to SA coins), on the "Krause" thread on the NGC Message Boards where I had that debate with one other contributor.

 

No, the point I was making is that to imply that similar profit opportunities exist with SA coins (whether ZAR or Union) today as existed in the past is misleading. If you or any other longer term buyer chooses to believe it, that is up to you but for more recent collectors who do not have the historical pricing context, I am specifically telling them that there is no reason to believe such a claim whatsoever. No one can remotely provide any evidence to support that the same profit opportunties exist.

 

To demonstrate my point, I am going to summarize the four methods which someone can take to make money off of any coin:

 

First is the grading arbitrage method. Its what Pierre described in his last post and the way I have made most of my profits myself. This isn't going to work as it did in the past for a few reasons. First, there aren't nearly as many ungraded coins available of the better specimens which is something I presume you also believe. Second, for more common coins such as circulated ZAR, the census counts are far too high now for the demand and the prices are much lower than they used to be. To give you a few examples, I sold both a 1895 2/ and 2/6 in VF-30 or VF-35 for somewhat less than $250 maybe six years ago. I believe I paid $30 for the 2/6 and somewhat more for the 2/, both ungraded. Both of these coins might sell for somewhat more than $50 today. Third, because most coins sell for less than during the boom, the arbitrage opportunity even for most higher grade coins has mostly disappeared. And even when pricing improves, there are more collectors who are aware of this opportunity which is why many (not all) better ungraded coins don't necessarily sell for the prices they did in the past anyway.

 

Second, someone can attempt the "crack-out" game by resubmitting coins to receive a higher grade. This is common in the US but given the disproportionatley low prices of most SA coins, it is only economical with the more expensive issues generally and for others, "conditional rarities" and maybe one grade below it. Additionally, given the limited number of these coins in the aggregate and the low probability of receiving an upgrade, it is hardly a "sure thing". Additionally, there is also the risk of receiving a downgrade.

 

Third, there is "cherrypicking" die varieties and other specializations but this is primarily a US centric practice because this collecting either doesn't exist at all in SA or only minimally.

 

Fourth, there is the "buy and hold" method which is what you described with that one collector who bought the 1895 2/ from the Mitchell collection. I believe that this is the only practical option for any decent number of collectors in your country but I don't see that they are really going to be any more successful than those from elsewhere. The best opportunity is to take advantage of the erratic prices which occur primarily as a result of who the particular bidders happen to be at any one time. For example, those two 1931 Union 1/ I mentioned in a prior post. I don't believe the PR-66 which sold for $2300 (or was it $3200?) at DNW was a real bargain, but I do believe that the buyer likely could have sold it for more.

 

To specifically address the 1895 2/, while I did expect it to sell for somewhat more, it isn't because I think this coin was that much of a bargain at this price. Its because I expected the ZAR market to demonstrate somewhat greater strength for such a prominent collection. My recollection is that the 1893 pond MS-65 sold for about $30,000. I certainly don't think this coin was a bargain at that price. I believe it should sell for less. However, I concurrently believe that most ZAR collectors consider it better than the 1895 2/ MS-64 which I do not.

 

I also do not believe that coins function as particularly effective stores of value which is what you either stated or implied in your comments. They can be used as a speculative vehicle but I consider them a very poor wealth preservation asset and in making these comments, I am not singling out SA coins but apply it to all of them.

 

If you or anyone else are really worried about asset security, there are any number of other options which I have covered in prior posts. To give you an example, while I am hardly a "metal bug", from a strictly financial standpoint, I would rather own silver at $20 per oz than the 1895 2/ NGC MS-64 at $17,000. Even if I am wildly underestimating the prospects of the better SA coins as I am sure many of you believe or at least did before, I don't see that this coin has much better prospects to double to $34,000 than silver does to reach $40, at least longer term. And I certainly do not see it as a better asset given the combination of its current price and liquidity. (For the record, I still expect silver to sell for less before it sells for a lot more.)

 

If I was really worried about what you are talking about, I would send at least some of my assets out of the country instead of buying any coin as a form of insurance. Its easy enough to do that now and there is no need to mimick what someone did in China in the 1960's.

Edited by jwither

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jwither
As an example I bought a 1893 Half Pond Graded XF-45 (PCGS) for R45,000 3 weeks ago.

 

Heritage has a PCGS AU-50 with a current bid of $8500 as I write this post.

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ZAR Coins
Heritage has a PCGS AU-50 with a current bid of $8500 as I write this post.

 

Well that is good news for me :grin: I see it sold for $11,162.50.

Edited by ZAR Coins

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jwither
Well that is good news for me :grin: I see it sold for $11,162.50.

 

Your purchase of this coin falls under option #4 in my post to Geejay. As I stated in it, I see it as the only realistic option to make high returns on any scale going forward. If i were based in your country (I live in the United States), I would be able to buy and sell many coins as you will with this one. However, I cannot because I do not have direct access most of the time to the coins and not at all to potential buyers. It will only work for me if I am able to buy the coin for an exceptionally low price. Otherwise, a "low" price might turn out to be even lower when I go to sell it.

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ZAR Coins
Your purchase of this coin falls under option #4 in my post to Geejay. As I stated in it, I see it as the only realistic option to make high returns on any scale going forward. If i were based in your country (I live in the United States), I would be able to buy and sell many coins as you will with this one. However, I cannot because I do not have direct access most of the time to the coins and not at all to potential buyers. It will only work for me if I am able to buy the coin for an exceptionally low price. Otherwise, a "low" price might turn out to be even lower when I go to sell it.

 

I have to be honest though, it seems the more ZAR Coin lucrative market is overseas. It just depends on the right buyer looking for the right coin at the right time. All the coins I own I bought in the USA. I got them for a steal because I waited it out, I knew that if the right buyers were present I would not pick up a good price so I waited and waited. I firmly believe I will get more for these coins overseas than in South Africa.

 

There are too many competitors in RSA, some selling too low, and others ridiculously high. The USA under values these coins because they don't attach sentimental value to the coin, however your average Joe that grew up in RSA and then moved to the USA doesn't know that he can pick these coins up for a bargain at a place like Heritage Auctions at a low buyer turn out auction. Most overseas buyers buy them here in RSA thinking there will be more of them in RSA than elsewhere meaning he can find the exact coin he is looking for. The simple fact is that thousands of coins left the RSA when wealthy people left in 1990 - 2014 and took their coin collections with them to the States and elsewhere. Now as they pass away and their children inherit the coin they see it as a coin and not as an investment and they sell it low over there and the dealers smile from ear to ear. They list it on Heritage and only the select view "educated" buyers find it and buys it.

 

As stated though, right buyer, right coin, right timing.

Edited by ZAR Coins

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jwither

My perspective is somewhat different than yours.

 

I believe the first reason these coins sell below their "real" value elsewhere is because the primary buyer who is in South Africa is "hedging" the risk that they won't receive it after they buy it. Your postal service is unreliable, I believe most of the ZAR buyers on Heritage are still in South Africa though I do believe this series is more popular than most with foreigners, many who are South African expatriates. Its my opinion that in actuality, many of the Heritage consignments are from South African sellers who ship the coin to Heritage who then sends it right back where the buyer then also has to pay VAT.

 

The reason I make this comment is that if you look at the volume of South Africa coin sales on Heritage, I don't believe there are nearly enough foreign buyers who collect even ZAR. Union I believe is hardly collected at all elsewhere. And the reason for this is what I told everyone here before. Look at how much these coins cost today and since 2004 or 2006. Apparently based upon the historical comments on this forum, everyone or almost everyone thinks these coins are a "steal" or "cheap" at current prices. Except for the Mandela issues, I do not recall even ONE post aside form mine which provided a contrary opinion. Obviously, there is no "numismatic law" that says how much a coin is worth but I don't believe foreigners are big buyers of ZAR and they aren't going to be either because no one can make the case that (outside of expatriates), they are going to prefer them to their own, regardless of where they live. South Africans don't prefer other coins to ZAR and since these coins cost so much more (on average) than those from elsewhere, to believe that foreigners will defies common sense. No one can remotely make any case to demonstrate it whatsoever.

 

I suppose that because South Africa is obviously the primary market for these coins, that this is the basis of your opinion. I believe a lot of what you see is many of the more expensive coins do not sell that often and there aren't that many buyers for them at any one time, It isn't like an equivalently expensive coin in the United States or even the UK. When a four plus figure coin (in USD) comes up for sale, there may be only two or three buyers seriously competing for it at any given time but over multiple sales, there will still be this number and there is a good chance that it doesn't include the same ones. Especially with a US series like the Morgan dollar, there are literally hundreds if not thousands of potential buyers near the "real" price who are potential actual buyers. With ZAR and especially Union, I suspect that after a coin has sold, that on the next occasion if it is in close proximity, there isn't much competition in many instances. Your market lacks the same depth and now that the supply has increased for many even better coins, the result is what you see.

 

Its true that foreigners don't attach the same sentimental value which I think is a big part of the cultural component of the price for ZAR (but not Union). But it isn't just because these are South African coins. If you look at the pricing of other "world" coins, It is my opinion that Americans have been the primary driver behind the price increases in a vast number of coins. Sure, Heritage (primarily) has a global customer base but I still believe a disproportionate percentage of their buyers are "locals" like me. This is apparent that if you look at auction listings outside the United States such as Sixbid or even DNW, the coins are almost never sold in a TPG holder. DNW sells SA coins graded but then that is because this is favored by your buyers. You don't see this for almost any other coin they offer.

 

The other reason for this last opinion is because in many markets, there isn't any organized collecting at all. To give you another example, Better 19th century Bust coinage from Ecuador is expensive. But I don't believe there are many (if any) buyers based in that country. It is certainly either expatriates or mostly random Americans like me buying these coins. In this example, I don't see these coins ever selling for more than ZAR, but the prices are lower or much lower and so is the supply. They are better relative values to most who do not prefer either.

 

The point I am trying to make is that given the price level of ZAR and what else this money can buy, outside of expatriates, I don't see why any of you would or should expect foreigners to pay the same prices for ZAR you do. I am an "oddball" in that I lived there in the 1970's which is why i collect them at all and even post here. But as I have written many times, I am not going to pay these prices either. If you compare these coins to the Spanish colonial pillars I also collect, the latter coins are disproportionately much cheaper and to practically any non-SA buyer, also better. So why would I or anyone else pay more for ZAR and buy them instead? I like ZAR (and Union especially) but just less or a lot less than other coins such as these.

 

On the supply, I agree with you that there are (or at least were) many coins elsewhere. I suspect though that of those that left in the 1990's, there are also many in other Commonwealth countries in addition to the United States. I also believe that there are a good number which predate this migration which were taken back home by visitors, since this is common for any number of coins. These coins I believe are disproportionately still not in the census or at least much less so that any in the USA because collectors in those countries do not like TPG.

Edited by jwither

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Pierre_Henri

I am preparing a post on this subject that will be posted in the week to come.

 

Many of the comments I have read on this subject so far here are based on speculation and some are pure nonsense.

 

In the mean time, does anyone that is not a dealer on BOB even realize how many of our Union and ZAR coins are sold to collectors in countries like China and Russia?

 

If time permits, I will do a long post on the small ZAR collection (approx. 20 coins) I sold individually on Thursday night on BidorBuy.

 

Pierre

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jwither

Pierre,

 

I will interested in reading your post because in my case, I can back every single one of my primary claims with evidence. Specifically, if you are referring to my reply to your post, obviously, it is still possible to make money in isolation on these coins or for a small number of individuals (such as yourself) to do so. Your personal experience or mine doesn't change any of the claims I made, including these 20 coins you mentioned in this last post of yours. Because you live in SA with better access to them and have been a collector longer, I am sure you have done better than I have. No, what I was referring to was the scale of the profit potential now versus the past. There isn't any doubt about this subject whatsoever.

 

As far as buyers from China or Russia, what does that prove? Obviously, there are some buyers from these countries, just as there are with many other coins. I have bought a few from one Chinese eBay seller on occasion myself. Since there are far more collectors, those in the US presumably buy more non-US coins (including those from South Africa) than collectors from any other country who do not buy their own. So what? This doesn't change any claim I made either. The pillar coinage I collect is bought by collectors all over the world and certainly by far more than either ZAR or Union.

 

In my prior comments, I already stated that ZAR is more popular than most other series, but that is only because there are so many of them. I am also aware that there are possibly a decent (but not particularly large) number of buyers for the more expensive coins (whom I believe are disproportionately expatriates and favor ZAR by a lopsided proportion), but though this is my opinion and no one can prove it one way or the other, I don't see that there is any reason to believe that foreigners particularly favor them either over their own coins (based upon where they live) or others that most collectors consider "better". This is invariably true of practically any coin when evaluating collector preferences.

 

What I am referring to with this last comment is the preference scale which no one can deny exists though there isn't universal agreement on where any particular coin falls in the "pecking order". To you and the disproportionate majority in South Africa, ZAR are the "best" coins and Union presumably second. To those in the US, it is any number of US actual and imagined rarities plus early federal coins are "best". Since there are far more collectors in the US (or any number of other countries) than in South Africa, that is why only a low number elsewhere will prefer them (ZAR or Union) to one degree or another. I also have my preferences but don't have any problem whatsoever recognizing how other collectors view my coins and I have a good idea how any number of different coins are generally viewed in the aggregate.

Also, many more non-locals will buy the lower or mid-priced coins (which are those you disproportionately sell) but not the more expensive ones which were the primary target of my claims. I was primarily making these claims in the context of ZAR Coins' posts, especially those with the profile of the 1893 1/2 pond, There is no doubt that foreigners have nowhere near the same preference for a coin like that as SA collectors do.

 

I certainly don't see how this concept should be hard to believe.

Edited by jwither

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