TNAG-0717-FCO40-914-Banking-and-monetary-matters-in-the-Dependent-Territories-is-1978 — Page 18

- 5 -

dependencies' coins minted in precious metals is in the range of 24% to

850% of face values. If we consider the gold price alone, we know

that there is an underlying world demand for gold for industrial and

cosmetic as well as monetary purposes. But since in 1972 the US

Government removed gold's floor price in terms of US dollars, gold has

been no more than 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

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 in the case with issues sponsored by the

US promotional companies, the value of the bullion content is

substantially below the face value, and where 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.

A decline in this somewhat fragile market is to be expected

at some future date, particularly if the present expansionary trends

continue, and problems could arise when the market value of coins falls

near their face value. It is not possible on the evidence available

to estimate when the decline will appear, whether it will lead quickly

to a widespread demand for redemptions, or whether one territory will

be more severely affected than another. Three particular factors for

consideration seem likely to be relevant:

(1) It is reasonable to expect that coins forming part of a

relatively small issue will retain a certain rarity value which would

not be true of the generally large, subscription basis, issues.

(2) The value for collectors would also be dependent upon

whether the coins had a genuine commemorative purpose and were well

designed, and were thus attractive in themselves as numismatic items,

or whether the initial sales had resulted primarily from intensive

marketing techniques.