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Platinum buyers need much more cash

This year has been a speculator’s paradise for new issues from the U.S. Mint. Last week's quick sellout of the proof platinum $100 issue turned a few wheels in my brain.

Every Mint sellout requires a cash outlay by buyers. The amounts vary.

Buyers of Mint offers were rewarded particularly well by the first two of four Coin and Chronicles sets issued this year.

The Truman and Eisenhower sets really jumped up in price because only 17,000 of each were produced by the Mint. It required relatively little cash to make this happen.

At the issue price of $57.95 each, 17,000 sets were worth less than $1 million at the time of issue. To be precise, the figure is $985,150.

So sellouts of the two Coin and Chronicles sets did not require speculators to tap too deeply into their cash balances.

In the dynamics of the secondary market where sets trade at double issue price, that would require buyers to find $1,970,300 to buy all of the sets from the original buyers.

Triple issue price is $2,955,450.

None of these amounts puts a particular dent in the finances of buyers.

This in part helps sustain the secondary market.

There are a lot of people who can find the $57.95 or $115.90 or $173.85 to support a sellout and then keep prices high on the secondary market for the two Coin and Chronicles sets.

Add in the fact that not every single set that was purchased originally has to trade at the current secondary market price and you get the idea that only essentially small change is required to support this particular secondary market speculation.

Last week the 2015-W proof platinum coin sold out in seven minutes. This looked very similar to the Coin and Chronicles sellout script.

Speculative buyers were egged on by the 4,000 maximum mintage figure. It sounds low. It is low. But the cash costs are much higher to achieve that sellout.

Issue price was $1,200.

That means buyers had to put up $4.8 million to acquire them all. That is roughly five times the sum needed for each of the two top Coin and Chronicles set sellouts. (I am ignoring the $4.95 handling fees in all cases cited here.)

For the platinum coin to double on the secondary market implies a value of $9.6 million for all 4,000 sets. A tripling would make the figure $14.4 million.

Those gross dollar numbers make any higher secondary market price harder to sustain over time.

Where it is fairly easy to tack on an extra $985,150 or $1,970,300 to support a particular Coin and Chronicles set price, it is relatively more difficult for the secondary market to find the cash to add $4.8 million or $9.6 million in extra value to the secondary market price of the platinum coin.

Because it is harder, the platinum coin’s value pop can be much less, or the top secondary market price will be sustained for less time than was the case for the Coin and Chronicles sets.

I will watch the platinum coin’s secondary market drama unfold, knowing that whatever happens, the platinum coin has a tougher road to follow than the Coin and Chronicles sets did.

This is less a story about low mintage or potential popularity and more about the amount of cash required for would-be secondary market buyers to put their money where their mouths (expectations) are.

Buzz blogger Dave Harper has twice won the Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper "Numismatic News."

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