[LETTER] Profitting From Pandas

Discussion in 'Modern Chinese Coins & Medallions' started by yennus, Jul 24, 2013.

  1. yennus

    yennus Well-Known Member Silver Stacker

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    > Hi Yennus,
    >
    > How have you been? Things seem to be pretty slow. I don't know if it is because of the summer holidays or its because of the downturn in prices of gold and silver. Since I mostly buy silver pandas the prices of the panda silver have just plummeted. So for now, it is a loss on those coins. I hope they will increase at least to the level I bought them...

    Hi Xxxxxxx,

    I've been well thanks. I hope you've been good too.

    Things for me have been pretty busy lately. I've been trying to make the most of the low spot gold and silver prices.

    Yes, some Panda prices have been depressed, but in relative terms, when compared against bullion, from what I've seen Panda prices have done very well.

    In short: many Pandas have appreciated against the falling spot gold/silver prices as well as fiat prices, and while some have depreciated against fiat they still have appreciated against spot/silver prices.

    A lengthier version is as follows:

    If we can look at the spot data from February this year (approx. 6months ago), and then compare it against the Panda movements, we can see if Pandas have appreciated or depreciated against gold/silver.

    The approx. spot data from February this year (prices in $USD):
    Silver is down from $30/oz (Feb) to $20/oz. Down 33%
    Gold is down from $1650/oz (Feb) to $1350/oz. Down 18%

    The CP (China Pricepedia prices) from February this year for a range of Pandas - (if I was smart like Fishball, I would have a more comprehensive index of Pandas - but alas, I don't have the time and patience to run the entire Panda listing, though I often do the maths for the Pandas that I have/care about). (prices are in $USD)
    1989 1oz Silver Panda MS69 is up from $121USD (Feb) to $138USD (Jul). Up 14%
    2000 1oz Silver Panda MS69 is up from $381USD (Feb) to $439USD (Jul). Up 15%
    2010 1oz Silver Panda MS69 is up from $64USD (Feb) to $71USD (Jul). Up 11%
    2013 1oz Silver Panda MS69 is down from $51USD (Feb) to $37USD (Jul). Down 27%

    We can ascertain from the above results that the 1989, 2000, 2010 Pandas have done very well against spot and very well in gold/silver ratios too.

    E.g. If you had $1000 invested in 15.625x 1oz Silver Pandas 2010 in February, that would have been worth $1000 or 33.33oz of Ag (ETFs, bullion, etc) then. Today that would be worth $1109USD or 55.5oz of Ag (ETFs, bullion, etc). This means that you can potentially increase your personal treasury by 22.17oz of Ag or $109USD. It also shows that you are 5.5oz better off because of your Pandas, than if you had held onto your cash and decided to buy pure Ag now.

    Comparatively, if we had invested $1000 in Ag bullion in February, then worth 33.33oz. Today, that would only be worth $667. In Feb you would have been able to purchase 15.25x 2010 1oz Silver Pandas, but today it would only worth around 9.39x 2010 1oz Silver Pandas. This means you have not only lost $333, but the opportunity cost of 16.67oz of Ag had you waited to buy today.

    If we look at the biggest Panda decline of the 4 Pandas above, the 2013 series, even then we can see that the drop is smaller relative to the drop in spot gold/silver. There is a 6% margin of difference, which means that there is room for profit!

    A Panda player would probably try to exploit that

    E.g. If you had $1000 invested in Pandas in Feb, that would be worth 19.61x 2013 1oz Silver Pandas. By July, that would be worth $725.49.

    However, if in Feb you had $1000 invested in Ag ETFs, bullion, etc, which was worth 33.33oz; today that would be worth $667.

    You being the shrewd Panda player notice the margin between the two, and smell the potential for profit. You exploit the margin by some of these methods:
    i) Selling your 2013 Pandas at a loss, and then buying Ag ETFs, bullion, etc; whereby you could have approx. 36.27oz of Ag, growing your personal precious metal treasury by 10% even when spot and Pandas had a down season!
    ii) Trading your 2013 Pandas directly for bullion, etc.

    In conclusion, Pandas have been doing pretty well considering the massive drops in bullion prices, and even during this downturn, it should be possible to turn paper losses into actual physical accumulation. If playing the Panda market seems a bit too stressful or inconvenient, there is also the option of doing what many collectors I think are doing - sit and hold, and wait for the paper prices to go up again

    I hope this helps, and as Jim Rogers often says "Don't take my word for it, do your homework."

    Kind regards,
    Yennus.
     
  2. silverzman

    silverzman Active Member Silver Stacker

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    Very informative :)
     
  3. Thor122

    Thor122 New Member

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    Nice data
     

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