Tuesday, July 15, 2014

Dandan's Comments on Chinese Coins (7) - 1997 Auspicious Matters

The coin I am going to talk about today is "Auspicious Matters". This coin was released in 1997. It is a coin with a big story as it went through huge price swings. Auspicious Matters coins were minted both in gold and silver. I will focus on the silver coins. In addition to the traditional 1 ounce coin, there were half-ounce, two-ounce, five-ounce and 12-ounce ones. Even the 1 ounce coin had two types, a 10-Yuan type, and a 5-Yuan piedfort type. It is the 1 ounce silver coin with normal thickness that I will discuss today, because the price swing was unprecedented in the history of modern Chinese gold and silver coins. Many new hands are still buying and selling this coin even today, hoping to bring back its past splendor.

The 1 ounce silver Auspicious Matters was released in 1997, with a mintage of 80 thousand. By today's standards, the mintage was not big, but it was huge in those years. This coin is a typical case where investment outran collection. I mentioned before that in a healthy collection market, collection should guide investment, where the prices of collectibles would see a steady growth. Once investment funds crowd in, or when speculation outruns collection, the market would be skewed, with the value of the investment target overdrawn in advance. The 1 ounce silver Auspicious Matters was targeted by coin speculators for the following reasons:

1.     Year of release. The year 1997 was the hottest year ever for the market. Speculative funds swarmed in. Market orientation turned from investment to speculation. Moreover, this change was entering into the late phase, gradually taking over the market.

2.     Good theme, with an auspicious homophone. The Chinese would like a fish when ordering food, hoping for "fish" (homophonic with "surplus") year in, year out. Good fortune forever, just like businessmen who love to buy a pot of lucky bamboo. Who would not wish for a better life, year after year? The theme of Auspicious Matters is well rooted among the Chinese people, reflecting the essence of the 5,000 years of Chinese civilization.

3.     Enough quantity for speculation. I mentioned before that market movers and speculators only speculate on items they can obtain in quantity. Money is made by hoarding them and then hyping about them. If there is no quantity, who will benefit when the price is whipped up? The quantity of Auspicious Matters was neither too big, nor too small. In addition, the coin could be obtained in quantity at that time, making it easy to flip.

With the three features above, and with the right timing, right place and right people, the rapid upswing was totally expected. Market development confirmed such expectations. The scenario that all the folks imagined unfolded before their eyes, but…

When the 1997 Auspicious Matters was released, the market had already entered the parabolic phase. The release price of the 1 ounce silver Auspicious Matters was already at 200 Yuan. Today, a silver coin with a 200 Yuan price tag is commonplace. Even a Panda with a mintage of millions and with no COA is priced in this range. However, considering the market conditions in 1997, 200 Yuan and plus was a fairly high price. But it was just the beginning. When average collectors were still hesitating, speculators and market movers started to move in. Soon Auspicious Matters saw rounds and rounds of price growth. The ratio of this price growth was more formidable than that of the stock market in 2007 and the Fourth Series of the banknotes last year. The 1 ounce silver Auspicious Matters made new heights all the way, reaching as high as 1,400 Yuan at the top. Pushed by hot money, it already overshot the market by ten years, overdrawing the price appreciation for that period. It would add a sense of epic tragedy to the upcoming market crash.

With the downturn of the coin market in late 1997, the price of the 1 ounce silver Auspicious Matters slid non-stop. Speculating funds had no loyalty to collectibles. When speculators found that not much profit could be gleaned from the targeted items, a tragedy would befall. A violent crash started. This collapse was unparalleled even on the stock market, because the stock market in our country has a down limit. But the coin market knew no such limits. The price dropped like a rock, from over 1,000 Yuan to under 1,000 Yuan, and again from just under 1,000 Yuan to a few hundred Yuan. By 2003, this 1 ounce silver Auspicious Matters, which was extremely popular with a good theme and favored by numerous collectors, went as low as less than 100 Yuan. The lowest price I saw at that time was 90 some Yuan. After half a year of intense hyping and speculation, and several years of non-stop dropping, the 1 ounce silver Auspicious Matters finally found its bottom. Collectors who bought the coin at that moment would realize what auspicious matters really were. Afterwards, Auspicious Matters went up and down with the market, till it reached the current price of several hundred Yuan, returning to its true value.

Even these days many people still love to buy and sell this coin, for the reasons I mentioned above. One other reason I can think of is that people believe that after ten years of market absorption, its availability is quite limited. But I have a different opinion. Those who bought this coin were mostly speculators, taking in sheets after sheets. These coins stuck with them when the market turned down. Did these owners melt the coins? Definitely not. The coins may have been stowed away in their safe boxes. Whenever the price of the 1 ounce silver Auspicious Matters makes a decent rise, it is met with strong down pressure. The reason can be looked up in my previous post on the 97 Unicorn. Auspicious Matters has a long way to go. Many who fell for it in 1997 are still under water, with the coin stuck in their hands, even after more than ten years. That's why some older people recommend this coin to new hands. They hope that new fund will keep pouring in, to bring this coin back to splendor. In the meantime they will rise above water, turning this loser coin for more than ten years into a profitable one.

Collection Index: 9
Investment Index: 5

1 comment:

  1. Very thorough and insightful article. I wish more numismatic enthusiasts would take the time to write about the story behind pricing of coins and reasons for fluctuations. It helps when considering to buy or not buy for investment. Thanks.