TNAG-0717-FCO40-914-Banking-and-monetary-matters-in-the-Dependent-Territories-is-1978 — Page 134

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another commodity.

Its price could thus fluctuate violently, and far more than it has in recent years. Much of the demand for precious metal coins is likely to be speculative

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investment in gold or silver

as a hedge against inflation. If gold and silver become less

attractive, for this purpose, so also will gold and silver coins. Where (as is the case with issues sponsored by US promotional companies)

the value of the bullion content is substantially below the face value,

and a coin's other qualities are regarded as worth little, then

clearly either its use as actual legal tender or its redemption at face value would become an attractive option.

9.3(7)

An additonal hazard attaches to the new numismatic market

which does not to most other commodity markets. Since the coins have

self-evidently no antique value (and cannot have for a number of years ahead), much of their value (other than any rarity value) depends on

the perfection of their finish. The slightest mark can thus reduce

or destroy numismatic value, so that the collector's or investor's

guarantee against total loss is then based only on its metal value and/or its legal tender status and redeemability. See Annex 6(2) for

advertising emphasis of "floor price" Devices such as heat-sealed

cases to prevent marks and discoloration can hardly be completely

reliable.

9.3(8) It is obvious, however, that problems would be likely to

arise only when the market value of coins falls near their face value

and this would probably occur sooner for specimen coins as these are

usually issued at near face value, than for proof coins which are

normally sold at well above face value.

9.3(9)

Nevertheless, there is nothing to suggest that this market is

in principle unlike other markets. The chances are, therefore, that

at some future date, for whatever reason or combination of reasons, it

will enter a period of decline, even collapse, before (possibly)

recovering again. When prices sink the only floor price for holders

seeking to recover some value will be the face value of a coin, and the

test is then likely to be made of the extent to which the face value

constitutes a valid claim on the issuing authority.

9.3(10) To sum up, it is a reasonable judgment that a decline in this

somewhat fragile market is to be expected at some future date,

particularly if the present expansionary trends continue.

We cannot,

however, on the evidence available, estimate either when the decline

will appear, whether it will lead quickly to a widespread demand for