Spot price movement and proof sets.

[Subspecies]

Spot price for gold moves by the second and this can be allied to the price of a loose gold coin (carat differences aside).

I have a 2005 4 coin proof sov set and it seems to me that these are not priced intra day, if the price for a set is circa 4k and spot rises £50. Sellers aren't varying their asking price daily, it seems. Is there a general lag in proof coins and sets to the prevailing market?

[sovereignsteve]

yes

[LawrenceChard]

17 minutes ago, sovereignsteve said:

yes

Ditto!

😎

[TeaTime]

Proof coins are a different market to bullion. Proofs are generally for collectors and have a hefty up-front premium which is largely unaffected by the spot price.  Similarly drops in spot don't make much difference either.

If someone is paying 2,3 even 5 x spot for an ounce of PM then a 5-10% deviation in the intrinsic value of the metal is of little consequence.  

Edited March 4, 2022 by TeaTime

[SovereignBishop]

Obviously there must be a limit to this theory in practice.

If a proof coin was worth £400 10 years ago I would imagine collectability aside, it would have moved upwards in price since then.

 

[sovereignsteve]

Yes😉😎

 

probably!

[sovereignsteve]

Gold has risen almost 50% in those 10 years, so generally it will be inevitable that most proofs, other than those highly collectable issues and overvalued hyped ones, will have risen to some degree.

[Pete]

A proof sovereign from 2005 is a special year so has a nice premium attached.
The way this works is to take spot price ( weight of fine gold ) then add the premium.
If the premium is significant, small fluctuations in spot have no effect as the price is set by interest like fine art ( i.e. has little bearing on the cost of paint )
I found that buying a proof set is totally different to selling and for regular sets you may only get close to bullion prices.
You will however find prices for the 2005 coins much higher but I am not sure whether a set would sell for a higher price than the sum total of the individual coins.
 

[TeaTime]

And that's where it gets complicated. If a proof set still commands a hefty premium due to popularity then movements in spot are largely inconsequential - the reality is that the majority of proof sets are not so desirable (and have little or or no premium) and then spot plays a more significant role.

So we're really not talking about proofs but about desirable coins. The fact that a coin is proof is less relevant than how popular it is (and the subsequent premium placed on it).

It's not really any different to numismatic pieces - the spot price has little or no impact on the perceived value - scarcity and desirability are the driving factors for prices to rise. 

 

[sovereignsteve]

In the old days, Chards used to price most of their coins with a formula that included spot, a % premium and a fixed additional  amount. So that prices went up with gold spot but included a constant uplift over and above the intrinsic value. I notice they don't do this now, or at least don't spell it out on the website. It would be interesting to hear the thoughts on this from the people concerned.

@LawrenceChard @ChardsCoinandBullionDealer

[Heirlooms]

What a significant increase in spot price will do is give the Royal Mint an excuse to charge more for new proof coin releases which isn't reciprocated when spot price significantly decreases 😤😤😤

[Abyss]

1 hour ago, Heirlooms said:

What a significant increase in spot price will do is give the Royal Mint an excuse to charge more for new proof coin releases which isn't reciprocated when spot price significantly decreases 😤😤😤

Same goes for Petrol pay at the pump. Price of Crude oil goes up and seems like automatically goes up the next day in petrol stations but when crude oil crashed to below $0 barrel I did not see any petrol stations saying selling it for zero.......

[LawrenceChard]

4 hours ago, sovereignsteve said:

In the old days, Chards used to price most of their coins with a formula that included spot, a % premium and a fixed additional  amount. So that prices went up with gold spot but included a constant uplift over and above the intrinsic value. I notice they don't do this now, or at least don't spell it out on the website. It would be interesting to hear the thoughts on this from the people concerned.

@LawrenceChard @ChardsCoinandBullionDealer

Old days?

Well remembered!

Yes, for some of our semi-numismatic or recent issues, we use a hybrid pricing system, with part based on intrinsic metal value plus percentage premium, and part based on fixed premium. Can can choose to display this, but it makes for a cleaner, simpler page if we suppress it.

It does creates some odd looking prices, but it saves us having to do frequent repricing when bullion markets change.

[GoldenGriffin]

21 hours ago, Subspecies said:

Spot price for gold moves by the second and this can be allied to the price of a loose gold coin (carat differences aside).

I have a 2005 4 coin proof sov set and it seems to me that these are not priced intra day, if the price for a set is circa 4k and spot rises £50. Sellers aren't varying their asking price daily, it seems. Is there a general lag in proof coins and sets to the prevailing market?

If you bought a gold proof coin for 90% premium above gold spot price at £1,000 per troy oz.

The coin costs you £1,900.

The intrinsic value is £1,000 (certainty on value, which follows gold spot price).

The collectable value is £900      (risk on value, which follows many factors considered by a collector).

If gold spot price climbs to £2,000 per troy oz, then...

The intrinsic value is £2,000.

The collectable value is £???, whatever a collector will pay for it.  However the certainty around the value of your gold coin has increased from £1,000 to £2,000, with it worth at least £100 more than what you paid for it.

If gold spot price increases after purchasing a proof coin, it could eat into the premium you paid if you come to sell it, as collectors may not want to pay at least the amount of premium you paid for it initially.

Edited March 5, 2022 by GoldenGriffin

[Darr3nG]

2 hours ago, LawrenceChard said:

it makes for a cleaner, simpler page if we suppress it.

Not so nice, when you're trying to scape it...  but I'll struggle on!