Mint Prices - Whats Your Views

[coinoisseur 11]

Hello Everyone

 

What do people think of the SA Mints pricing structure for modern coins? Are many people attracted to the pricing? Naturas, Proteas, Proof Krugerrands, Commemorative Sets, Silver Rands etc... When looking at the market, a lot of coins/sets sold in the past for high amounts are being sold for far less. Is the current designs attractive enough to warrant a purchase? Why is the secondary market sometimes cheaper than the SA Mints official price. We all know that the Flypress Tickey is a hit and is always sold out, but we also notice that the mintage has increased from 300 to 400. Why is this the case?

 

Your views and input will be appreciated.

 

Cheers

 

[Guest]

I've always wondered what use buying a proof Krugerrand. When buying a normal Kruger I must first get past the dealer mark-up before I can see a profit. Paying extra for proof quality and then trying to make a profit seems to fall in the commemorative category. The silvers are even worse. I have bought a couple of these in the past and only made a bit of a profit when the market allowed it a couple of years ago. Whenever the latest mint pricelist arrive I appreciate the quality and designs, but I think these are niche coins, much the same as the uncirculated birthday sets. Like buying a Mercedes with a custom colour and mag wheels, and hoping to make your money back when you sell. I don't know if the mint can design and mint a limited run without charging a premium, but maybe they should try a cross subsidy structure to make it more attractive. Good question though, as the mint reflects our history and heritage.

Edited September 26, 2016 by Cold Sea

[jwither 16]

I never provided a response having missed this topic earlier but will do so now.  I'm not familiar with the SA Mints practices but will describe what is evident here in the US and anyone can reply with any differences.

One: The US Mint is run similar to a private business when it's real mission should be first, providing circulating coinage.  And second, to the extent it should be making limited production run collectible coins at all (proof sets, mint packs and NCLT), it should be at price points and mark-ups which make it affordable to a "noticeable" proportion of the collector base.  No mint exists to provide profit opportunities for speculators which is exactly the sentiment expressed by the post directly above mine.

Problem with my last point (on mark-ups) is that to do so given the level of secondary market speculation just makes it more profitable for speculators while "shutting out" actual collectors from buying it at the issue price.  Most US Mint issues invariably ending selling for less in the secondary market (more on that in a minute), so setting a below market price is self defeating.

This recently happened with the 2019-S (San Francisco mint) ERP ASE (yes, it's a real mouthful).  It's better classified as a gimmick coin, but with a "low" mintage of "only" 30,000 skyrocketed to well over $1000 (thousands depending upon the grade, TPG holder and label) from an issue price of $66.50 USD or something like it.  Large dealers and speculators bought most of the supply and made a windfall while collectors mostly got shut out.  Somewhat less so but similar story for the 2014 gold Kennedy half which has since crashed back to earth and now sells for what it should, irrelevant premium to the metal content.

Two: More generically, the reason most US Mint issues sell for less than issue price in the secondary market is because the supply (mintage) exceeds real collector demand, no matter how "low" it seems.  I mean, it's not like hardly any (If any at all) of this coinage is actually interesting as a collectible.  Low mintage is meaningless if hardly anyone wants it and this is even more true when it applies to most of what the mint issues, as it also does in SA.

In a financially stagnant market (which accurately describes the USA and SA both), the primary if not only thing new mint releases do is cannibalize sales of previously existing coinage. If the value of purchases is (relatively) flat, buying power for this coinage has to come from somewhere and this "somewhere" is from the coins collectors and "investors" already own.

Three: In South Africa and to a somewhat lower extent in the USA, much of what the mint releases isn't affordable to the traditional mint customer.  By traditional, I am referring to those who bought proof sets and mint packs which is all the SA Mint and US Mint used to offer before they started selling this flood of NCLT c*ap.

Given the price level of Union and ZAR, it should be evident that outside the tickey, the other coins listed are hopelessly unaffordable to the overwhelming percentage of the collector base.  This primarily leaves "investor" buyers who have no affinity for collecting at all.  A noticeable proportion of buyers are probably located in the USA since all mints target it but it doesn't change my description to collecting locally in your country.

For real collectors who can afford it, it should also be self evident that this NCLT isn't remotely as interesting as Union or ZAR as a collectible.  Given the metal value alone, I can buy over 95% of Union coinage for the same price or less and a majority of ZAR except in the better or best grades.  So why would I even want any of the gold coins listed?

Lastly, even the cheaper mint issues aren't necessarily affordable to most collectors in your country.  I don't know how much the Flypress tickey costs but if most US collector budgets are at most $500 as I believe, it's almost certainly a fraction in SA unless I have misjudged the profile of the typical collector in your country.

Recently on the PCGS forum, I mentioned that the annual base metal US proof set is no bargain at the 2019 issue price of $32.  Sure, it's cheap by US standards but it's also common as dirt, a guaranteed money loser going by past performance, and there are literally tens of thousands of coins (US and otherwise) which are a lot more interesting as a collectible.

So yes, it makes total sense that sales volumes have collapsed over 80% from the peak from several decades ago and will almost certainly decline even further indefinitely into the future.

Edited March 3 by jwither

[Pinkx 10]

Up until 2009, you could purchase a short proof set from the mint for less than R300. Then in 2010 it jumped to over R500, and that's when I stopped collecting them. They were no longer a "nice to have, low cost item". Now I see they sell 2020 short proof sets for R720 (which is similar to what the 2011/2012 short proof sets used to be sold for - if I remember correctly. So presumably they haven't increased much over the last 8-9 years - or maybe they did and have now reduced in price?). I thought the short proof sets were always a good way to attract new collectors to numismatics without having to pay excessive amounts for what is circulation coinage but even R720 is too much now.

[I N Collectables 17]

I agree with the sentiments above and think the issue lies in what Ernesto describes when he says that the US mint is run similar to a private business. This is almost certainly the case with the SA Mint based on the prices that it charges for "collector/commemorative coins". As with any private business, the primary objective is always to increase it's bottom line. The price level increases described above by Pinkx could probably be attributed to two things:

1. Production costs have increased - Especially with the increase in electricity prices over the past decade or so, production costs have probably increased by far more than standard inflation would necessitate. I'm not entirely sure that metal prices have increased at all (with the exception of gold of course), however what about over overheads such as wages etc?

2. Profit margin - In keeping with the sentiment that the mint is run like a private business, prices have to increase to profit margins at their desired levels.

Of course I am not saying the the Mint should become loss making so that we can all afford to buy it's commemorative issues however their price levels should perhaps be set with an additional mandate in mind: To foster national interest in the numismatic heritage of the country.

 

Just my thoughts

[jwither 16]

Agree with both of the above posts. 

R720 for an annual proof set is too much.  At current exchange rates, that's close to $50 USD.  That's not affordable to the typical hobbyist in your country, unless the collector base is a lot more affluent than I believe.

Per my above post, the 2019 US proof set with 10 coins (1c, 5c, 10c, five 25c coins, 50c and dollar) is $32.  (This is for the base metal set.  There is also a second set with mostly silver coins costing proportionately a lot more.) 

The only justification I can see for the higher price is the much lower mintage but I doubt it's really that low by international standards.  I couldn't find the mintage numbers on the SA Mint website but doubt it's really that low for the hobbyist collector base either.

If production costs are really this high, it might also be due to the limited production run and probably because the SA Mint buys their equipment from elsewhere.  If true, they might be able to sell these coins for less by outsourcing production (such as to the UK or Canada) and importing the coins back into the country.  This is especially true for silver coins since I'm not aware there much local mining production.

In the USA, traditionally proof sets were bought by a substantial number and proportion of non-collectors, and probably still are now.  Prior to the internet, there was also a lot less collectors could buy.  Yet in 2019, 561,000 base metal sets sold (down from a peak of 3.8MM a few decades ago) plus about 300,000 silver.  There is still a long way down to go.

Let's face it.  The target client for both mints is the financially motivated affluent buyer, not the hobbyist collector.  In South Africa, I presume it's also bought as a store of value given the limited number of local alternatives.  In both countries, as a potential dual opportunity speculation hoping for increasing metal prices and collectible premium.

It's my opinion that current practices by both the US Mint and SA Mint don't do much of anything to promote numismatics.  Both produce too much product hobbyist collectors either do not want or cannot afford.  I consider it undeniable that the price level would also be helped by fewer mint products.

[GROOVIE COINS 13]

Excuse the pun, but the SA Mint is coining it when it comes to anything they sell.

What were the 2019 25 years of Democracy uncirculated sets going for? R300? For 6 coins with a face value R15! These were normal business strikes in unc condition.

Silver proteas (The life of a legend) are a half ounce of sterling silver, but they retail for between R375 to R500 uncirculated and R550 to R600 proof. That is over thrice the spot price for uncs and 6 times for proofs.

Don't get me started on the aluminium bronze collector coins with R50 face value. What do they sell for R300? They have a mintage of 10 000.

The silver krugerrands retail for about R800- R900 for proofs for a one ounce coin and a whopping R2000 for their new 2 ounce release.

Somebody once mentioned gold proofs go for a 14% premium above the unc krugs, but when it comes to silver the premiums hit the moon.  

The SA mint is in the game to make profit, not to promote the hobby. 

 

Regards Robert

[jwither 16]

I wasn't aware of the 2oz silver but suspect it's predominantly made for the international (primarily US) market.  Mostly also true of the 1oz if the mintages are as high as I have read.

It's my assumption that the primary buyer for silver NCLT is from the US.  Due to the local price level, US buyers are used to paying much higher prices versus everyone else.

For the South Africa buyer, the problem with both the 1oz and 2oz is that neither are remotely competitive as a collectible compared to what can be bought from ZAR or Union..  Both are financially more liquid but neither are real coins and there is nothing interesting about it other than the profit potential.

[Pierre_Henri 64]

In 1993 the SA Mint stopped issuing proof sets in the “normal” blue boxes and changed to the fancy black boxes where the coins were then forth encapsulated in acrylic and accompanied by colorful descriptive pamphlets regarding the “theme” of that year – the Arum Lilly, Blue Crane, Springbok, etc. etc.

Those new (expensive to produce) sets were probably wonderful gifts to family and friends (non-coin collectors) who celebrated something special in that specific year.

However, for true coin collectors, the bells and whistles meant nothing -  a full coin set of 1993 vs.1994 were in their minds the same – why now pay extra because the “new” sets were made up to look like Christmas gift boxes wrapped up like a Detroit sneaker box?  

And that are for only the “normal” yearly uncirculated and proof sets.

Has anyone seen how some of the SA Mint’s latest fancy issues are sold in – boxes and cases made of rhino leather, stinkwood, alabaster holders and what have you?

Those cases probably cost more for the Mint to procure than the very coins they produce to put in these …

And for whom? Coin collectors?

Why would I pay more for a coin from the SA Mint in a simple paper envelope than one set in a R1000 Stinkwood case rimmed with golden inlays?

Maybe the SA Mint’s Numismatic Department, is targeting non-coin collectors as their main income stream – if so, then all their shenanigans and horrendous pricing make perfect sense.

[jwither 16]

2 hours ago, Pierre_Henri said:

In 1993 the SA Mint stopped issuing proof sets in the “normal” blue boxes and changed to the fancy black boxes where the coins were then forth encapsulated in acrylic and accompanied by colorful descriptive pamphlets regarding the “theme” of that year – the Arum Lilly, Blue Crane, Springbok, etc. etc.

Those new (expensive to produce) sets were probably wonderful gifts to family and friends (non-coin collectors) who celebrated something special in that specific year.

However, for true coin collectors, the bells and whistles meant nothing -  a full coin set of 1993 vs.1994 were in their minds the same – why now pay extra because the “new” sets were made up to look like Christmas gift boxes wrapped up like a Detroit sneaker box?  

And that are for only the “normal” yearly uncirculated and proof sets.

Has anyone seen how some of the SA Mint’s latest fancy issues are sold in – boxes and cases made of rhino leather, stinkwood, alabaster holders and what have you?

Those cases probably cost more for the Mint to procure than the very coins they produce to put in these …

And for whom? Coin collectors?

Why would I pay more for a coin from the SA Mint in a simple paper envelope than one set in a R1000 Stinkwood case rimmed with golden inlays?

Maybe the SA Mint’s Numismatic Department, is targeting non-coin collectors as their main income stream – if so, then all their shenanigans and horrendous pricing make perfect sense.

The packaging might account for a noticeable proportion of the cost in the USA also, though it's not nearly as elaborate as you described.

On your second question, US Mint sets and coins sold without the Original Government Packaging (OGP) and Certificate of Authenticity (COA) sell at a discount in the secondary market to those with it.  It's just what the market has decided.

I agree with you that all mints are also targeting non-collectors. 

With gold coinage, it must be predominantly financially motivated buyers.  This coinage isn't competitive with other collectible coins and is far too expensive for frequent gift purchases. 

With silver and base metal, your description indicates that the proportion of non-collector buyers in SA is probably higher than here.  If so, I'd attribute it to the much lower mintages along with the lack of competitiveness with pre-existing coinage.  In the USA, I suspect that non-collectors still account for a noticeable percentage of sales for annual mint (UNC) and proof sets.  For silver NCLT, I doubt it; only a low minority.

[testrarossa 10]

In 2004 the 1oz Democracy cost R5995. 
Gold was approximately $400 oz. 

In 2019 the 1oz Democracy cost R33 995. 
Gold was approximately $1500 oz. 

With the Rand Dollar exchange getting worse over the years too. 

[I N Collectables 17]

14 hours ago, testrarossa said:

In 2004 the 1oz Democracy cost R5995. 
Gold was approximately $400 oz. 

In 2019 the 1oz Democracy cost R33 995. 
Gold was approximately $1500 oz. 

With the Rand Dollar exchange getting worse over the years too. 

If we analyse these prices further, we find that:

2004 - Average gold price: $409 * Average USD/ZAR Exchange Rate: R6.4616 = R2,642.8/ounce

2019 - Average gold price: $1,392 * Average USD/ZAR Exchange Rate: R14.4566 = R20,123.6/ounce

Hence the 2004 price represents a premium of approx 127% over the average gold price for that year whilst the 2019 price represents a premium of approx 69% (nearly half of that of 2004).

Further in the period 2004 - 2019 gold realized growth of 661% whilst the price of the commemorative gold 1oz coin quoted above realized growth of 467%.

From the above it seems that the premium charged over gold is actually declining over time however the nominal prices of the item still make it un-affordable/non financially attractive for most.