EDITORS NOTE: The evolution of the cold war with China is leading to many new disruptions in the financial and precious metals sector. Coins that are famed for their Chinese Lunar Calendar affiliation are dropping in premium due to a lack of buyers and interest in Chinese related products. It is important to note if you have Royal Mint Lunar Gold or Privy-marked Silver or Canadian Chinese Dragon Coins that these products are subject to fall in premium in the short-term. Adding insult to injury is the vast amount of counterfeit gold that has been housed in depositories by the Chinese, as we've mentioned in prior articles. All I can say is, "Buyer, and Holder Beware!"
Scanning for major risks on the horizon is critical to investing successfully. It means you’re being proactive and prudent. At GSI Exchange, we make it a regular practice to announce forward-looking risks that might affect our clients. When we see a precarious situation arising, you hear from us right away.
Right now, the escalating tensions between the US and China are creating an unstable environment with regard to Chinese lunar calendar coin premiums. The latest espionage attempts have only exacerbated an already-fragile geopolitical environment.
As you may know, the Trump administration was strongly considering de-pegging the Hong Kong dollar from the greenback. That wasn’t a viable option, as it risked the US dollar’s global reserve currency status in addition to creating conditions that can spark a global financial crisis.
In light of potential sanctions on China for current human rights and espionage violations, we expect to see premiums on Chinese lunar year coins dropping significantly.
Although our company has a number of Chinese lunar coins in stock, at a competitive premium that’s adequate enough to cover our costs, we’re not very optimistic about the near-term prospects for these coins. And until the geopolitical environment cools, we can’t say how long this price uncertainty might last.
What we do know is that Chinese lunar coins are vulnerable to a significant plunge in premium values.
And we highly discourage our clients, or any precious metals investors for that matter, from purchasing Chinese lunar coins given the current instability in US-China relations.
In short, gold and silver coins are supposed to be safe-haven assets. Generally, they are, unless overinflated premiums cause you, upon purchase, to take a loss, or deflated premiums reduce the value of your holdings.
Many gold dealers are selling Chinese lunar coins that, based on our forward-looking forecast, are subject to a major deflation in premium price due to geopolitical instability. Be careful with these, as the need for sales can sometimes result in a need to skirt the boundaries of ethical sales practices as well.
As gold and silver continue to rise, driven by the low-interest-rate environment and the COVID-19 pandemic, know that you have plenty of other gold and silver alternatives. Not every coin is the same, and Chinese lunar coins may not present the best opportunity for investors who are looking to park their money. Again, the metal content has value, but the premiums that make up a portion of the price likely present overinflated values that are subject to a massive correction.
If you need assistance finding other gold and silver coins that may prove a better and more robust alternative, feel free to call us. Otherwise, just consider our warning, as we do our best to proactively scan the environment for conditions that might put our own clients’ wealth at risk.