Author Topic: Watching market maturity happen: 2016 2 oz silver classical gardens Liu Yuan  (Read 900 times)

0 Members and 1 Guest are viewing this topic.

Offline badon

dragonzeng168 (new, ending, sold) brought to my attention the fact the 2016 2 oz silver classical gardens Liu Yuan are the cheapest of all the classical gardens right now, especially in 69 and 70 grades. I did a search, here (screenshot attached to this post):

Search ebay for non-antiqued silver classical garden in 69 and 70 grades, lowest prices first

...and indeed, they are the cheapest by far, but even more interesting than that is the fact they're also rarer than most of the other coins that have both higher mintages and higher prices. Have a look at the mintage table I screenshotted from the CC, originally posted in Re: 2016 classical gardens Zhou Zheng Yuan due for release in October:



I think there are 2 reasons the silver Liu Yuan are cheaper and rarer. The most obvious one is the fact they are the newest ones currently available, so their prices have had less time to mature. The other reason is not so obvious. The mintage of the cameo version is 500, and the reverse cameo is 500. Most of the other silver classical gardens coins typically have a much higher mintage of 1000. However, I noticed the total combined mintage of both of versions of the silver Liu Yuan is the same at 1000, and the total mintage of most of the other silver classical gardens is also exactly that amount or near to it.

My first reaction upon discovering that was to think the total mintages are important, but that's not correct. In actuality, the total mintages (split among several varieties) are only important BEFORE the market matures. That is when the supply of all of the coins is good, and differences in mintage don't make it easier or harder to buy them. Market immaturity (good supply) perfectly explains why prices are so low for the Liu Yuan, working backward from the basic fundamentals of coin investing! That means we are dealing with an animal with predictable behavior. Predictability is good, from an investor point of view.

After the market matures, then mintage rarity and relative rarity matters. The market will mature when collectors get closer to completing their sets. The difficulty in obtaining rarer versions will start to increase when all the primary market supply is sold out, and people must offer more money to buy coins on the secondary market to complete their sets. People with more money to spend will be able to push out everyone else with less money to spend. I think this natural maturation process can be studied pretty easily for the classical gardens series, because you can clearly see that older coins are more expensive than newer coins, even if the older coins are not as rare as the newer ones.

This is one of the best examples of the market maturation process I have ever seen in the modern Chinese coins (MCC) market. The MCC market is so profitable BECAUSE it is immature, which makes it easier for mere mortals to be able to afford some of the best investments (they're too expensive in mature markets). Being able to directly correlate prices with market maturity is very reassuring. We can objectively demonstrate that these newly-issued coins are priced fairly, because their prices make sense when studied in the context of the fundamental principles of supply and demand, and the correlation between being older and having a higher prices. That gives us more confidence that they are likely to be good investments.

Fascinating!

One more thing I want to point out is, notice where all the watchers are in the screenshot below. The market knows where the most upside potential is, and sometimes you can see it in the ebay watcher counts. It appears some of the older coins are priced a little too low.
« Last Edit: 2016 Sep 26, 09:43:57 PM by badon »