Saturday, November 3, 2012

Beginners' Approach to Collection

by Huang Ruiyong

Good evening everyone. gave me a grand title. I do not feel quite up to it, though.

Honestly, the overall research in the MCC coin field looks weaker than in other coin segments. But just because of this, a historical opportunity presents itself to us. Let’s collect with pleasure, put our hearts to research, and we will have a splendid future.

The three lectures starting from today cover the following topics:

1.   Beginners'  Approach to Collection

2.   Transition to Intermediate Collectors

3.   Top Choices for Advanced Collectors

Let's take a look at the topic today, which is directed at new collectors.

Many new collectors get to know precious metal coins and medals of the PRC, and feel deeply impressed. But they have no reference books, no access to the markets in Beijing and Shanghai, and no teachers to learn from. They grope the way all by themselves, like walking in darkness, with extreme difficulty. So I will provide the many new collectors with some suggestions, from the perspective of collection.

“A job can be completed more easily with sharp tools.”

In coin collection, one will definitely gain success if the DIRECTION and APPROACH are correct.

A new collector must adopt the right methodology from the very beginning, focusing on the following aspects: affinity with the coins, logic reasoning, coin knowledge, awareness of the real gems, making friends, and receiving correct information.

If we manage all these aspects successfully, we can pass the beginner phase with success and no hassle. Now let me expand these aspects in detail.

First let’s talk about coin affinity.

What is coin affinity? It is directly “fall in love at first sight.” You fall in love with a coin at first sight, intoxicated by it, applauding it loudly with admiration. This comes from pure appreciation, without any consideration of material gain.

For example, the first set of Bronze ware gold coins were crafted by Tong Youming and Sun Qiling, two top engravers of Shanghai Mint, who put all their heart and soul into these coins. You set them out in a row under spotlights, and watch them beaming out dazzling lights and colors, simply gorgeous and beautiful. It is hard to imagine anyone resisting their temptation.

Another coin is the 2001 2oz Dunhuang silver coin. The sacred image of the buddha in high relief from the prosperous Tang Dynasty is absolutely stately and life-like. The ingenious use of frosting and anti-frosting on the coin endears it to many collectors.

This is coin affinity. If you are a collector and you can pick out the coin you like at first sight from a pile of coins, congratulations! This comes from your coin affinity. It is absolutely a wonderful thing to feel this affinity to a coin.

Most collectors start from appreciating modern precious metal coins due to coin affinity, and then go out of their way to search for and collect these coins.

We all say that there are no cheap or expensive collections, meaning for an item, if you can appreciate its merits, it is worth collecting. But wait! Although we do not distinguish between cheap and expensive collections, there are degrees of sophistication in collection.

For modern precious metal coins issued by the PRC, nobody has the financial power or market channels to collect them all. A newbie should avoid trying to grab at everything in order to advance their own collection. Do not covet every coin that comes in sight. Otherwise your pocket will always be empty, and you be enslaved by coins. Learning what to go after and when to give up, picking coins that you feel affinity for from your own perspective: these are the basis for a newbie to move up to more advanced levels.    

After the discussion of coin affinity, let’s focus on the importance of logical reasoning.

If we want to achieve high quality in any work, a methodology that employs logical reasoning is a must. An effective methodology cannot be developed in one day, but logical reasoning can help us with objective analysis and judgment on many occasions.

For example, for a beginner, a top issue is whether a coin is worth buying for the price. On this mind racking issue, logical reasoning can come to our help.

Here is an example:
5oz pandas were issued in many years. In general, if the prices are the same, we will pick the one with the smallest mintage. If the mintage is the same, we will pick those issued in earlier years.

Another example:
If the 1/2oz Guandu Battle gold coin and the 1/2oz Chibi Battle gold coin are not very different in price, we will definitely pick the Guandu Battle coin. The reasoning is: 1. Guandu is from the second set, while Chibi is from the third set; 2. Guandu’s mintage is 2000, while Chibi’s mintage is 3000.

Logic reasoning dictates that when we pick coins we have affinity for, we must consider the following factors: mintage, excellence in design, technology, awards received, key date status, packaging, whether made from platinum or palladium, whether priced close to bullion, whether belonging to a special segment (such as piefort, bimetal and coin alignment). Once we developed logical reasoning, we have met the critical requirements for moving up.

The third aspect is coin knowledge. This is a key point, too. In any art collection or investment field, professional expertise will finally transform into physical wealth. This is universal, in China and abroad, in ancient times and in current days, with no exception. With regard to modern precious metal coins, I would like to kindly remind new collectors: gold and silver coins by nature are dual functional, for collection and appreciation, as well as for investment. If we dive deeply into coin knowledge, we will finally harvest both a great collection for appreciation and rewarding investment return. But if one focuses exclusively on investment or speculation, ignoring the essence – accumulation of coin knowledge, he or she will lose out in the long run.

Coin knowledge needs to be accumulated with solid effort: buy coin catalogs/reference materials, visit coin markets, browse online gold and silver coin sites, go to coin shows, communicate with friends constantly, inspect physical coins, and summarize one’s own knowledge from time to time. In this way, you will find yourself transformed into a veteran before you even realized it. 

Of course, it takes great pains to accumulate rich coin knowledge. But if you really like modern precious metal coins, this effort is worth the effort.

Next, we need to establish a sense of gem coins.

What are gems? Gems are like the moon amid the many stars. As time goes by, fashion will fade with wind and rain, but gems will shine forever.

Gems can be divided into high-end gems and gems for the masses. High-end gems, judging from the term, are targets of the top collectors and the super rich. They are like villas in the Xiangshan area in Beijing or those in the Sheshan area in Shanghai. We believe that gold and silver coins generally have three kinds of values: 1. Enjoyment value; 2. Investment value; 3. Show-off value.  For the high-end gems, the show-off value is more dominant. For example the flower-watering (Year of Children) piefort gold coin, 5oz gold coins with a mintage of less than 100, platinum lunars… These are all high-end gems which will only change hands among top collectors or appear on auctions. These are the most expensive coins.

On the other hand, the gems for masses are those affordable by the ordinary people, like the SOHO buildings in the Jianwai area in Beijing, or apartment buildings in the Xujiahui area in Shanghai. Although the gems for masses are a lot cheaper than the high-end gems, their collector base is much larger than that of the high-end gems. These include Year of Children gold and silver coins (normal thickness), 8g lunars, 1989 platinum panda, and the award-winning coins over the years. These are all excellent gems for the masses.

These gems, whether high-end or for the masses, will lead price surges and resist price declines. Their ownership is endorsed by the collector community. In this sense, it is vital to develop a sense for the gems. This is especially important for beginners, because it will save them a lot of wasteful errors.

How can a newbie make sure that the coins he or she collects are gems? Coin affinity, logical reasoning and coin knowledge, which were discussed above, all play an important role.  To those, we can add the following aspects: making friends and information symmetry.

Making friends is key to precious metal coin collection.

The Analects by Confucius said: We have three kinds of friends to benefit from, those with integration, those with tolerance, and those with rich knowledge. We need friends with such qualities. Friends with integration will let us see other perspectives than our own. Tolerant friends will encourage the voicing of different views in the coin collection community. Knowledgeable friends will help us save time and wasteful errors. For most people, coin collection is a hobby after work. Because of this, we do not have enough energy to explore details of everything. So friends are great complements to our personal limitations.

Coin collection has never been an individual experience, something one can keep just to oneself. When we get hold of a piece of treasure, we immediately feel our heart pounding with maddening elation. But this elation has to be shared with some one. So getting together with friends, chatting over a cup of tea, showing one’s own collection, exchanging new learnings, trading coins and expanding one’s coin knowledge, these are extremely pleasant experiences.

There is a club for fans of modern coins and medals in Hangzhou now, who meet regularly. On the bank of the West Lake, in a warm breeze, sipping fragrant tea, watching glittering gold coins, we get together to spend a happy afternoon or evening over the weekend. Like what Sister Sandezi said, if you can enjoy it with others, why keep it to yourself?

For beginners, breaking the information barrier is critical, too. Luckily we have information readily available these days, and the coin market has totally transformed itself in 10 years.

10 years ago, prices of gold and silver coins in major cities like Nanjing and Hangzhou had a time lag from the prices in Shanghai, not to mention in small cities or county seats. But now, with the power of the web, many collectors can make impressive gains even from small cities. For example, although Youxia is located in a remote place in Northern Jiangsu, he can make contacts abroad and find impressive coins for fellow collectors. His timeliness is no less than that of coin dealers in Lugong or Madian.

It is my personal view that collectors have more options in the world of Internet. Before buying a common coin, do price comparison on the web. But for coins with a high price tag, it is imperative to do as much homework as possible in advance. Now the topics discussed above all circle back to us: coin affinity, logical reasoning, coin knowledge, awareness of gem coins, a group of friends. With more thinking and knowledge, we will feel more confident. I believe that the purpose for to list honest dealers is to build the reputation for them, and remove the information barrier between dealers and collectors.

In addition, with new releases and common coins, the market is relatively transparent. But due to the extreme scarcity of some early precious metal coin gems, it is absolutely a seller’s market. In addition, because there are few transaction records available, which beginners have a hard time to obtain, they have to take great precautions when buying/trading such coins. It is not that dealers are always trying to trick collectors. To be fair, the price information of some early coins is even beyond the reach of coin dealers.

I have been sorting out transaction price data of modern Chinese gold and silver coins from all over the world. If anyone is interested, we can compare notes sometime and use them as reference. As far as I know, auctions exclusively for modern Chinese gold and silver coins will be held this year. Auction records will be used later on as important guides for early rare coins.

Time is running out. I have covered only a small part of the materials I prepared. Sorry to you all.

To summarize:

Coin affinity will guide our affection to the coin;
Logic reasoning equips us with the ability to maneuver through the market;
Coin knowledge is the requirement for beginners to grow;
Awareness of gem coins enables us to take off;
Good friends make us completely relaxed;
Symmetry in information gives us a sense of security.

If beginners can achieve all these, they will naturally advance to intermediate collectors before long.

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