Author Topic: Why Medals?  (Read 4903 times)

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Offline fwang2450

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Why Medals?
« on: 2014 Dec 10, 02:35:54 PM »
Ever since I argued with badon on the Chinese Coin Forum and Live Business Chat about the differences between coins and medals, I myself have gradually gravitated towards medals, including brass ones. I received some inquiries on my shift of attitude and position. Instead of answering individually, I hope this post can shed some light on my current understanding of medals vs. coins. Comments are welcome.

Unlike badon, who denies any difference between fiat coins and non-fiat medals, I do see a difference between them. So I still call a coin a coin, and a medal a medal. But (and this is a big "but"), in terms of the precious metal coins issued by PRC after 1979 (MCC), the difference is minimal and nominal. MCCs were never issued for circulation. Instead, they have been produced as "artwork for collection" (from Mr. Zhu Dechun, regarded as father of MCC). In that sense, they are not very different from medals made for the same purpose. (One of the mistakes in MCC collection is to compare MCCs to precious metal coins issued for circulation in the US. This mistake led to many false analogies between the two, in terms of mintage, grade rarity, and predictions of price trends, among others. I really want to emphasize that these two are fundamentally different, as one was meant for circulation, and the other mainly artwork for collection. If anything, MCCs should be compared to the little known precious metal commemorative coins in the US, which were first released in 1892 and the collection of which has not been very popular.)

The main arguments against medal collection include 1) medals are not officially protected and can be counterfeited without punishment; 2) medals lag behind coins in price appreciation. Let's examine these arguments one by one.

First, coins, whether circulating ones or MCCs, are not immune to counterfeiting. Even newly issued circulating commemorative coins with a street value of 15 Yuan ($2.5) are faked. Fake coins are sold on the Chinese Taobao site with no sign of pending official punishment. Punishment for coin counterfeiting has largely remained as a theoretical deterrent, but has so far failed to be effectively implemented. The reason may be that commemorative coins, whether of base metal or of precious metal, are not in circulation and so their faking poses no threat to the financial system, while counterfeiting of large face value paper notes is treated seriously, as the latter are real medium of exchange in life. Whatever the reason, it is a fact that MCCs have not been better protected than medals against counterfeiting.

If we look beyond modern Chinese coins and medals, we will see that counterfeiting has not stopped people from collecting/investing in the pre-1949 coins. Coins made from all types of metal, copper, silver and gold, between the time when milled coins were first introduced to China in the late 19th century, up to 1949, are counterfeited recklessly as there is virtually no protection for them. Dies to make Fat Man coins are openly available on Taobao. Cheap fakes flood the market, including eBay. And yet, due to the pioneering work of early collectors, foreigners included, collection of "old silver round" as they are known in China has been the most popular and advanced numismatic category among Chinese coin collection, with detailed studies of their varieties and huge price gaps between high grade coins – phenomena observable in US coin collection. It was no coincidence that the "old silver round" was the first numismatic category to embrace coin grading in China. With the help of grading companies, the risk of running into fake coins is greatly reduced if not totally eliminated, as long as one insists on buying graded specimens.

Second, it is true that many medals have not appreciated in value as fast as coins. I used the example of the Xinjiang silver coin vs. medal in my argument against medals when I first brought up the issue with badon. This is due to the smaller number of medal collectors in the past. "Medals are lesser than coins", a motto among some Chinese collectors, becomes a self-fulfilling prophesy. Because medals are regarded as having less investment value, fewer collect them, which in turn reduces the demand and drags down the price. However, even with the small number of collectors, the top rarities among medals have not lost to coins in the same ranking in price appreciation. Here is a comparison of top silver coins and medals in a fixed time frame. They are priced in the Chinese Yuan.

Item                         April, 2008 Price       Current Price      Growth Ratio
Coins:
Year of the Child piedfort      40,000         120,000         3.0
Year of the Child matte         8,500         24,000         2.82
86 Football Player matte         3,300         7,200         2.67
Medals:
84 Great Wall mirror            4,050         34,700         8.57
87 Opening of China Coins   2,464         16,600         6.74

 (I am comparing top small size silver coins with top medals because I do not keep track of prices of large size coins. Those familiar with large size coins can do a similar comparison. Large size silver coins are not in my range of collection.)

It is obvious that in terms of price appreciation, top silver medals have outrun top small size silver coins. The Jianzhen silver medal set has an even higher ratio - close to 40x price growth since December, 2007. Of course, not all the medals appreciate as rapidly. The 1987 Long Beach Expo silver medal, which sold 100 Yuan more than the Jianzhen set at the same auction run by the Oriental Auction House in 2007, has appreciated only slightly in price. Rarity plays a crucial role in price appreciation among medals due to the smaller collector base. The sharp contrast in price appreciation between the top medals and more common ones reveals the profile of current medal collectors: a small number of advanced, well-to-do individuals who collect both coins and medals alike and are relentlessly in pursuit of the rarest medals.

In addition to past price appreciation, we should bear in mind the possibility that the self-fulfilling prophesy "medals are lesser than coins" may be abandoned by new MCC collectors, thus pushing the price of the currently undervalued medals way up. Collectors of the recent Chinese Classical Garden series medals are mostly MCC collectors, too. Is it a sign that the trend is starting to turn?

Finally, as artwork, officially minted medals tend to stand out over coins. Coins are strictly controlled in their theme, design, artistic style, technology and time to market. Low relief is typically required on coins made in large quantity, for example. In comparison, the same mint artists designing medals have a lot more freedom to themselves. Zeng Chenghu spent over a year (on and off) working on his hand-engraved Pagodas, and Bai Wenjun spent nearly a year on his hand-engraved medal set Plum, Orchid, Bamboo and Chrysanthemum. The recently released Chinese Classical Gardens series employed techniques unparalleled in coins, such as double-sided deep dish and ultra-high relief. Some of the most artistically sophisticated artwork exists only in the form of copper medals, such as the hand-engraved Guilin Scenery set. Of course there are exquisitely made MCCs (the first series of lunars, for example) and poorly made medals, especially those commissioned by organizations or individuals. But overall the consensus is that medals are artistically more appealing.

Enjoying wonderful artwork, nice price appreciation, the vanity of owning and bragging about top rarities, with the possibility of a huge price breakout in the future – what can be a more fulfilling experience in numismatic collection and investment?
« Last Edit: 2014 Dec 10, 04:26:39 PM by fwang2450 »
 

Offline badon

Re: Why Medals?
« Reply #1 on: 2014 Dec 10, 03:34:32 PM »
In addition to past price appreciation, we should bear in mind the possibility that the self-fulfilling prophesy "medals are lesser than coins" may be abandoned by new MCC collectors, thus pushing the price of the currently undervalued medals way up. Collectors of the recent Chinese Classical Garden series medals are mostly MCC collectors, too. Is it a sign that the trend is starting to turn?

That is what I am betting on, and it's the reason why nearly all of my new investments are in non-fiat coins ("medals") instead of fiat coins. I believe that the superiority of coins with a fiat value on them will be questioned, then rejected, then hated, in that order. The reason why is because when fiat loses its value, people become bitter and angry. No one selling coins with a fiat value will be able to overcome that by praising the virtues of fiat over non-fiat. In fact, such a point of view will soon be considered ridiculous.

As you have noted, that shift in attitudes has already begun. Right now, the shift is mostly because people are noticing that non-fiat coins often rise in value much more percentagewise than fiat, but gradually, people are also seeing that the legal protection against counterfeiting fiat is not actually superior, especially for older fiat issued by governments that no longer exist - and it doesn't matter whether the coin is precious metal or not.

In short, the non-fiat coins ("medals") have been underpriced due to erroneous beliefs that will not survive the test of time, and they are sometimes experiencing larger price gains as the market for them corrects itself. For myself as an investor, I love that. For myself as a collector, I love that!
 

Offline badon

Re: Why Medals?
« Reply #2 on: 2014 Dec 10, 03:42:45 PM »
(One of the mistakes in MCC collection is to compare MCCs to precious metal coins issued for circulation in the US. This mistake led to many false analogies between the two, in terms of mintage, grade rarity, and predictions of price trends, among others. I really want to emphasize that these two are fundamentally different, as one was meant for circulation, and the other mainly artwork for collection. If anything, MCCs should be compared to the little known precious metal commemorative coins in the US, which were first released in 1892 and the collection of which has not been very popular.)

This is probably the most important information in your article. Myself and many other influential people make comparisons of China's coin market and the USA coin market, routinely. Although you are right to say such comparisons may be wrong, I think the end result could be the same, due to other factors, and that's why I continue to use them. Instead of Chinese commemorative coin valuations being lower than USA coins, I think some Chinese coins will achieve valuations so high that no will believe it in today's market.

Right now, nearly all of the world's most expensive coins are American. Soon, the Chinese coins will dominate, just like in nearly everything else. Some of the most famous and valuable American coins have sold for $10 million USD. I think some Chinese coins have the potential to sell for much more than that. Today, those coins are worth about $30'000 to $100'000, and some people think that's too expensive. They are going to be shocked!
« Last Edit: 2014 Dec 10, 03:45:48 PM by badon »
 

Offline fwang2450

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Re: Why Medals?
« Reply #3 on: 2014 Dec 10, 04:14:34 PM »
Right now, nearly all of the world's most expensive coins are American. Soon, the Chinese coins will dominate, just like in nearly everything else. Some of the most famous and valuable American coins have sold for $10 million USD. I think some Chinese coins have the potential to sell for much more than that. Today, those coins are worth about $30'000 to $100'000, and some people think that's too expensive. They are going to be shocked!
I do not doubt that this may happen, but it will most likely happen with the "old silver rounds" and modern circulating coins, not MCCs. The collector base of MCC is much too small to drive the price to that level. MCCs are unknown among folks on the street in China. A couple of months ago, the circulating coin guru Sun Keqin was invited by CCTV (China's Central TV Station) to be one of the guests on a numismatic collection show, which covered the old silver rounds, papernotes and circulating coins. The director firmly ruled MCCs out. That caused the MCC community to cry "Not fair!"

Because of the popularity of the show, a second session is being planned. Again this time MCC is ruled out. As a MCC collector myself, I feel bad about it, but on the other hand it does reflect what the general public know about coins. So yes, some of the Chinese coins will go sky-high, but MCC may not be included.
« Last Edit: 2014 Dec 10, 04:17:13 PM by fwang2450 »
 

Offline badon

Re: Why Medals?
« Reply #4 on: 2014 Dec 10, 04:36:42 PM »
Once again, I agree with your explanation, but I disagree about the conclusions because of other factors that will come into play. One of them is that I think increasing Chinese national pride will improve the popularity of precious metal coins issued by the current government of China. I have no doubt the older non-fiat circulating coins (silver, gold, copper) will do well, but the 1949 to today pure fiat circulating coins made in aluminum and nickel alloys will probably be the ones to benefit the least. Firstly, the introduction people will experience will be due to the government's encouragement of private ownership of precious metals in the form of lunars and pandas. From there, those people may go no further, but enough of them will advance to becoming collectors. But, none of that is the dominant factor.

The biggest, most important thing that will change in China is the shift away from communist-friendly collectibles like postage stamps and wristwatches, to capitalist-friendly collectibles like coins and art. The market for those collectibles is much bigger than all of the coin sectors combined, and maybe even the bullion precious metals sectors too. That shift will take a few decades to complete because the shift relies on the change in generations. Grandpa's old stamp collection that the younger people inherited will be sold, and the declining value of it will be reinvested into something else. The people who make the shift the soonest will be the ones that get the most value out of those collections before the supply increases and the demand decreases.
 

Offline fwang2450

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Re: Why Medals?
« Reply #5 on: 2014 Dec 10, 05:24:16 PM »
Once again, I agree with your explanation, but I disagree about the conclusions because of other factors that will come into play. One of them is that I think increasing Chinese national pride will improve the popularity of precious metal coins issued by the current government of China. I have no doubt the older non-fiat circulating coins (silver, gold, copper) will do well, but the 1949 to today pure fiat circulating coins made in aluminum and nickel alloys will probably be the ones to benefit the least. Firstly, the introduction people will experience will be due to the government's encouragement of private ownership of precious metals in the form of lunars and pandas. From there, those people may go no further, but enough of them will advance to becoming collectors. But, none of that is the dominant factor.

The biggest, most important thing that will change in China is the shift away from communist-friendly collectibles like postage stamps and wristwatches, to capitalist-friendly collectibles like coins and art. The market for those collectibles is much bigger than all of the coin sectors combined, and maybe even the bullion precious metals sectors too. That shift will take a few decades to complete because the shift relies on the change in generations. Grandpa's old stamp collection that the younger people inherited will be sold, and the declining value of it will be reinvested into something else. The people who make the shift the soonest will be the ones that get the most value out of those collections before the supply increases and the demand decreases.
I base my conclusions on on-the-ground observations, not theorizing. The old coins are the best studied category, comparable to numismatic research in the West, because some of the early collectors were Westerners. As such it is easy to see where they are going, and recent high-profile auctions proved it.

The nickel and aluminum circulating coins were not seriously collected until about a decade ago, but then their collection has taken off fast. They do not need advertisement. They are daily objects. Once people realize they are collectible, the collector base swells like a balloon. This category also has all the stories you hear in US numismatics, such as production cut short, gifts for VIPs, reduced mintage in a series, minting of designs in a wrong year, patterns/bank specimens leaked out. You know how such coins are highly valued in the US. And so you do not have to be a genius to see their future in China.

As for MCC, if my analogy to the US commemorative coins is correct, they will still be good investment, but will lag behind the two categories above.
« Last Edit: 2014 Dec 11, 06:39:06 AM by fwang2450 »
 

Offline badon

Re: Why Medals?
« Reply #6 on: 2014 Dec 11, 01:18:00 AM »
The fact that a coin was used as circulating money will always make it stand out as different from coins minted for collectors, VIP's, patterns, trial strikes, or other purposes. I hope you write more articles about some of the stories you mentioned. I love reading those.
 

Offline badon

Re: Why Medals?
« Reply #7 on: 2014 Dec 11, 02:02:37 PM »
Do you know of any fiat coins that were minted with hand engraved dies? I've noticed that there are many hand engraved non-fiat coins ("medals"), which are virtually impossible to counterfeit perfectly. Despite not having any legal protection against counterfeiting, they do have the ancient guarantee of authenticity that coining was originally invented to provide, because advanced forgery technology cannot duplicate it. That could be another point in favor of collecting the hand engraved non-fiat coins, instead of the highly automated fiat coins.
 

Offline fwang2450

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Re: Why Medals?
« Reply #8 on: 2014 Dec 11, 02:29:34 PM »
Do you know of any fiat coins that were minted with hand engraved dies? I've noticed that there are many hand engraved non-fiat coins ("medals"), which are virtually impossible to counterfeit perfectly. Despite not having any legal protection against counterfeiting, they do have the ancient guarantee of authenticity that coining was originally invented to provide, because advanced forgery technology cannot duplicate it. That could be another point in favor of collecting the hand engraved non-fiat coins, instead of the highly automated fiat coins.
Zeng Chenghu confirmed there were no hand engraved coins.
 

Offline badon

Re: Why Medals?
« Reply #9 on: 2014 Dec 11, 02:57:24 PM »
You mean the dies, or the coins themselves? I meant the dies. Hand engraved coins would be pretty impressive, but the closest we get to those are the individually cast coins, like the 9 sons set.
 

Offline fwang2450

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Re: Why Medals?
« Reply #10 on: 2014 Dec 11, 03:04:36 PM »
You mean the dies, or the coins themselves? I meant the dies. Hand engraved coins would be pretty impressive, but the closest we get to those are the individually cast coins, like the 9 sons set.
I meant dies. No hand engraved dies were used for coin making.
 

Offline badon

Re: Why Medals?
« Reply #11 on: 2014 Dec 11, 03:13:50 PM »
Maybe not hand engraved entirely, then, right? Many of the coins have obvious hand-work done to them that couldn't have been done using automated techniques. That might be better to describe as hand work or hand rework, instead of "engraving". Maybe you can write an article about that topic, and mention Zeng Chengdu's info? Coins like these, 141504106789, are described as hand engraved, and maybe that's only partly correct.
 

Offline fwang2450

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Re: Why Medals?
« Reply #12 on: 2014 Dec 11, 03:45:27 PM »
Coins like these, 141504106789, are described as hand engraved, and maybe that's only partly correct.
This set was hand engraved, by Huang Jian. But the style is really strange.